Sam, the founder of FTX exchange, made $25 billion in 4 years.
Unfortunately, it only took him 10 days to go bankrupt.
$8 billion from customers, nowhere to be found.
A month later, the total value of all cryptocurrencies evaporated by more than $2 trillion.
The collapse of FTX marks the end of the cryptocurrency boom.
1. Mathematics shapes our worldview
Samuel Bankman-Freed, born in 1992, is the fastest earner in history.
Make $25 billion in 4 years, then spend $5.2 million to get Biden in office, and spend $5 billion to get Trump to give up the presidential race.
Unfortunately, within 10 days, his wealth turned into negative $8 billion.
A month later, he wiped out $2 trillion from the entire industry.
He was less than 30 years old at that time.
Seeing this, you will definitely guess that this person must be involved in cryptocurrency.
But what’s interesting is that this most dazzling tycoon in the currency circle once claimed that he knew nothing about cryptocurrency.
The abbreviation of Samuel Bankman-Fried's English name is SBF.
His company went bankrupt, leaving $8 billion in client funds missing.
I guess that among the customers who have suffered losses, if they speak Chinese, they would affectionately call him SB.
English-speaking customers, on the other hand, prefer to call him f***.
Everyone calls him Sam or SBF, but I don't want to sound like I'm cursing, so we'll just call him Sam from now on.
Sam was born on March 6, 1992. Both of his parents are famous law professors at Stanford University, a prestigious American university. He has been considered gifted since he was a child and particularly likes mathematics.
It is mathematics that shapes Sam's worldview.
When he was in middle school, he argued with his English teacher about why Shakespeare could not be the greatest writer of all time.
The argument goes as follows: when Shakespeare was born, the whole of Europe was basically full of farmers, and the number of literate people would not exceed 10 million at most.
Today, the world’s literate population exceeds 7.2 billion.
Therefore, it is a very low probability event that the greatest writer in history was born in 1564.
As a mathematical genius, Sam's statement is different from my simple explanation. He claims to use Bayesian prior to prove this point.
When he grew up, Sam studied physics at MIT, and in 2014, he went to a financial company.
This was not a traditional Wall Street firm, but a high-frequency trading firm that was emerging in those years.
In this kind of algorithm-dominated trading, an advantage of a few milliseconds can be worth billions of dollars.
This speed cannot generate any real value, but can bring huge and stable profits.
In 2014, the financial statements of the company that Sam joined showed that in the company's 1,238 days of trading, there was only one day of loss.
Of course, algorithms are responsible for collecting and calculating information, but it is still up to humans to decide which information is profitable.
There are many magical logical connections in the new experience on Wall Street.
For example, in June 2014, the World Cup was held in Brazil, and four months later, the presidential election was held.
Some financial companies made a fortune by taking advantage of this incident.
Of course, they are not gambling.
Instead, it was found that every time the Brazilian football team wins a game, Brazilians will be happy with the status quo, and being happy with the status quo will increase the possibility of the current President Dilma Rousseff being re-elected.
The Brazilian market has great distrust of President Rousseff, who is embroiled in corruption scandals, so the stock market will plummet.
In this way, even if you know the result of the game a few milliseconds in advance, you can make a fortune in the stock market.
This strange connection, of course, does not only occur in Brazil; it also happened in the United States in 2016.
At that time, not only the US, but also the global stock market will fluctuate due to the fluctuations in Trump's election situation.
For high-frequency traders, volatility is an opportunity to make a fortune.
A team led by Sam discovered that there has been no particularly timely dynamic publishing system for the US presidential election.
Financial markets learn about this like ordinary people do, by watching the news on TV.
Sam described that the news anchor took fifteen seconds each time to walk towards the map of the United States with the election campaign marked on it.
Every step he takes can lead to billions of dollars in transactions.
So Sam built a model and sent a large number of people to polling sites in various places.
They get polling data faster than anyone else.
The evening of November 8, 2016, was the night of the US election.
The effect is very obvious. When there is good news about Trump, the stock market falls. When there is good news about Hillary, the stock market rises.
The company would buy or sell U.S. and emerging market stocks.
At the end of the day, Sam's team had made tens of billions of dollars in stock market transactions.
