According to the acclaimed author Michael Lewis in his
biography „Going Infinite”, Sam Bankman-Fried’s initial foray into crypto
trading was marked by huge losses, with his hedge fund losing over half a million
In 2017, Bankman-Fried secured an investment of nearly $170
million from a group of investors who subscribed to the ideology of effective
altruism, as mentioned in the book preview cited by Coindesk. These investors were dedicated to finding ways to make a positive
impact on society, often through donations or funding noble causes.
Bankman-Fried, a 26-year-old at the time, had ambitious
goals for these funds. His plan was to enter the rapidly growing crypto
markets, leveraging differences in prices across various platforms and using
high-frequency trading (HFT) strategies to earn profits, even if they were just
small amounts every few seconds.
Alameda Research’s Comeback
Alameda Research, under Bankman-Fried’s leadership, started
with a series of trades that seemed promising but quickly turned into significant
losses. During one particular month, the firm lost over $500,000 each day,
leading to serious concerns about its future viability. Some trading funds even
disappeared mysteriously due to poor management, Lewis narrated.
One of the notable disappointments was a trading bot known
as Modelbot. This bot, designed to navigate the trading of nearly 500 tokens
across about thirty exchanges, proved to be a significant letdown in its
initial phase. It showed no discrimination between popular cryptocurrencies
like Bitcoin (BTC) and Ethereum (ETH) and less popular meme coins. This lack of
discernment raised alarms among early Alameda staff, who feared that it might
erode all the capital raised.
However, things started to improve for Alameda Research when
Gary Wang and Nishad Singh joined. Both were Directors at the cryptocurrency
exchange FTX, and they used their expertise to help Alameda overcome its
Wang’s contribution came in the form of a quantitative
trading system that began generating profits for Alameda. Singh took on the
challenging task of managing the company, guiding it toward what would later
Sam Bankman-Fried’s Plans to Pay the Bahamas’ Debt
Besides that, Bankman-Fried engaged in discussions about
paying off the Bahamas’ substantial $10 billion national debt, as described by
Lewis. Bankman-Fried’s plan to ease the debt burden aligned with his belief
that the Bahamas’ regulatory environment had the potential to legitimize the
He saw the Bahamas as attractive due to its
progressive regulatory framework. It offered the potential for the
cryptocurrency industry to flourish. However, this shift was not without its
challenges. The Bahamas, heavily reliant on tourism, had been hit hard by the
Bankman-Fried’s vision was to provide the nation with the
financial means to undertake vital infrastructure projects, such as road
improvements and the construction of schools, with greater ease and speed.
Michael Lewis’ biography reveals that Bankman-Fried even discussed this plan in
a meeting with the Prime Minister of the Bahamas, Philip Davis.
In New York, Sam Bankman-Fried’s trial has entered the
second day. Despite the absence of a comprehensive legal framework for
cryptocurrencies in the United States, the Department of Justice (DOJ) contends
that this will not deter the pursuit of fraud charges against Bankman-Fried.
In a filing published today (Wednesday), the DOJ argued that
the existence of specific laws might be relevant in establishing a statutory
duty of care, but the absence of such regulations does not undermine the fact
that customer funds were entrusted to the defendant’s care, and
misappropriation is a violation of existing laws.
This article was written by Jared Kirui at www.financemagnates.com.