Busted: Sam Bankman-Fried arrives at his court hearing in New York in February. Image: Stephanie Keith / Bloomberg

The Great Crash 2023

A verdict has been reached on the case and career of the crypto-fraudster Sam Bankman-Fried. But is it possible to regard him differently?
December 6, 2023
Going Infinite: The Rise and Fall of a New Tycoon
Michael Lewis (RRP: £25)
Buy on Bookshop.org
Buy on Bookshop.org

On 2nd November 2023, the definitive judgement on Sam Bankman-Fried’s character came in. The founder of FTX was found guilty on seven charges of fraud and conspiracy by a New York jury. Bankman-Fried wasn’t merely a failed entrepreneur, as his lawyers had argued. He was a liar.

Just one year before, Bankman-Fried’s wealth was estimated at $26.5bn. FTX, a cryptocurrency exchange he started in 2019, had taken off like a rocket, as had his reputation. Statesmen, celebrities and titans of business came to pay obeisance to this scruffy prophet from whom dazzling disquisitions about the future of everything emerged like smoke. Bankman-Fried, who was in his late twenties but looked even younger, bestrode the world in cargo shorts. He held talks with the Bahamian government about paying off its national debt. He offered Donald Trump $5bn not to run for re-election. 

Michael Lewis is an author who seems to get lucky in his choices of subject so often that you begin to suspect he might actually be good at choosing them. He found Billy Beane, a baseball executive who had adopted innovative techniques for talent recruitment, before Beane’s team went on a run of extraordinary success that changed the world of team sports. Lewis’s bestseller Moneyball was the result. When he started following Bankman-Fried, two years ago, he thought he was tracking the rise of another brilliant maverick disrupting an industry, in this case the one Lewis knows best and respects least—finance.

But, as Lewis was completing his book, FTX collapsed into bankruptcy. Over 10 days in November 2022, it became apparent that it was disastrously and illegally entwined with its sister company, Alameda. Bankman-Fried was arrested and indicted. Lewis now had his ending, but he also had a very different book to the one he thought he was writing. Had his hero suddenly become an antihero?

Bankman-Fried, who talked to Lewis at length and gave him access to diaries and other private material, was happy to reveal himself as a deeply odd person. He hated being a child and made almost no childhood friends. One he did make, through a shared love of maths, described Bankman-Fried as both “hyper-rational and extremely kind”. But he was generally regarded by his high school and college peers as aloof and apart, and he felt that way too. As an adult, he found a way to make his oddness work for him after discovering his talent for risk. 

On graduating from the Massachusetts Institute of Technology (MIT) in physics, Bankman-Fried joined Jane Street Capital, a boutique Wall Street trading firm, where interns were encouraged to play betting games among themselves, including with weighted coins, to inculcate the skill of thinking quantitatively about unknowable outcomes. Bankman-Fried was brilliant at this. He thrived in any game in which you had to make fast, calculated decisions with little information, especially those in which the rules changed as you went along. He started earning a lot of money as a trader.

But he felt he was wasting time. At MIT he had become a convert to effective altruism, a movement for social change, derived from utilitarianism, which seeks a mathematical basis for doing good. Effective altruists (EAs) believe in maximising one’s positive impact on the world. Sure, you could become a doctor, go and work in a poor country and save a hundred lives. But isn’t it better to get enormously rich so that you can pay for a hundred doctors and save 10,000 lives? To give at scale, earn at scale.

In 2017, Bankman-Fried decided to go big. He left Jane Street to start his own company, Alameda Research, and recruited a bunch of young traders who were also EAs. The bosses at Jane Street had been alarmed by this cohort of ideologically motivated bankers. Bankman-Fried dressed like a teenager, ate nothing but pizza and didn’t seem interested in acquiring a summer house in the Hamptons. That made it harder to seduce him with promises of riches, and easier for him to leave the firm for a start-up. “It wasn’t going to cut into his lifestyle, because he didn’t have a lifestyle,” a former Jane Street employee told Lewis. 

Bankman-Fried pitched Alameda to similarly minded investors as a vehicle for making a lot of money and doing a lot of good. The question of how it would make money was secondary, but the nascent crypto market was fertile territory. Trading in these new digital currencies was largely unregulated, and the market was growing like crazy. Fortunes were being won and lost almost randomly. The time was ripe for a company able to bring analytical rigour to the market and yet take more risks than Wall Street firms. 

