Michael Lewis showing up for an interview should probably one of those ominous signs, like the ravens leaving the Tower of London. When he started this book, Sam Bankman-Fried was the hottest thing in cryptocurrency, a rumpled financial wunderkind who's very lack of charm was charming, who was making money hand over fist, was making crypto legitimate, and using the profits to change the world for the better via his ideology of effective altruism. And then a few months later the whole thing collapsed, as Binance, a competing exchange, began dumping FTX's backing token, and it turned out that Sam's crypto exchange FTX had transferred billions of dollars of its clients' holdings to his trading firm Alameda Research (run by his secret-former-sort-of-poly-girlfriend Caroline Ellison), and that money was gone. FTX suffered a classic bank run, everything fell apart, Sam was arrested, and as of March 2024, sentenced to 25 years in jail.

Fin.

So what the hell actually happened? Where did the money go? Did we learn anything? Who the hell is Sam Bankman-Fried?

One thing that become clears is that Sam was and is a profoundly weird dude, and I say this as member of the Guild of Weird Dudes. He drifted through childhood without any close friends, an outsider even in quantitative environment of Silicon Valley. His guiding principal, that most of what people believe in is bullshit, seems to have been present from a young age. He went to math camp and MIT, where two things happened that set him on his path. First, he met William MacAskill, who converted his general utilitarianism into focused effective altruism, a specific philosophy that argues that smart people should focus on earning as much money as possible to spend on alleviating universal harms (a critique of effective altruism is beyond the scope of this review), and he landed an internship at Jane Street Capital.

Jane Street Capital was a profoundly weird environment that precisely matched Sam's temperament and abilities. It was a place where the employees played games where the major object of manipulation was the rules of the games themselves. Interns were encouraged to bet against each other on everything, finely honing their Bayesian reasoning to sniff out hidden inefficiencies in the market. Sam worked hard at Jane Street, but found it unfulfilling. Bitcoin was entering its second major boom then, and as he studied the the crypto markets, Sam realized that crypto traders were using sticks and stones compared to the financial stealth fighters Jane Street had at its' disposal. If he could capture even a small percentage of the wealth sloshing around cryptocurrency, it would be billions of dollars, enough to make all the effective altruist dreams come true.

So he founded Alameda Research, and then he moved to Hong Kong and founded FTX. And then he moved to the Bahamas and bought millions of dollars of real estate, and donated millions more to various political causes and spent yet more millions on advertising. And then the wheels came off.

Having read the book, for the life of me I cannot understand how the whole thing took off and lasted as long as it did. Alameda Research appeared to make lots of money, but not through any deliberate effort, as both Sam, and Caroline appeared to actively avoid involvement in what they were nominally leading. FTX was mostly coded by one reclusive genius who operated in parallel to the engineering staff, and was just as vulnerable to hacks as any other crypto exchange (perhaps a billion dollars was flat out stolen from FTX by outsiders). There was no org chart, no accounting, no sense of what anybody was doing.

Everybody agrees there was a crime, but if so, Sam and his colleagues at FTX are some of the most incompetent fraudsters in history. At least one of them should have had a plan to rugpull and run, to convert the assets into fiat and disappear into a non-extradition country. For all the expensive tropical real-estate and lurid poly rumors, Sam and co hardly had a good time. They turned the luxury penthouse for the inner circle of effective altruists into a nerd flophouse where the main activity was boardgames. There were no parties on the beaches with models, no Scarface piles of drugs. While Sam rubbed shoulders with the rich and famous, he seemed to take no pleasure in name dropping, seeing it as an entirely transactional venture to advance FTX. During the critical last year, he spent most of the time saying "Yuuuup" on Zoom calls while playing video games on a second monitor. Sam could have had the exact same lifestyle indefinitely on his parent's money for no more effort than typing "Vegan Poly Shared Housing Berkeley" into a search bar, and he wouldn't be disgraced and in jail.

Being scammed by Sam Bankman-Fried seems like being mauled by a golden retriever puppy, and yet it happened. I think there are two reasons. First, his innate total disregard of what other people thought of him, combined with the practiced agreeableness he developed at Jane Street, where he realized that persuasion was mostly wasted effort and just saying "Yes" and then doing whatever was more efficient, operated as a kind of social hack. We're used to social dynamics of desire, of chasing and being chased. Sam never chased people, and when he popped up on the Forbes list out of nowhere, people who should have known better chased him.

Second, (and this is where I get on my soap box), the cryptocurrency ecosystem as a whole is a grotesque fraud. Value is built on belief, on trust. Real money is backed by governments, by banks, and ultimately by the faith that the future will be more prosperous than the present. Bitcoin and Ethereum offer one quote-unquote useful service, which is paying ransomware hackers, but their fantastic run-up in value has inspired a legion of gamblers who hope to earn riches from thin air. All of this "wealth" isn't backed by code, it's backed by faith in the crypto-ecosystem as a whole. And this thing is real money constantly drains out of it, because mining Bitcoin and Ethereum takes a lot of electricity and field-programmable gate arrays, and those can only be bought with actual money. The value of crypto is backed up by the utterly fictitious amounts of stablecoins like Tether, by a constant flow of new suckers, and a desperate desire by those who know to keep the party going.

This is a fun book, but somewhat unsatisfying. Lewis's judgement is a non-judgement, that the whole venture was basically sound and everybody just got confused. The courts clearly disagree. Sam decided from a young age that a lot of what people care about is bullshit. And frankly, as a Weird Dude myself, I'm not going to argue. But the thing about a lot of people is that ultimately, we live in a society, and that means

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