PDF Summary:Going Infinite, by Michael Lewis

In just a few years, Sam Bankman-Fried went from being a relative nobody to the architect of a cryptocurrency empire whose net worth neared $30 billion. But, even quicker than his empire burst onto the scene, it crumbled in November 2022 with the news that his cryptocurrency exchange, FTX, had lost nearly $10 billion of its clients’ money. In Going Infinite (2023), financial journalist Michael Lewis provides a rare glimpse into the inner workings of Bankman-Fried’s meteoric rise and fall. And although Bankman-Fried has been convicted of seven counts of fraud and conspiracy, Lewis suggests that the case against Bankman-Fried is less damning than outsiders believe.

In this guide, we’ll break down Going Infinite into three main parts, first examining Lewis’s portrayal of the enigmatic Bankman-Fried himself before proceeding to the rise and precipitous collapse of his cryptocurrency empire. We’ll also discuss alternative accounts of Bankman-Fried’s actions at FTX and dive deeper into the nature of cryptocurrency that lay at the heart of FTX.

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(Shortform note: Although Modelbot earned money consistently in early-to-mid 2018 by exploiting price disparities between the US and Japanese cryptocurrency markets, its success was short-lived: By the end of 2018, these arbitrage opportunities had vanished as both markets became more efficient, leaving the price of cryptocurrencies identical in both markets.)

The Development and Rise of FTX

Although Alameda Research eventually became wildly successful, as of 2018, Bankman-Fried didn’t believe it was earning enough money for effective altruism—of its $30 million profit that year, Alameda had to pay the majority to former investors, taxes, and severance packages, leaving only $1.5 million to donate to effective altruism causes. Lewis writes that, consequently, Bankman-Fried decided to open FTX, an international cryptocurrency exchange, in April 2019 to earn even more money.

Cryptocurrency exchanges, Lewis explains, provide a platform for purchasing and selling an array of cryptocurrencies for a small fee. They require an immense amount of trust in order for customers to deposit thousands (or even millions) of dollars on the platform. But, as Lewis points out, Bankman-Fried’s personality didn’t instill trust—a social outcast who played video games during crucial meetings wasn’t the person you wanted managing your money. For this reason, Bankman-Fried focused on two key aspects of FTX to develop consumer confidence: its technical superiority and its endorsement deals.

(Shortform note: Although cryptocurrency exchanges crucially depend on trust, widespread hacks to the tune of nearly $4 billion in 2022 have eroded this trust. For instance, North Korean hackers stole over $600 million in crypto from the Ronin Network exchange in March 2022, and FTX’s formerly largest competitor, Binance, suffered a $570 million hack in October 2022.)

FTX’s Technological Superiority

To prove that his new platform was reliable, Lewis says, Bankman-Fried created a cryptocurrency exchange that was technologically superior, especially when it came to futures—contracts that allow customers to make outsized bets on whether cryptocurrencies would rise or fall, using a smaller proportion as collateral. For example, if one Bitcoin was trading at $20,000, you could pay $5,000 as collateral to enter into a futures contract with a seller that obligates you to purchase Bitcoin at $20,000 one month in the future. Then, if Bitcoin rose to $22,000, you would purchase it at $20,000 and immediately sell at $22,000 to net a $2,000 profit (in addition to retaining your collateral). By contrast, if Bitcoin dropped to $16,000, the $4,000 loss would be taken out of your collateral.

(Shortform note: Futures contracts can be settled in two ways: through physical delivery or with cash. Physical deliveries mean that, at the contract’s end date, the buyer receives the cryptocurrency and pays the seller the agreed price—in the previous example, the buyer would pay $20,000 and receive one Bitcoin, which he could sell if he chose to. Cash settlements, by contrast, involve the buyer and seller each receiving their net profit (or loss) rather than the cryptocurrency. For instance, if Bitcoin rose to $22,000, the seller would wire the buyer the $2,000 difference between the agreed price of $20,000 and the current price of $22,000, rather than sending the buyer one Bitcoin for $20,000 and making the buyer sell it to earn $2,000.)

