SBF appears in court for the "final battle," perhaps you need to read these stories

Authors: Nianqing, flowie, ChainCatcher

This week, the trial of SBF has temporarily calmed down in the media due to a one-week interruption, with proceedings expected to resume on October 26, local time in the United States. The defense team revealed that SBF will take the stand, perhaps engaging in a "desperate last stand" for himself.

In the past few weeks, SBF's friends, lovers, and colleagues have taken turns to reveal shocking details during the trial, accusing SBF of deliberately deceiving investors, lenders, and clients. Although this is a normal part of the trial process, the revelations between former close friends and lovers are still quite poignant.

We may find some answers and supplementary background stories of the characters outside the trial in Michael Lewis's new book, Going Infinite.

Michael Lewis is a contemporary American author of narrative nonfiction and financial journalist, a graduate of Princeton University and the London School of Economics. His most well-known work among Chinese readers is The Big Short, where he excels at vivid character portrayals and conveying financial knowledge to the general public.

In Going Infinite, Lewis conducted in-depth conversations with SBF himself and several of his close associates, including former FTX employees, SBF's former colleagues at Jane Street, as well as family, friends, and classmates. Therefore, this book reveals a wealth of details that were not covered in previous reports and are not widely known.

The book is highly readable; as a renowned bestselling author, Lewis's writing carries a strong personal touch and focuses on amplifying character traits, turning historical events into compelling stories. However, objectively speaking, he is certainly not a faithful journalist.

Due to his close relationship with the characters, Lewis has a great deal of empathy for SBF. He comprehensively analyzes SBF starting from his childhood experiences. In Lewis's portrayal, SBF is an effective altruist, a precocious genius, a person with a cold personality disorder, and a somewhat naive and unrealistic idealist.

The authors at ChainCatcher recently read Going Infinite and will supplement some details mentioned in the book that are outside the trial.

SBF: The So-called "Effective Altruist"

If you have read a few reports about SBF before, you should be familiar with the term "effective altruist," usually abbreviated as EA. This term originated from a new social movement initiated by the upper echelons at Oxford University, where a small group of young philosophers began to put Peter Singer's idea of "rational thinking to derive effective ways of improvement" into practice.

Soon, this concept spread from the UK to the elite on Wall Street. Lewis writes: "Those who can calculate the expected value of complex financial gambles are precisely those who are attracted by the belief that they can calculate the expected value of their entire lives."

"Effective altruism" has become a kind of special religious belief, continuously "preached" by social elites, with SBF being one of its loyal "believers."

EA has, to some extent, become SBF's organizational and behavioral principle. His experiences at Jane Street, Alameda Research, and FTX are all related to it, and it is an important starting point for understanding all of SBF's actions.

A passage in the book is quite interesting:

I asked him how much it would take for him to sell FTX to use the money for something other than making a profit. He thought for a long time and finally said, "150 billion dollars," then added, "I need infinite dollars" to do many things.

……

He needs infinite money because he plans to solve the biggest risks on Earth: nuclear war, pandemics more deadly than Covid, uncontrolled artificial intelligence, etc. Recently, he added American democracy to his list of problems to solve, but clearly, 150 billion dollars would be a good start to address one of those big issues.

After moving FTX to the Bahamas, SBF even considered repaying the Bahamas' 9 billion dollar national debt himself, so the country could use the money to repair roads and build schools. Therefore, after the September 2021 Bahamian elections, the first person the new president wanted to meet was SBF.

• Experience at Jane Street

Lewis spends a significant amount of time describing SBF's work experience at Jane Street.

Like most American genius narratives, SBF was taciturn from a young age, indifferent to things that brought joy, comfort, and a sense of belonging. His younger brother, three years his junior, believed their brotherly bond was "just living under the same roof."

Fortunately, Jane Street allowed SBF to no longer be an outlier, and no one was surprised by his emotional difficulties. This place gathered a bunch of similar people, most of whom had participated in math summer camps in high school and studied computer science or mathematics at MIT, Harvard, Princeton, or Stanford, excelling in their fields. Additionally, many employees were effective altruists.

But even among this flock, SBF was still quite special. Jane Street treated SBF well, placing him in the company's most profitable department—the international ETF trading department. A year later, SBF's annual salary was $300,000, which doubled to $600,000 the following year, and in the third year, Jane Street was prepared to offer him a $1 million bonus. Besides the high salary, Jane Street also hired SBF's brother, Gabe.

• Using Jane Street's Bonus to Found Alameda

SBF used the money he earned at Jane Street to establish Alameda.

The company was mostly comprised of young people in their twenties, and apart from SBF, almost no one had experience in financial market trading. Most of them neither knew nor cared about cryptocurrencies; they simply followed SBF's views, believing it was an inefficient market where they could exploit his "Jane Street" trading methods to extract billions of dollars.