Because Trump was elected in the end, the company concluded that the stock market would plummet, and they shorted a large amount of stocks.
The team estimated that they made at least $300 million in net profit that day.
So Sam happily went to sleep for three hours.
But he underestimated the faith of the capital market. Since he could not resist, he just closed his eyes and enjoyed it.
In these three hours, the market went from resistance to welcome.
When Sam returned to the company, he found that the $300 million profit had turned into a $300 million loss.
The most profitable deal in the company's history turned into the most losing deal.
Sam is a Democratic supporter, and he will get super entangled with American politics, but that's a story for another time.
Because he is so close to Biden and Trump, he needs a lot of money.
He doesn't have much money yet.
2. The wealth storm is coming
In 2017, Sam resigned from the company and started his own business.
Sam is featured on the cover of Fortune magazine
The hot topic this year is, of course, cryptocurrency.
In 2017, the total value of all cryptocurrencies in the world soared from $15 billion to $760 billion.
Around $1 billion worth of cryptocurrencies are traded every day.
As of the end of 2018, there were 2,177 different tokens in circulation.
Some are high like Bitcoin, with a market cap of $60 billion, and some are low like a SHADE coin, with a total value of $20.
There is also the Sexcoin coin, which is said to be mainly designed to make it easier for people to buy sex toys.
Another PUTinCoin is a tribute to the "Russian people and their president."
But Wall Street is still waiting and no one is trading cryptocurrencies at high frequencies.
Although Sam knew nothing about cryptocurrency, and he himself said that he didn't quite understand it until he went bankrupt.
But this did not prevent Sam from feeling that he had discovered this highlight.
So he did it. At the end of December 2017, Sam founded a new company called Almida Institute, which specializes in high-frequency trading of cryptocurrencies.
His calculation was correct. In 2018, this newly established company with only a dozen employees made a profit of more than 30 million US dollars.
But earning this little in a year is really too slow.
Sam was not satisfied. He found that in this new way of playing, no matter how smart a trader was, he would not be the top one.
You can really make big money by building your own cryptocurrency exchange and then issuing your own tokens on the trading platform.
In May 2018, Sam's exchange began operating, which later became the famous FTX.
FTX soon issued its own token called FTT.
FTT is not a cryptocurrency in the serious sense. It is a bit like a stock in the FTX exchange, but without full equity.
Many people compare it to shopping mall points.
But this point was quickly hyped up, and its value increased dozens of times in a few months.
Now, Sam's door to wealth was officially opened.
In 2018, global stocks traded $600 billion per day and cryptocurrencies traded $200 billion per day.
In 18 months, FTX went from nothing to become the fifth largest cryptocurrency exchange in the world.
From the summer of 2020 to the spring of 2021, through four rounds of financing, approximately 150 venture capital firms bought approximately 6% of the company's shares for US$2.3 billion.
They can only receive dividends, have no board seats, and have no control.
So in 2022, more than four years after starting his business, Sam, who is less than 30 years old, has assets valued at more than 25 billion US dollars.
We can do the math: 6.2 billion U.S. dollars a year, 17 million U.S. dollars a day, equals 120 million RMB a day.
He also has full control over all capital operations of the FTX exchange, as well as his previous quantitative trading firm, the Almida Institute.
Market value exceeds $80 billion.
Forbes magazine exclaimed that the speed at which this man makes money is only comparable to that of Mark Zuckerberg, who founded Facebook.
Also in 2022, Sam told reporters in an interview that at some point, based on the market price of cryptocurrency at the time, his total assets reached $100 billion.
Naturally, Sam has become the world's top cryptocurrency hero.
Young, unkempt, with a signature shaggy hair, he has publicly claimed countless times to be an altruist.
He said his ultimate goal is to make enough money to donate most of it to prevent pandemics and stop runaway artificial intelligence from destroying humanity.
Take January 22, 2022, for example. His typical day was like this: having breakfast in Los Angeles with company spokesperson Shaquille O'Neal, and then discussing investments with the prime minister of an Eastern European country in Washington.
I had dinner with the CEO of Goldman Sachs in New York, and he had seriously considered acquiring Goldman Sachs.
At night, he returned to Los Angeles and was invited to a party.