Before FTX, cryptocurrency exchanges were often liable for losses that exceeded their customers’ collaterals. Returning to the previous example, if Bitcoin dropped from $20,000 to $13,000, your $5,000 collateral wouldn’t be able to cover the loss. Thus, these losses were often socialized, meaning they were taken out of other customers’ accounts. However, Bankman-Fried’s FTX cofounder, coding expert Gary Wang, designed a new system that instantly liquidated losses that outstripped customers’ collateral, which avoided socialized losses. Thus, FTX instantly became more attractive than other exchanges without that feature.

(Shortform note: Further complicating the issue of collaterals on cryptocurrency exchanges is the fact that many such exchanges now allow you to use crypto itself as collateral. For example, if you wanted to purchase a futures contract for $20,000 worth of Ethereum, you could use $5,000 worth of Bitcoin as collateral for that contract. This practice makes it more likely that your losses could exceed your collateral, since your collateral itself could drop in value—for instance, if Bitcoin dropped such that your initial $5,000 collateral was now only worth $3,000, then a drop in Ethereum’s price of only $3,000 (rather than the initial $5,000) would max out your collateral.)

FTX’s Endorsement Deals

Lewis writes that Bankman-Fried also sought to generate customer trust through endorsement deals with celebrities whose personalities were more magnetic than his own. For example, he paid Tom Brady $55 million for 20 hours of his time, in addition to paying Steph Curry $31.5 million and Shark Tank entrepreneur Kevin O’Leary nearly $16 million. Bankman-Fried understood that these figures would be more appealing to his target audience—younger men—than he could ever hope to be.

(Shortform note: In the wake of FTX’s collapse, FTX’s celebrity spokespersons were hit with a class-action lawsuit, including Brady and comedian Larry David. The plaintiffs alleged that because FTX was a platform for trading securities, these celebrities were required by the US Securities and Exchange Commission (SEC) to disclose their financial agreements with FTX, unlike normal endorsement deals that require no such disclosure.)

Thus, as Lewis relates, Bankman-Fried managed to develop another company that was on a similar scale to Alameda Research—in both 2020 and 2021, FTX earned over a billion dollars annually in revenue, becoming the world’s second largest cryptocurrency exchange in the process. In 2021, Bankman-Fried even raised $2.3 billion from venture capitalists in exchange for a 6% stake in FTX, suggesting that FTX was then worth around $40 billion.

(Shortform note: In light of FTX’s meteoric rise in the cryptocurrency world, some financial analysts—such as Sequoia Capital partner Michelle Bailhe—thought that Bankman-Fried had a legitimate chance to become the world’s first trillionaire. Following his arrest, however, Bankman-Fried’s net worth plummeted to a low of $4 million in October 2023.)

FTX’s Lack of Organizational Structure

Although FTX became the cornerstone of Bankman-Fried’s cryptocurrency empire, Lewis argues that FTX nonetheless suffered from a nonexistent organizational structure. Lewis reports that, according to FTX’s company psychiatrist George Lerner, Bankman-Fried notoriously hated organization charts, refusing to assign anyone in FTX formal titles—even as the company ballooned to over 300 employees.

Lerner thus attempted to develop an organizational chart himself, which to date is the only organizational chart of FTX. He found that, despite its financial success, the company was structurally in disarray: It had no chief financial officer, no chief risk officer, and nobody working in human resources. And, as we’ll soon see, this total lack of structure made it difficult for any of FTX’s employees to see the concrete reasons behind its later collapse.

(Shortform note: According to experts, a lack of initial organization can help startups like FTX grow and evolve faster than their competitors. But as startups grow into larger entities, it becomes more necessary to develop a hierarchical organizational structure that clarifies who reports to whom. Without such an organizational structure, employees are likely to be confused about the tasks assigned to them and are unsure who they should ask for clarification. Thus, although hierarchical organization charts can feel stuffy and inefficient, they often prevent burgeoning startups from falling into disarray.)

Bankman-Fried’s Uses for His Newfound Wealth

Having built his empire, Bankman-Fried quickly became one of the world’s wealthiest individuals—Lewis reports that, in November 2021, Forbes estimated Bankman-Fried was worth $22.5 billion, making him the 60th wealthiest person on Earth. Lewis writes that Bankman-Fried had three primary uses for his wealth, all of which were ultimately geared toward effective altruism: Lobbying politicians to further his business interests, donating money to mitigate existential threats, and minimizing the influence of Donald Trump.