"He demanded and expected everyone to work 18 hours a day, giving up any normal life. He didn't attend meetings, went weeks without showering, and the place was a mess, with food everywhere, and he would fall asleep on his desk."

Most of the core team members at Alameda and FTX were people close to him. Gary Wang met SBF during a high school math summer camp, and both later attended MIT, where Gary pursued a bachelor's degree in mathematics and computer science. After joining Alameda, Gary Wang essentially single-handedly wrote a complete quantitative code system, generating millions of dollars in profits in the initial months, and he later became the mysterious second-in-command at FTX.

Nishad Singh, the former engineering director at FTX, was Gabe's best friend in high school. Gabe and Nishad became effective altruists in college. Before joining FTX, Nishad worked at Facebook, starting with a salary of $300,000, but after five months, he grew bored and called SBF to ask what he was doing. During their first meeting, SBF clicked a few times on the screen and made $40,000.

• SBF's Political Genes and Generous Donations

SBF's political genes seem to be innate; his mother researched the effectiveness of political campaign donations full-time, and his brother worked with decision-makers in Washington. SBF has always spent on U.S. elections. In 2020, he donated $5.2 million to Joe Biden and subsequently invested tens of millions of dollars in 100 different candidates and political action committees. He even revealed in an interview that he planned to invest $1 billion in the next U.S. presidential election. SBF's brother was specifically responsible for distributing money to political candidates.

Whether effective altruism was an important criterion for SBF's large-scale donations.

His political spending was hastily divided into three buckets. The first bucket, the smallest, contained his narrow business interests: millions of dollars donated to politicians and interest groups willing to push legislation that would allow Americans to trade cryptocurrency contracts on FTX domestically, just as foreigners did on FTX outside the U.S.

The other two buckets were opaque—money that had little to do with his narrow financial interests. He tried to change the world because he believed it needed changing, and this had little to do with his business. But to be effective, he had to hide what he was doing to prevent others from thinking the purpose of his donations was to shape cryptocurrency legislation. In some not unreasonable minds, "cryptocurrency" is synonymous with "criminal." The problem is, if it were disclosed, everyone would think it was "cryptocurrency money."

In SBF's view, he happened to acquire "effective altruism currency" through cryptocurrency.

For example, in pandemic prevention, he tried to persuade elected officials to take an interest in pandemics or to elect some new pandemic warriors to Congress. He sought out as many congressional candidates as possible who supported pandemic prevention spending and large-scale purchasing. He dined with Republican Mitch McConnell to discuss a $10 billion allocation to an entity within the Department of Health and Human Services called the Biomedical Advanced Research and Development Authority to address pandemics.

Additionally, SBF considered paying Trump $5 billion to prevent him from running for president. SBF believed Trump was trying to undermine American democracy and thought he "belonged on the list of risks."

Moreover, SBF and FTX also conducted a luxurious charitable donation experiment. Displeased with traditional charities being too bureaucratic, the FTX Foundation sent emails to about 100 "experts who might have better ideas for donations," stating: "Hey, even though you don't know us, here's $1 million with no strings attached. Your job is to get it out as effectively as possible…"

• Multithreaded Person and Social Anxiety

SBF is a multithreaded person; his PR chief mentioned that if you see SBF's eyes moving during a live television interview, it's because he is also playing video games. He can play games while replying to messages, editing documents, tweeting, etc. In 2021, SBF was extremely busy; even his father had to call his assistant to schedule a 15-minute meeting with him. His whereabouts were also very mysterious; even the PR chief, who knew his schedule best, often couldn't find him, and it was common for him to cancel or be late.

SBF would feel at a loss when facing strangers. Former COO Constance mentioned that when SBF first established the exchange and was still an unknown, during several meetings she took him to, SBF's legs would shake violently, causing the table to shake as well. Constance would sometimes place her hand on his knee to calm him down.

• Lack of Security and Risk Awareness

"He was always easy to steal from," Lewis repeatedly mentions in his new book Going Infinite.

First, FTX's global temporary headquarters had no security whatsoever.

"On that morning at the end of April 2022, almost anyone could walk into his jungle hut and take anyone or anything. The guard station in front of FTX's global temporary headquarters was unattended. The door to the jungle hut where SBF worked was unlocked, and the receptionist's desk was empty. I would soon ask Nishad Singh the same question I asked others at the top of the psychiatrist's organizational chart: Imagine we are in the future, and your company has collapsed: tell me how this happened. 'Someone kidnapped SBF,' Nishad would immediately answer, then unfold his recurring nightmare: SBF's lax attitude toward his personal safety led to the destruction of their empire.

FTX lost a lot of money due to hacking. To avoid encouraging other hackers, FTX ****remained silent about its losses. Moreover, what they inadvertently discovered was not a simple hack in November 2022, but rather a complex hack involving BitMax and MobileCoin in the spring of 2021, amounting to $600 million.