Early on, Bankman-Fried fell out with his management team over what to do about $4m worth of cryptocurrency that went missing. The others wanted a pause in trading until they could figure out whether it had been stolen or lost. Bankman-Fried insouciantly insisted there was an 80 per cent chance it would turn up, and that they should therefore act as if they still had 80 per cent of it. His furious colleagues pointed out that if they never got the money back, nobody would accept this explanation: “Everyone is just going to say we lied to them. We’ll be accused by our investors of fraud.” Bankman-Fried hated after-the-fact arguments—the way that we look back on inherently probabilistic situations and pretend the outcome was certain all along. To his mind, it is always less clear in the moment who is right or wrong than we like to think afterwards. Hindsight is a deeply unreliable narrator.

One of Bankman-Fried’s favourite thought experiments goes like this. Imagine you have a friend called Bob. Bob is at a house party where someone is murdered. Nobody knows who did it. There were about 20 people there, and you have no compelling evidence on any of them. You are pretty sure Bob would never commit a murder, but one of those people did it. Since you are rational, you assign a 1 per cent probability to Bob being the killer.

The question is, how should you feel about Bob now? If you stay friends with him and he turns out to be guilty, that will seem bad. But the same applies if you cut him off and he turns out to be innocent. There is no obviously fair way to behave towards your friend. Bob is like a subatomic particle whose position cannot be determined; a spread of possibilities rather than a stable entity. Bankman-Fried believes this is what people are. They are not fixed characters with definite attributes—honest or deceitful, brave or cowardly—but probability distributions around a mean. You are neither the worst nor the best thing you ever did, even if you get judged on these outliers by society. A person should be treated as a weighted coin that hasn’t yet landed.

The story of FTX can be read as a parody of capitalism, with its mirrored promises and moral ambiguities

Bankman-Fried’s non-judgementalism was of a piece with his utilitarian outlook. When making moral judgements, utilitarians emphasise impersonal forces: society, situation, biology. Some go further, as Bankman-Fried does, and argue that blaming individuals is irrelevant or unfair, since what people do is always predetermined by these structural forces. Lewis’s account of Bankman-Fried’s life paints him as hyper-rational; as someone who never accepted inherited stories, like the greatness of Shakespeare, but fashioned all his opinions from first principles. Perhaps it is just coincidence that he arrived at the same highly unusual worldview as his parents. Barbara Fried and Joseph Bankman were professors at Stanford University, and self-declared utilitarians. In 2013, Fried wrote an article for Boston Review entitled “Beyond Blame”.

There’s no doubt that Bankman-Fried was a singular person. He didn’t feel emotions, except a persistent sense of sadness. He had very little, if any, empathy. He stared blankly at people when they were talking to him, until he trained himself to move his mouth and eyes in a way he knew to be socially acceptable. He didn’t enjoy art or read any books except Harry Potter. But his sense of difference became an asset as an entrepreneur. It’s not so much that he was exceptionally intelligent—he was very smart, though not the smartest among his high-­achieving peers—but that his alienation from the world gave him a unique perspective on it. He was also charismatic in his own way, a fluent talker who spun bewitching webs of words in the air. Investors found him mesmerising. An employee of FTX told Lewis, “Sam’s oddness mixed with just how smart he was allowed you to wave away a lot of the concerns. The question of why just goes away.”

In its early months, Alameda struggled, losing large sums of money on crypto trades. Bankman-Fried’s arrogant management style enraged his team. After the argument over the missing money, his EA associates tried to force him out. When that failed, they left and tried to ruin his reputation, “as a service to humanity”. But this apparent disaster proved to be a turning point. With Bankman-Fried in full control, Alameda started making a profit. What’s more, the missing money turned up (one of the departed managers admitted, “Ex-post I was wrong”). From then on, Bankman-Fried’s already strong confidence in his own judgement became impregnable.

In 2019, he decided to create a new company, separate from Alameda: FTX, a crypto exchange, with its own token. Bankman-Fried devoted his time to running FTX and appointed his girlfriend—Caroline Ellison, a former colleague from Jane Street—CEO of Alameda (Ellison later testified against him on the stand). The plan was to make FTX the world’s first legitimate crypto futures exchange, a place where established financial institutions would feel comfortable buying and selling. It proved to be the right idea at the right time.

Cryptocurrency markets were booming, despite not appearing to be built on anything but hype. Companies would launch virtual tokens, declare them valuable, and if enough people believed them, or believed others might believe them, they could make a fast profit. It was, in part, an ideological movement: true believers saw crypto as a way to smash a corrupt and self-serving financial system. Most financial experts were suspicious of everything to do with it. 

That crypto peaked in 2020 and 2021 was probably not coincidental, the pandemic being a time when millions of people went quietly mad in multiple ways. Zeke Faux’s new book Number Go Up is a savage chronicle of the crypto fever dream. Faux never regarded Bankman-Fried as anything but a charlatan, and was surprised to see Lewis, who at one point interviewed his subject on stage at a conference, taking him seriously.