Use #1: Promoting His Business Interests

First, Bankman-Fried donated to politicians and political groups with the aim of allowing FTX users to trade futures contracts in the US (where it was illegal, despite being legal in other countries). Although Lewis notes that Bankman-Fried donated the least amount of money to this particular aim—for instance, a million dollars here and there—Bankman-Fried would’ve been able to extend his crypto hegemony into the US if he succeeded, thus earning him more money that he could donate.

(Shortform note: In the wake of FTX’s collapse, other cryptocurrency companies have continued to lobby Congress to treat cryptocurrencies as a commodity—an interchangeable good, like water or gold—rather than a security—tradable financial assets used to raise capital for a company—so that the US Securities and Exchange Commission (SEC) has less regulatory power over cryptocurrencies. However, because of the cryptocurrency industry’s association with Bankman-Fried, cryptocurrency companies have struggled to curry political favor since Bankman-Fried’s arrest.)

Use #2: Preventing Existential Threats

Next, Bankman-Fried poured large amounts of money into causes designed to fight existential threats, such as an asteroid destroying the earth, or the possibility of AI eliminating our species. Lewis observes that, in particular, Bankman-Fried focused on pandemic prevention in the wake of the Covid-19 pandemic. For instance, he met with Senate Minority Leader Mitch McConnell (himself a polio survivor) to discuss the possibility of funding $10 billion in the US Department of Health and Human Services for pandemic research—Bankman-Fried estimated that $100 billion would actually be needed, but $10 billion was a good start.

(Shortform note: In addition to pandemics and AI-driven apocalypses, experts warn of several other potential existential threats to humanity. For instance, many believe that climate change poses an outsized threat with global temperatures steadily rising. Additionally, the prospect of nuclear catastrophe continues to loom with China increasing its nuclear arsenal and Russia threatening to use nuclear weapons in Ukraine.)

Bankman-Fried’s reasoning in attempting to prevent existential threats was straightforward: Even if these existential threats were unlikely, they would cause such pervasive death that on balance, trying to prevent them still yielded an astronomically high number of expected lives saved. For example, even if there was only a 1% chance of a pandemic that wiped out (say) 5 billion human lives, if we could guarantee that such a pandemic didn’t occur, we would be saving an expected 50 million lives (5 billion times .01).

(Shortform note: Even within the effective altruism movement, there are varying opinions as to how probable existential threats are in the next century, and thus how important it is to mitigate those threats. For example, MacAskill places the odds of human extinction in the next century at around 1%, while another influential effective altruist, Toby Ord, places the odds at around one-in-six, or 17%.)

Use #3: Minimizing the Influence of Donald Trump

Finally, Lewis relates that Bankman-Fried used his wealth to combat Donald Trump’s influence on US politics and what Bankman-Fried saw as Trump’s assault on US elections. Again, Mitch McConnell was a surprising ally: Bankman-Fried donated millions of dollars to McConnell to help defeat many of Trump’s preferred candidates for the US Senate. Further, Bankman-Fried’s team even reached out to Trump directly to see whether it would be legal to pay Trump to sit out the next election, and if so, whether Trump was interested—according to Bankman-Fried’s team, Trump would have considered not running for re-election for $5 billion.

(Shortform note: Legal experts remain unclear about the legality of potentially paying a political candidate to withdraw from an election. For instance, Pace Law Professor Jim Fishman argues that although the law prohibits bribing someone to win a vote or receive political favor, paying someone to sit out an election is conceptually distinct from such a bribe. Yale Law Professor Stephen Carter, however, contends that such a payment would probably be illegal on the basis of precedent, as a South Carolina County Council member was cited in 2016 for expressing a willingness to drop out of the council race for $20,000.)

The Collapse of Bankman-Fried’s Empire

Although Bankman-Fried’s cryptocurrency empire skyrocketed in just a few years, its collapse was even more sudden, lasting just a few days. In this section, we’ll examine Lewis’s account of the downfall of FTX, focusing on three key aspects: The precipitating events on November 6, 2022, that caused mass withdrawals from FTX, the missing $8.8 billion in customer deposits that FTX seemingly lost, and the aftermath of this massive scandal.

Precipitating Events Leading to the Collapse

Although FTX’s downfall seemed instantaneous to outsiders, Lewis writes that a series of cascading events precipitated the collapse. We’ll focus on three such events: A tweet from FTX’s largest competitor that undermined confidence in FTX, a response from Alameda’s CEO Caroline Ellison that exacerbated the issue, and mass withdrawals by FTX users.

