Impeccable timing, as I just finished reading Michael Lewis Going Infinite bookon Sam Bankman-Fried.
I had put off reading it when it came out since, well, we were all bored to bits hearing about this wackball and his financial-crypto shenanigans. And price was in the gutters and sentiment in the shitters, so what was the point
...but Michael Lewis is usually worth reading (though I've complained about him in the past, see "The Backward-Looking Storyteller"), so eventually it was time: and what a captivating read it was!
Lewis has always been an incredible storyteller.Lewis has always been an incredible storyteller.
Here's Matt Levine recapping background on FTX:
it was a wildly lucrative business, run sloppily by inexperienced young people out of luxury apartments in the Bahamas, with a distinctive charitable mission... Even the good story of FTX was that it was a vast machine for extracting money from crypto traders and giving it to effective altruism charities.
Clearly before their time. (#1309060)
So, some dude who worked for them briefly had been promised income plus donation-to-charity-of-his-choice, but then FTX bankrupted and no money was sent, so:
he filed a claim in bankruptcy, asking FTX’s bankruptcy estate to send the $650,000 to the charity of his choice. FTX’s bankruptcy estate fought the claim, arguing that it had no obligation to pay him, but the bankruptcy judge disagreed and awarded him the money. (The $650,000 was an unsecured claim, but FTX ended up recovering more than 100 cents on the dollar for unsecured creditors, so he got the full amount.)
He asked FTX to send the money to Manifold for Charity, the charitable arm of prediction market Manifold Markets, because of course he did.
FTX getting all the money back/more then thew owed is
a) a big deal in Lewis' book (and also what SBF said on Twitter etc before he got gagged by the courts), and
b) a little weird since at the point of bankruptcy (=lower crypto prices during the cycle) those claims were dollarized and so the 5-10x from there made FTX whole while the court shenanigans took place in the last three years.
plus, some nonsense wording in the contracts for lawyers and journos to bicker about:
Another thing that is going on here is that no lawyer can resist the opportunity to say “aha, if this document said ‘a’ you’d get $650,000, but it says ‘the’ so you don’t.” That is the sort of thing that lawyers live for.
Judge overruled it, and so more money to EA charities!
"One important model of FTX is that, before November 2022, it was a way to funnel money from crypto traders to EA charities, but after November 2022 it has become a way to funnel money to lawyers.""One important model of FTX is that, before November 2022, it was a way to funnel money from crypto traders to EA charities, but after November 2022 it has become a way to funnel money to lawyers."
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I think this is the reason for the roughest criticism around Lewis's book. It created this narrative of SBF and Co were not doing anything criminal, or if they were it was good criminal, like Robin Hood. Robin Hood didn't rent penthouses.
As far as the stuff I've read (which is something as FTX was so proximate to Tether), "sloppy" is not the only adjective I'd use. They were moving customer funds to Alameda without telling customers. As far as I can tell, that's stealing. Doesn't much natter if you hope to give it back one day.
And as you point out, recovering everyone's money is a deceptive claim.
I never used FTX, but I really don't like this rehabbing SBF and FTX into some kind of goodness endeavor that was just a little sloppy with their accounting.
No, exactly the other way around. Because Alamada existed first, and as a US hedge fund and because FTX was offshore crypto business during operation chokepoint, depositors wired Alameda their funds which then got credited at FTX but held by Alameda. That' comingling and them not really keeping good track of it is probably the major origin of their troubles
Lewis point out, quite rightly, that it's hard to say what SBF's real crime was.
Isn't this some of what came out in the class action lawsuit?
This is from a civil suit, so I don't know that these allegations have been proven. However, if you read the evidence that is produced in this suit (largely from Caroline Ellison) it's hard to see how this wasn't happening.
Maybe Lewis didn't know about any of this though. Going Infinite was published in October 2023, and this stuff from the lawsuit came out in Feb 2024.
Also, I may be somewhat naive, but if I was to go to an exchange's website and set up an account and then wire them a deposit, and then some other entity used that money to trade and lost it all, I don't think I would be cool with it if they told me "Look, you weren't actually wiring money to us, you were wiring it to this other entity which could do whatever it wanted with it."
Ok the deltec involvement is later and I don't know much about that
Plus, as came out here they didn't really "lose" it all. Lewis does a back-of-envelope calc at the end, too, and even disregarding value of serum and Solana etc, there's plenty left over.
I still really disagree with statements Lewis's conclusion that "It's hard to say what SBF's real crime was."
Even if we say it wasn't a crime to give customer funds to Alameda when customers expected them to be deposited at FTX, and even if we say Alameda never actually lost any funds, there's still stuff like using customer funds to give personal loans to FTX executives.
This is from an SEC complaint against SBF, so again, not necessarily proven. Although, if you read it, I think the SEC did their homework and isn't just making stuff up.
I think SBF committed fraud. I don't like that Michael Lewis went all-in on wishy-washy trying to say nothing really bad happened.
Can you undeclare bankruptcy, if it turns out you actually are solvent?
not that I know of, and regardless that sounds like a legal question.
P.S., didn't Hertz try some shit like this during the pandemic, when meme traders bought shares in their defunct business like crazy?
I don't know, but that sounds pretty interesting