But Lewis was hardly the only one. Bankman-Fried became a global guru, the slouching avatar of a new financial order. His chubby face and frizzy hair became ubiquitous. Anna Wintour asked him to the Met Gala. He was invited to Congress to discuss crypto regulation. He moved FTX to the Bahamas, where he acquired a vast beachhouse in which his senior managers lived and worked. He commissioned architects to design and build a lavish headquarters, ordering a block of tungsten as a centrepiece at the cost of a quarter of a million dollars, because, well, why not? Within two years of starting up, FTX was worth more than $30bn.

All ears: Michael Lewis at the Bitcoin 2023 conference in Florida. Image: Eva Marie Uzcategui / Bloomberg via Getty Images All ears: Michael Lewis at the Bitcoin 2023 conference in Florida. Image: Eva Marie Uzcategui / Bloomberg via Getty Images

Work on the new HQ had barely begun when FTX’s roof fell in. A leak revealed that a large proportion of Alameda’s assets—around $8bn—were comprised of the tokens issued by FTX, fatally compromising both companies. The crypto equivalent of a bank run was sparked, as traders rushed to sell FTX’s token, and FTX found that it couldn’t return the funds that had been placed with it. Bankruptcy swiftly followed. When the lid was lifted on FTX’s magic box, a grisly mess was revealed. Bankman-Fried and his team of earnest twentysomethings, fuelled by prescription amphetamines, had been running the world’s first grown-up crypto exchange like a student party.

The court case turned on whether Bankman-Fried had known about FTX’s and Alameda’s co-dependence and lied about it. The line between legitimate failure and fraud isn’t always easy to draw, even in retrospect. The same week that Bankman-Fried was convicted, another much-hyped business, WeWork, filed for bankruptcy in the US. Its founder received a multimillion-dollar payoff when he left, and was never found to have broken any financial rules. Crypto tokens have no inherent worth, but then neither does a $50 note or a stock option, even if the latter are guaranteed by institutions. The story of FTX can be read as a caricature or parody of capitalism, with its mirrored promises, moral ambiguities and magical transformations.

Before we get to finer details, let’s be clear: Going Infinite is a gripping, riotously entertaining read. Lewis, who writes plainly but not inelegantly, has a sure command of story, and stories do not come much wilder or more colourful than this one. He is relentlessly curious about people—about Bankman-Fried, yes, but also about the host of characters he encounters, each of whom is brought vividly to life. He weaves big ideas into the narrative without slowing it down. Going Infinite is a short book that packs a lot in—a model of efficiency, unlike FTX.

There are certain lacunae. Mr Bankman and Ms Fried were key sources for Lewis, and he presents them as intellectuals with no interest in money or prestige. We now know that Bankman took a job at his son’s firm and demanded a million-dollar salary, and that Bankman-Fried gifted him and Fried $10m in cash, with a $16m beachhouse in the Bahamas thrown in. According to a lawsuit underway, they accepted these gifts knowing that FTX was in a precarious state. This is the problem with utilitarianism—if you believe in the goodness of your ends with mathematical certainty, then all sorts of dubious means become justifiable. 

It would not be true to say that Lewis gives Bankman-Fried an easy ride. He tells us about FTX employees who found Bankman-Fried evasive, manipulative and dishonest. He details, with gusto, the many ways in which Bankman-Fried sprayed millions or billions around on a whim, as when he paid a minor reality TV star $15m to appear in a few ads. You can’t come away from Going Infinite and think he was fit to run a company. What Lewis doesn’t quite do is arraign him as a fake.

Lewis includes a telling quote about Bankman-Fried from the chief Bahamian financial regulator, Christina Rolle: “It’s not hard to see you are being played by him, like a board game.” Critics of Going Infinite have suggested the quote applies to its author, who spent a lot of time with his subject and grew to like him, or at least be fascinated by him. But I think Lewis’s very inclusion of it signals that he is aware of that charge and wants to let the reader make up their own mind.

Does Lewis view Bankman-Fried as a cold-eyed scammer, as a case study in the limits of utilitarianism, or just as grossly incompetent? Or does he think about him like Bob—as indeterminate? My impression is that Lewis believes that Bankman-Fried’s quest for social impact was genuine, at least originally. 

But I am having to guess Lewis’s true position, because his book is fundamentally ambiguous on this central question. While this has incensed some readers, the world is not short on loudly declared moral certainties, and there is something admirable about this refusal to join in the crowd’s condemnation. The jury, and the world, has delivered its verdict: Bankman-Fried is a crook. But Lewis is not interested in writing a book about a coin lying flat on its side; he’d rather show us one spinning in the air.