- Category: Non-fiction
- Rating: 4 out of 5
- Tags: Cryptocurrency, FTX, Private Equity, Sam Bankman-Fried
- How I learned about it: Review in The Globe and Mail
This is a story involving wildly odd characters, ridiculous amounts of money, extreme philanthropic goals, and either shocking carelessness or outright fraud.
Sam Bankman-Fried (SBF) is at the center. He wears his curly black hair in an unkempt, afro-like tangle, with cargo shorts, a t-shirt, and sagging athletic socks. You’d never know from looking at him that his net worth was once in the billions.
SBF really was different from the other kids. He says he has no trouble understanding other people and their emotions, but doesn’t feel happiness, and had to practice his facial expressions to show his feelings. At the age of eight, he was critiquing arguments for a paper to be presented by his mother, a law professor at Stanford. Hyper-rational, he questioned traditional assumptions. Sam figured things out “by thinking about things for himself, without a whole lot of concern for the thoughts of others.”
Sam was eventually drawn to a from of utilitarianism called effective altruism (EA), described as a way to be better at doing good. (See, for example, the book by Will MacAskill). It made him wonder how he could have the biggest, positive impact on the world. After graduating from MIT in physics and math, he got a job trading at a private equity firm. The pay was high, in the hundreds of thousands after the first year. They told him he’d be making between $15 million and $75 million dollars a year by his tenth year. He was giving most of it to charities identified by the EA movement as very good at saving lives, but Sam wanted to do more, and his eye fell on cryptocurrency. Assessing the price variations, he estimated he could make around a million dollars a day.
Sam started a private equity fund, hired some staff, attracted $25 million in capital, and was soon making half a million dollars a day. But careful tracking of money just wasn’t of interest to him. Once, $4 million of cryptocurrency went missing, and SBF’s blasé attitude was, “Don’t worry, it’ll turn up.” It eventually did, but not before his whole management team and half the employees quit over this and other problems at the company. Freed from the constraints of his more conservative staff members, Sam decided to let loose his new trading algorithm, and see whether it generated huge profits or bankrupted the company. Incredibly, it worked.
The equity fund made lots of money, but after taxes, expenses, and distributions to investors, not much was left over for philanthropy. Sam decided to go even bigger, by creating a crypto exchange. This worked too, and in 2021 Forbes estimated Sam’s net worth to be at least $20 billion. Apparently motivated by a genuine desire to improve the world, he spread large amounts of money around to see what worked. He and his partners planned to make and distribute hundreds of billions of dollars to address existential risks to humanity – nuclear war, asteroid strikes, global pandemics, rogue AI.
It was not to be. The price of crypto crashed, and investors wanted to withdraw their money, FTX suffered a liquidity crisis, money went missing, and Sam was arrested and extradited to the US, despite questions about jurisdiction. Was there intentional fraud? A jury thought so, and Sam waits to be sentenced.
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