Furthermore, without the checks and balances of a board of directors and a CFO, SBF seemed to have no concept of money and spent extravagantly. Large sums were splurged on political donations, reckless investments, charitable experiments, and exorbitant advertising.

In addition to the previously mentioned commitments of billions in donations and charitable experiments, SBF planned to invest about $5 billion in 300 different investment portfolios over three years. The advertising spending was even more extravagant. FTX signed three-year contracts with Coachella Music Festival, Stephen Curry, and the Mercedes Formula One team for $25 million, $31.5 million, and $79 million, respectively. They also signed a five-year contract worth $162.5 million with Major League Baseball and a seven-year contract worth $105 million with game developer Riot Games (just because Sam liked League of Legends).

SBF also promised to invest $5 billion with Hollywood agent Michael Kives without consulting anyone else, having only met Michael Kives a few weeks before making that promise. He knew nothing about him, not even how to pronounce his name.

It is well known that SBF invested $500 million in the AI startup Anthropic, while people at FTX were "almost completely unaware of this company." Additionally, SBF paid a former Jane Street trader named Lily Zhang $450 million to create a second secret quantitative trading fund located in the Bahamas, named Modulo Capital.

SBF's political investment portfolio is similar to his venture capital portfolio. For example, SBF's political team put up $10 million for Carrick Flynn's congressional primary, which became the most expensive primary in Oregon's history and the third most expensive Democratic House primary in the nation. However, Carrick Flynn lost.

FTX and Alameda

• FTX's Bahamian Mansion is a Microcosm of FTX: A Glamorous Exterior Hiding a Chaotic Interior

Former FTX engineering director Nishad Singh reflected that Alameda's operations were illegal from the start, as SBF and others opened trading accounts using the identity of a Korean graduate student and profited from the "kimchi premium." From the beginning, the accounts were always muddled. Employees revealed that they executed 250,000 trades daily, but most of them lacked records or were lost, and they didn't know where the money was.

Additionally, Lewis devoted more space to describing the chaotic living conditions of FTX and the core team, stating, "They turned a $30 million luxury apartment into a mouse house." The mansion in the Bahamas seems to be a microcosm of FTX, with a glamorous exterior hiding a chaotic internal environment.

FTX's current CEO, John J. Ray III, submitted a report to the U.S. Bankruptcy Court for the District of Delaware six days after taking over the bankrupt FTX. FTX had no employee list. There was no organizational chart. He stated, "In my career, I have never seen such a complete failure of company control and a total lack of credible financial information as what has occurred here."

The chaos in management and finance also made it impossible to clearly address the most important question—"Where did the money go, and why is there such a big hole?" In Going Infinite, it seems no one truly understood that the core team at FTX was much smaller than the outside world had imagined.

SBF seemed to make many decisions that only he knew about.

SBF mastered the management skills of Jane Street: allowing ordinary employees to see only their small piece of the puzzle while keeping the overall picture to himself… This company was almost a black box for all internal employees.

SBF refused to share equity with anyone; he owned about 90% of Alameda, with the remaining 10% belonging to Gary Wang. Even when he later sold shares of FTX to 150 venture capitalists, SBF still held more than half of the shares, while the third-largest shareholder, Nishad, held only 5% of the company.

• A World Without Checks and Balances

FTX had no real board of directors.

SBF said, "If we didn't have a board, someone might question it, so we have a company with three people." When he said this to me on Twitter, he admitted he couldn't remember the names of the other two people. "I knew who they were three months ago."

FTX had no CFO.

In the past 18 months, SBF had been told by several venture capitalists he was allowed to invest in that he should hire a mature person to serve as the company's CFO. SBF said, "The CFO has a kind of functional religious belief." "I would ask them, 'Why do I need one?'" Some couldn't name a single thing a CFO should do. They would say 'track funds' or 'make forecasts.' I thought, what the hell do you think I do all day? You think I don't know how much money we have?"

More importantly, SBF preferred to find people who would support his views rather than those who could raise reasonable doubts to discuss. For example:

When there was something new he wanted to buy (like purchasing Twitter), SBF often found it useful to talk to Ramnik and Nishad. Both had a strange ability to disagree with SBF's views without making a big deal out of it or forcing SBF to feel he had to listen to everything they said.

Even more incredibly, even when they disagreed with SBF's ideas, they could always come up with some "arguments" to validate or affirm his views. For instance, when SBF proposed funding Musk's acquisition of Twitter, despite their doubts about the benefits of this move, they still aligned with SBF's preferences. Ramnik would say, "Twitter has 230 million daily active users; if you can get 80 million to pay $5 a month, that's $400 million a month in revenue." Nishad would say, "This is an interesting dynamic; Musk acts as our proxy investment tool."

