This month’s book review “Going Infinite” is from the award-winning author of Moneyball, Liar’s Poker and many more, Michael Lewis.  

This is the story of Sam Bankman-Fried, commonly known as SBF, the 32-year-old, and formerly one of the world’s youngest billionaires, who founded the crypto-currency exchange, FTX and saw its meteoric rise and its spectacular fall, and then his arrest. The book goes back to his childhood and leads all the way up to the bankruptcy of FTX and Lewis was there at some of the crucial points and was even in the room with SBF as FTX unfolded and collapsed. 

SBF is an interesting character and strange in nature with an odd dress sense. His childhood is covered in the book although in his own words ‘I just can’t figure out what I did with it’ and he couldn’t name any friends from that time. He had very different views growing up to others of the same age and his mind was blown that other kids actually believed in Santa! 

After studying at MIT he left to join Jane Street Capital, a high frequency trading firm and his time there is covered, including falling out with his workmates and senior management when it came to internal betting, something the firm actively encouraged. 

He learned of what was called the ‘Effective Altruism Movement’ which to him broadly translated to making as money as possible so that he could give it away and change the world for the better and ‘do as much good as possible’ 

He then left Jane Street Capital to set up Alameda Research and so began his rollercoaster life in crypto with his own business. 

The book covers in the detail the two key businesses SBF had, Alameda Research and FTX. Both of these were separate legal entities that had different functions and different business models, but they were owned by the same person and over time it was difficult to know where one started and one finished. It also covers the crypto trading market so is a good book to provide some understanding of a complicated market. 

FTX created a token called FTT, and they minted 350 million of them. However, it was illegal to sell tokens inside the United States and the US Securities and Exchange Commission (SEC) were very aggressive that these tokens were considered securities. This was one of the main reasons the business and all the key individuals moved to the Bahamas, who were putting the finishing touches to their own crypto regulations, which were favourable to FTX. By this time, SBF’s girlfriend, Caroline Ellison, was the CEO of Alameda Research. 

They grow from nothing to huge businesses with a large ‘value’ and the FTX name was everywhere. He once had a video called with Anna Wintour, Editor in Chief of Vogue. However, during the whole call, and unbeknown to Wintour, he changed the screen and played video games the whole time. He kept saying ‘yup’ or ‘that’s interesting’ without really listening to anything. She was trying to get him to sponsor the Met Ball, which he did agree to do, but later pulled out of! 

This was in a time where FTX were sponsoring anything and everything, including stadiums, the Superbowl, every umpire’s uniform in Major League Baseball and spokespeople including Shaquille O’Neal, Le Bron James, Tom Brady, Kevin O’Leary and Gisele Bundchen. 

SBF could be seen and heard on every news station, talking all things crypto, and to be fair to him, he was not hiding away. He was always front and centre and willing to talk to market journalists. 

He made huge political donations; some open and many in secret to both sides. 

The businesses continued to expand, and they raised further investment. 

From its early days, detail and tracking were largely ignored. They did not keep track of the money and regularly lost money and could not find millions of dollars at a time. They never learned that this eventually would become such a problem, as would treating both businesses as if they were just one big piggy bank! This was not helped because they could not initially open a bank account for customer deposits in FTX, so funnelled them through Alameda instead! 

One of the key parties in the whole demise of FTX was Changpeng Zhao, or CZ, and he was the CEO of a competitor crypto exchange, Binance. Initially they got on and indeed CZ invested, but they later fell out, made up and fell out again. FTX paid back the CZ investment, part in cash and part in FTT coins. 

In October 2022 it all started to fall apart. Coindesk published an article based on information leaked from someone inside Alameda Research. It wasn’t a formal balance sheet and no one confirmed it was accurate, but to the outside world it contained some very worrying numbers and structure. CZ then tweeted to his 7 million followers that ‘due to recent revelations that have come to light, we have decided to liquidate any remaining FTT on our books’ which amounted to about $500million worth. 

This then started a run on FTX. There should have been c$15bn in customer deposits on the exchange, and after $5bn left the exchange in just one week, there should have been $10bn left – but there wasn’t!! 

FTX then tried to raise $7bn to cover the ‘hole’ and keep the business going although they could not explain why there was a hole in the first place. CZ actually offered to help and sent a Letter of Intent, which gave him access to the books. However, the following day CZ pulled out tweeting of ‘mishandled customer funds’ and ‘alleged US agency investigations’ 

At that point everyone started to jump ship and then trying to flee the country. SBF stayed, and Michael Lewis joined him there. 

The book goes into detail about how it all fell apart and eventually led to FTX filing for bankruptcy on November 11th 2022 and SBF returning to the US and being arrested.  

The question was what had happened to all the money! 

His girlfriend, Caroline, was also arrested. She was the first to plead guilty and worked with the prosecutors and became their star witness. She is yet to face sentencing but based on what I’ve seen and read, she appears a lot more involved and culpable than her story suggests. 

Since the book was released, the court case for SBF has recently come to an end, and SBF has been convicted of stealing $8billion from customer deposits off his exchange and of fraud and conspiracy. He faced up to a maximum of 110 years in jail, but was sentenced to 25 years last month. SBF was described by the judge as ‘a calculating math genius who sought power and influence whilst knowingly committing wrongdoing’ 

Interestingly, the creditors and account holders are actually expected to get all their money back that was held in their accounts. This is based on the value of bitcoin at the time, although since then the value of bitcoin is four times higher. It was initially thought that most of the money was stolen or lost, and it took some time to unpack the mess of accounting. Money was everywhere with very limited record keeping. They had invested in property and in companies and some of those company investments had actually proven very lucrative. 

John Ray III was hired to oversee the mess after the bankruptcy and he was the lawyer who oversaw the liquidation of Enron, so he has seen his fair share of corporate scandals and accounting frauds. He said that FTX was worse than Enron and ‘never in his career has he seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred there’ 

If you are interested in corporate scandals and/or have an interest in crytpo, then well worth a read. 

If you want to watch a great documentary about everything SBF and FTX related, watch this one as it has all the main players and many insiders and is an excellent watch alongside the book.