- Author Michael Lewis said SBF “didn’t need to know” what cryptocurrency was
- SBF was making “pennies” trading stocks while he worked for Jane Street
- People came to SBF because FTX was the first exchange aimed at institutional traders
Michael Lewis called Sam Bankman-Fried, who testified on Friday and will testify again in court today, the biggest fraud in history. SBF has pled not guilty to seven charges.
CNN talked to Michael Lewis, Bloomberg columnist and author of the book Going Infinite: The Rise and Fall of a New Tycoon, which is about Sam Bankman-Fried.
What is cryptocurrency, actually?
The interview started with the host asking Lewis what cryptocurrency is, essentially. Lewis was very amused, but ultimately said that SBF “didn’t need to know” what cryptocurrency was.
A solution to a nonexistent problem
The expert added that crypto is “a solution looking for a problem.” The first pitch was that it would replace the dollar, which it didn’t. The second pitch was that it was an uncorrelated asset, and it didn’t move around like everything else, but it actually does.
The beginning
SBF was making “pennies” trading stocks while he worked for Jane Street. Stock trading margins are very slim, whereas you can make a huge profit on Bitcoin instantaneously and without risk. This attracted the budding entrepreneur.
What was behind his success?
According to Lewis, it was mainly brazenness. SBF was brave enough to jump into a market that was shady. Lewis said FTX was “like a casino that took a slice out of every transaction.”
What is more, people came to SBF because his exchange was the first one aimed at institutional traders. Sizeable entities from Wall Street came to FTX; SBF was also from Wall Street.
The trick
Banks wouldn’t open accounts for FTX because they didn’t want to be associated with high-risk crypto. However, they opened accounts for Alameda, deceived into thinking it was a research and development firm.
Lewis concluded with valuable insight into the difference between crypto exchanges and stock exchanges. The former are also custodians. They have to hold your funds in cold storage. FTX customers believed that, but instead, SBF held the funds at Alameda Research, his private hedge fund.