Event #1: Changpeng Zhao’s Tweet

Lewis relates that, on November 6, 2022, Changpeng Zhao (CZ)—the CEO of the world’s largest cryptocurrency exchange, Binance—tweeted his intent to sell his shares of FTT (FTX’s own cryptocurrency that functioned as equity in FTX). In justifying his decision, CZ cited only “recent revelations” that convinced him to sell FTT. According to Lewis, this tweet caused many other holders of FTT to sell, thus dropping FTT’s price, as they reasoned that CZ wouldn’t be selling without good reason.

(Shortform note: In early October 2023, a class-action lawsuit was filed against CZ for this tweet, which plaintiffs alleged represented an attempt to monopolize the cryptocurrency market by attacking FTX. Moreover, the plaintiffs argued that the language in CZ’s tweet was misleading because he had already sold his shares of FTT by the time he tweeted. For this reason, the plaintiffs claimed that CZ’s tweet was nothing but an illegal attempt to drive FTT’s price down.)

Event #2: Caroline Ellison’s Response

In response to CZ’s tweet, Alameda Research CEO Caroline Ellison—Bankman-Fried’s former romantic partner, who had only become CEO in August 2022—attempted to stabilize FTT’s price with a tweet of her own. Lewis notes that, only 16 minutes after CZ’s initial tweet, Ellison tagged CZ in a tweet offering to repurchase his FTT tokens at $22 per share—the market price at which FTT was trading. According to Lewis, Ellison’s intention was to prevent FTT from tanking through a show of confidence in FTT’s value.

(Shortform note: Ellison’s offer was functionally similar to that of a stock buyback, in which a publicly traded company repurchases shares in itself from investors. Experts note that, in normal circumstances, investors often perceive stock buybacks as an expression of confidence on behalf of management. In such cases, the company’s stock will often rise in response to this perceived confidence.)

However, Lewis points out that Ellison’s tweet had the opposite effect. Rather than quelling investors’ fears, it caused them to ask a question: Why was Alameda Research, the largest owner of FTT, so invested in keeping its price at $22? In response, investors drew the conclusion that Alameda must be using FTT as collateral to borrow money, and thus needed its price to stay at $22 to avoid a margin call—a demand from lenders to increase collateral value. The perception that Alameda had been gambling with FTT in turn caused massive sales of FTT, and its price dropped from $22 to $7 overnight.

(Shortform note: Since Ellison’s tweet and FTX's bankruptcy declaration in November 2022, FTT’s price has dropped even further. Experts point out that because FTT was functionally the same as equity in FTX, it’s possible that FTT’s price will eventually drop to zero.)

Event #3: Mass Withdrawals By FTX Users

Finally, because FTT functioned as stock in FTX, its sharp drop in value led FTX users to withdraw money from FTX in droves. According to Lewis, on the night of Sunday, November 6, FTX users were withdrawing $100 million from FTX per hour, totaling $2 billion over the course of the day. Then, on Monday, November 7, FTX users tried to withdraw another $4 billion. Lewis relates that, by Tuesday morning, FTX had already issued $5 billion in withdrawals, with several billion more dollars in “pending” withdrawals.

(Shortform note: The mass withdrawals that eventually sank FTX are structurally similar to the bank run in March 2023 that shuttered Silicon Valley Bank (SVB) in California. On March 8, 2023, SVB announced that it hoped to raise about $2 billion in capital after taking a $2 billion loss to sell its supply of government bonds after the federal interest rate rose. However, this news caused investors to panic about the possibility of SVB going under, spurring mass withdrawals to the tune of $42 billion and leaving SVB $958 million short. Two days later, on March 10, 2023, California regulators officially intervened and shut down SVB.)

The Missing Money at the Heart of the Collapse

However, Lewis points out that withdrawals shouldn’t have caused a catastrophe—though they cut into FTX’s short-term trading volume, that should have been short-lived once customers realized FTX was stable and redeposited their money. In reality, the opposite occurred: After processing $5 billion in withdrawals, FTX ceased allowing withdrawals because it lacked the money to pay the remaining $8.8 billion customers were asking for. In other words, customers who had collectively deposited a total of nearly $9 billion at FTX were told their money was gone.