The casual Sam went there in big shorts and a T-shirt.
On the back lawn, he encountered Hillary Clinton, Leonardo DiCaprio, Orlando Bloom, Jeff Bezos, at least four Kardashians, and at least 60 other celebrities.
Everyone expressed their desire to get to know Sam's company better.
In practice, this requirement cannot be achieved.
Because even Sam himself doesn't understand his own company.
The two companies under his name basically have no clear financial statements and have never held board meetings.
Even the most basic organizational structure does not exist.
In a company, the only organizational chart is the one that the company's psychologist figured out himself.
Because psychologists believe that an employee’s mental condition is related to who he reports to.
The main feature of the company's organizational structure is that you can report to whomever you want.
According to the psychiatrist’s observations, 24 people reported directly to Sam.
These people do not include chief financial officers, chief risk officers or heads of human resources.
Because there are no such positions in the company.
There is a CTO, and in a normal cryptocurrency-related company, there will be a group of programmers reporting to the CTO.
But at FTX, no one reports to the CTO.
Because he is not popular.
Another person has neither shares in the company nor receives salary from the company.
Yet somehow he was in charge of all international operations, with 27 employees reporting to him.
There are many such things. This place is more like a student club than a company.
But even so, Sam still stands at the top of the business hierarchy in all aspects.
In February of that year, he gave a virtual speech to the Economic Club of New York.
In the previous 115 years of history, those who were qualified to speak at this club were kings, prime ministers and presidents of various countries, Jeff Bezos of Amazon and Jamie Dimon of JPMorgan Chase, as well as central bank governors, CEOs of large companies, and so on.
These speeches will have a great impact on the subsequent market.
As the 29-year-old cryptocurrency king leaned back in a gaming chair and spoke via Zoom.
A reporter was allowed to sit behind him and watch.
The reporter said he would never forget this incident.
The reporter was impressed, and it had nothing to do with the content of Sam's speech.
Instead, during the question-and-answer session at the end of the speech, Sam opened a video game while answering, selected a hero character, and started fighting.
"I expect the U.S. economy to see significant growth."
While Sam was performing a heroic magic, he was also answering questions from a boss of a listed company sincerely.
3. How do cryptocurrency tycoons spend their money?
As a successful person, Sam makes money quickly and spends it quickly.
To be fair, he didn't seem to spend much on himself.
He spends most of the day working and sometimes sleeps on a beanbag in the office at night.
Other times, he retreats to the apartment, or dorm, he shares with 10 other co-workers.
Sam's dormitory in the Bahamas
Of course, this apartment is 500 square meters in size and is worth 30 million US dollars.
"It doesn't affect his lifestyle because he doesn't have one," a former colleague said.
But Sam is definitely not a frugal person.
In September 2021, Sam moved the company to the Bahamas and bought a 20,000 square meter piece of land to build a new company headquarters.
The architect had never met Sam, but he was given a copy of what was said to be Sam's requirements.
First, when looking down from the air, the entire building should be an F shape. Second, when looking from the ground, the building should be shaped like Sam's fluffy hair.
The third is to design a huge atrium and place a tungsten cube.
For some reason, dense metal tungsten is particularly popular in the cryptocurrency circle.
A few months later, at the acceptance ceremony, the architect finally met Sam and asked if these were Sam's ideas.
Sam knew nothing about this and told the architect that his only requirement for the building was that it have a badminton court.
In order to meet the above requirements, the building cost a total of $300 million.
Of course, $300 million is just a drop in the bucket, and most of the money is used for investment and marketing.
Over three years, Sam spent $5 billion on 300 investment portfolios.
The money was spent very casually, with decisions taking an average of three days for investments of several hundred million dollars.
When Musk acquired Twitter, Sam also bought $100 million of Twitter stock. Later, he realized that he could not compete with Musk, and the $100 million was completely forgotten.
Another part of the money was spent on FTX's marketing and promotion. The company spent a lot of money on American basketball, baseball, and football, and hired a bunch of celebrities to endorse it.
In 2022, Sam aired an ad during the American Super Bowl that cost about $20 million to produce.
This is probably one of the most expensive advertisements in American advertising history.
Of course, as a big American businessman, Sam would not miss the political game.