• "FTX is smaller than people think, and Alameda is much larger than imagined"

From the beginning, there were no boundaries between Alameda and FTX; for a long time, everyone in the crypto world considered capital transactions between the two to be very natural.

Although the business of cryptocurrency exchanges was like a "money printing machine," Alameda's asset scale was much larger than FTX's. People deposited cryptocurrencies into Genesis or Celsius, and then they lent the money to traders like Alameda. This provided billions of dollars, while Alameda had even more mysterious billions.

In interviews with SBF and other core members, Lewis mentioned that most of the customer funds within Alameda (specifically, $8.8 billion) should be in an account at FTX named Fiat.

The Fiat@Account was established in 2019 to receive dollars and other fiat currencies sent by new customers to FTX. Alameda Research created this account after FTX was unable to obtain its own bank account. From its establishment in the spring of 2019 until July 2021, FTX finally persuaded Silvergate to open an account in its name, and there was still no direct way to accept dollar deposits. As SBF said, "I didn't ask, for example, 'How many dollars do we have?' We felt Alameda had infinite money."

• Core Team's Confusion: FTX's Business is Highly Profitable, Alameda Could Have Borrowed, Why Did He Choose to Misappropriate Customer Funds?

The rough balance sheet of Alameda included details of hundreds of private investments made by SBF over the past two years, totaling $4,717,030,200. Among these liabilities, one item was more significant than the sum of all others: $10,152,068,800 in customer deposits. More than $10 billion originally held by FTX ultimately flowed into SBF's private trading fund. However, this document only listed $3 billion in liquid assets, including some readily sellable dollars and crypto assets.

The core management team at FTX was puzzled, "Our business is very profitable." "Our profit margin is between 40% and 50%. Last year we made $400 million."

At the end of 2021, Alameda Research could have borrowed $25 billion to $30 billion without much trouble. Why not take that money and move the $8.8 billion of customer funds back to FTX, so if Alameda collapsed, it would take down the crypto bank instead of FTX?

SBF and CZ's Grievances

The book contains two brief mentions of SBF and CZ.

In late October 2022, SBF flew to the Middle East to raise funds while finding a second home for FTX in the Eastern Hemisphere. On the evening of October 24, he encountered CZ at a conference in Riyadh. This was the first time they had been in the same room in nearly three years. They had a brief and awkward conversation, simply because it was much easier to do so than not to. "It was a five-minute conversation, with no real information exchanged," SBF said. "It was like pretending to be friendly. We absolved ourselves of the obligation to acknowledge that we were both there."

At that time, regulators hoped FTX could make Dubai its headquarters in the Eastern Hemisphere. SBF later wrote down the message he wanted to convey to them. "I love Dubai, but we can't be in the same place as Binance. There are two reasons for this: first, they constantly invest a lot of company resources to try to harm us; second, they tarnish the reputation of the location, accepting Binance's jurisdiction, and we don't trust their standards."

When FTX was on the brink of bankruptcy seeking $7 billion in assistance, SBF and Can, Ramnik, and others called every possible person on Earth who could quickly deliver $7 billion: sovereign wealth funds, private equity funds, and Asian secret exchanges.

CZ was one of the last people SBF reached out to. "I called CZ, and he was angry," SBF said. "So I started to grovel. Three hours later, we signed a letter of intent." The agreement granted Binance the entire company minus FTX US in exchange for assuming its debts. It also gave Binance the right to review the books of FTX and Alameda Research. It positioned CZ as the first outsider on Earth to see FTX and to know or seem to know what was happening in FTX and Alameda. Unfortunately, Binance ultimately announced on Twitter that it would not provide funding, and SBF learned of this from Twitter like everyone else.

Reflections on Effective Altruism and Breaking Free from SBF

People around SBF later realized he was reckless, dishonest, and manipulative. Nishad mentioned that discussions among other FTX executives often evolved into "how to get rid of SBF."

Although he once fervently believed in "effective altruism," Nishad saw a very strange relationship between this so-called effective altruist and money in SBF. They acted without regard for the consequences, focusing on money, but Nishad ultimately realized that "caring about money itself is a moral decay."

Lewis also interviewed SBF, SBF's brother, Caroline, and the shared psychologist of others in Alameda, who commented on this group of so-called "effective altruists": "They all claim to care about humanity, but in fact, this group has very poor empathy skills."

Why did it take until FTX's final collapse for people to realize the mistakes SBF had made?

Perhaps because the eccentric genius seemed to have a great deal of deception. It led people to respond to the "abnormal" things happening with him more with "I don't understand, but I trust you and even expect your astonishing feats" rather than questioning.

"Why did he and anyone he knew not foresee this day coming?" Zane's final conclusion was, "S am's eccentricity," his eccentricity combined with his intelligence made you dismiss many concerns, leading to many issues being left unresolved.