In 2021, Forbes magazine put cryptocurrency mogul Sam Bankman-Fried on its cover. He had just made his debut on its rich list.Forbes estimated his net worth at $US22.5 billion ($35 billion),ranking him the 32nd richest person in the world. He was 29 years old.
FTX co-founder Sam Bankman-Fried is facing a lengthy jail term.Bloomberg
Enter Michael Lewis. TheMoneyball author first met Bankman-Fried when an investor friend asked him to do some due diligence on the entrepreneur. Intrigued,Lewis ended up writing this book about him. During the year that Lewis followed Bankman-Fried,his subject went from the world’s richest person under 30 to an arrest that led to seven criminal convictions for wire fraud,securities fraud and money laundering.
The son of two Stanford professors,Bankman-Fried loved mathematics and puzzles. After graduating from MIT,he worked at,a high-frequency trading firm that encouraged its traders to hone their thinking by betting with one another. The point was to see how fast you could juggle probabilities and how adept you were with uncertainty.
At Jane Street,Bankman-Fried’s most ambitious number-crunching exercise involved the 2016 US presidential election,for which he designed a model that accessed local voting data more quickly than the television networks,and computed the probability that Hillary Clinton or Donald Trump would win. In a narrow sense,it worked spectacularly well,informing Jane Street traders that Trump would win before anyone else caught on. Throughout the campaign,Trump’s success had been inversely correlated with the strength of the sharemarket,so Jane Street bet several billion dollars against the S&P 500.
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Yet within hours,the markets had changed their mind about the likely economic effect of Trump. Bankman-Fried and his colleagues had devoted their energy to hoovering up and analysing voting data,but failed to anticipate how the markets might react to the news. If they had been right about a Trump slump,it would have been Jane Street’s most profitable trade. In fact,it was the company’s worst ever deal,costing around $US300 million.
Bankman-Fried became curious about cryptocurrencies,digital currencies that owe their existence to an electronic blockchain ledger rather than a national government. Jane Street did not trade crypto,so Bankman-Fried left to establish a trading company,Alameda Research,and build a cryptocurrency exchange,FTX.
He was a savant,but also chaotic. He played video games during vital meetings and while being interviewed on live television. In the space of a few days,he had brunch with Shaquille O’Neal,dinner with the Kardashians and met with the CEO of Goldman Sachs. He toyed with paying Donald Trump $US5 billion not to run for president.
One of the weirdest parts ofGoing Infinite is the memorandums that Bankman-Fried exchanged with his business and romantic partner,Caroline Ellison. The memos have a utilitarian,office-like tone,as they explore the costs and benefits of staying in a relationship,and whether to reveal the relationship to other staffers. If they made a movie about these memos,it might be calledLove,Actuary.
What drove Bankman-Fried? Unusually for the finance sector,he seems to have been enamoured not by spending money on himself,but by the potential to give it away to worthy causes. Inspired by the effective altruism movement,he told friends that his goal was to support the most effective charities.
Yet reading Lewis’ book,the reader is left with a sense that Bankman-Fried was too distractable to make a philanthropic impact,more focused on corporate growth than charitable giving.
The genius of Michael Lewis is that he understands the financial details,but doesn’t allow the minutiae to get in the way of the big story.Getty
Ultimately,the chaos caught up with Bankman-Fried. In November 2022,a slew of investors attempted to liquidate their holdings. When it became clear that FTX could not meet its obligations,the firm declared bankruptcy.
An eyewitness to the unfolding disaster,Lewis is in the Bahamas with Bankman-Fried when local police come to arrest the entrepreneur.
The genius of Michael Lewis is that he understands the financial details (he worked as a bond trader before becoming a writer),but doesn’t allow the minutiae to get in the way of the big story. The book was produced swiftly,yet is replete with fly-on-the-wall insights and pithy lines.
Of Ellison,“Caroline thought in periods but spoke in question marks and exclamation points”. Of the technology “The blockchain is going to chang e… everything,they’d say,and hope that would suffice”. Of Bankman Fried,“[he] didn’t think his childhood had anything to say about him – which struck me as odd,as he had spent roughly two-thirds of his life in it”.
Given that Bankman-Fried’s meteoric rise can be traced to his ability to juggle risk and uncertainty,it is apt thatGoing Infinite leaves much unresolved. Lewis offers few defences of cryptocurrencies,a perspective in line with many economists,who note that Bitcoin’s 10th anniversary came and went without it proving to be superior to regular currencies in any legal context.
In court,several of his business partners testified against Bankman-Fried. Found guilty this month,he is due to be sentenced in March 2024. Together,the counts on which he has been convicted carry a maximum penalty of 110 years.Going Infinite is like a catherine wheel:a shower of sparks that ends in a puff of smoke.
Andrew Leigh is a member of the Australian Parliament. His most recent book,, is published by Monash University Press.
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