Crypto Kid
Sam Bankman-Fried (SBF) viewed himself as the J.P.
Morgan of crypto currency, instead he was far more like P.T. Barnum; a huckster
of the first order. He is now on trial for multiple counts of fraud. I didn’t
like crypto currency before I read this book; I now like it even less. Author
Michael Lewis really let me down in his trying to make a hero out of SBF.
Nothing could be further from the truth as SBF comes off as the pampered child
of the Stanford bubble he grew up in with his too indulgent law professor
parents. Even at age 31 he held on to his childhood stuffed animal.
Lewis chronicles his career from MIT to Jane Street
Capital where he earns his trader chops and then on to trading crypto currency
in Hong Kong. He then formed his Alameda Research and his market maker FTX. Because
there were no financial controls it was very easy to intermix customer deposits
at FTX with his hedge fund which was nominally run by his on and off paramour
Caroline Ellison, another piece of work.
,
Some of that money was invested in Bahamas real estate
for his firm and for a fancy house for his parents. The money also found its
way to Washington D.C. where SBF became a leading contributor to the Democratic
Party and anti-Trump Republicans and boy did that buy him access.
SBF had an unusually high degree of tolerance for
risk. All he cared about was a positive expected value, no matter how high the
probability of losing was. Thus, he totally ignored the Kelly Criterion for the
proper sizing of investments. His goal was to get as rich as possible so that
he could give away his fortune to save the world. He operated under the
principal of “effective altruism” in order to maximize the greatest good for
the maximum number of people. He professes to love humanity, by he really
doesn’t like people as individuals. Further he virtue signals by his vegan
diet, unruly hair, and dressing in shorts.
To me his effective altruism is nothing but a
marketing hype to justify the huge fortune he was creating which peaked at
around $40 billion before the collapse. Somehow, he managed to lose $8 billion
of client funds and therein lies the core of his fraud.
Too conclude Michael Lewis was snowed by Sam Bankman Fried. A more critical look would really have improved this book.
For the full Amazon Review see: Crypto Kid (amazon.com)
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