As Lewis relates, it became obvious that FTX lacked the money to process further withdrawals by Tuesday, when it simply stopped processing further withdrawal requests. One week afterward, FTX’s employees had overwhelmingly fled its Bahamas headquarters, fearing legal retribution from Bahamas authorities. However, Lewis notes that FTX’s Chief Operating Officer, Constance Wang, stayed in the Bahamas with one goal—to find what happened to the missing $8.8 billion so that she could act as a witness in the case against Bankman-Fried.

(Shortform note: Although Lewis writes that Wang agreed to serve as a witness for the US Department of Justice’s case against Bankman-Fried, the prosecution ultimately refrained from calling her to the witness stand. The key witnesses for the prosecution, experts report, were Caroline Ellison, Gary Wang, and Nishad Singh.)

Lewis says that Wang found a tentative answer when scouring financial documents for Alameda Research (which shared the same headquarters as FTX). According to these documents, over $8.8 billion was listed under Alameda Research’s liabilities as “customer deposits,” even though as a private trading firm, it shouldn’t have had any customer deposits. In other words, the documents suggested that FTX had been using customer deposits in Bankman-Fried’s private trading fund for Alameda Research. But, puzzlingly, the same documents showed only $3 billion in liquid assets for Alameda Research, meaning $6 billion remained unaccounted for. Hence, these documents just produced another question: What happened to that $6 billion?

(Shortform note: Lewis doesn’t clarify that FTX’s act of sending customer funds to another company without customer consent is generally considered illegal, according to experts. Moreover, financial regulations require trading platforms like FTX to have at least as much money available as its customers have deposited, so FTX also violated these regulations.)

Bankman-Fried’s Partial Explanation of the Missing $6 Billion

Lewis notes that in Bankman-Fried’s conversations with Wang, Bankman-Fried provided a plausible explanation as to why FTX’s customer deposits were stored in Alameda’s trading fund. According to Bankman-Fried, FTX had been unable to acquire a legitimate bank account because traditional banks were wary of cryptocurrency. Thus, FTX had nowhere to store its customer deposits, and so he decided to use Alameda as a functional bank for FTX’s deposits, with the caveat that the money was supposed to go untouched within Alameda.

But, Lewis points out that although this explanation answers why FTX’s customer deposits were stored in Alameda, it doesn’t answer where the missing $6 billion went. Eventually, Bankman-Fried told Lewis a small part of the story: In 2021, FTX had lost $1 billion to hackers, and decided to keep quiet about it to discourage further hacks. Still, that left $5 billion unaccounted for, with no plausible explanation—Bankman-Fried flatly denied that Alameda Research had lost the $5 billion with risky investments, and Lewis notes that such massive losses in an elite quantitative trading firm would be unheard of. So, Lewis suggests, the question of the missing $5 billion seemed like an unsolvable mystery.

The Prosecution’s Account of the Missing Billions

Lewis doesn’t discuss the account offered by Bankman-Fried’s prosecutors, who opted for a straightforward story: Bankman-Fried stole billions of dollars from FTX’s customers, using those funds to grow his personal wealth and funnel money toward his preferred causes, such as political campaigns and new cryptocurrencies. The prosecutors argued that Bankman-Fried knowingly and intentionally committed fraud and attempted to silence FTX employees who raised concerns, as shown by his decision to fire Julie Schoening, the head of an FTX subsidiary who discovered the code that allowed Alameda Research to borrow from FTX.

Bankman-Fried’s defense, however, painted a different picture. They argued that, rather than a criminal mastermind, Bankman-Fried was more of an incompetent executive who made serious mistakes, but did so in good faith. Thus, they contended that Bankman-Fried couldn't have been guilty of fraud, since a fraud conviction requires demonstrable intent to defraud victims.

The Aftermath and Lewis’s Verdict on the Collapse

On November 11, in the immediate aftermath of FTX’s collapse, Bankman-Fried formally declared bankruptcy—his company that had been recently valued at $40 billion was insolvent. And although public onlookers were quick to assume Bankman-Fried had committed fraud, Lewis argues that several factors undermine this narrative. We’ll examine two such factors: The findings of John Ray, FTX’s new CEO tasked with helping US officials find the missing money, and Bankman-Fried’s decision to go to trial.

Factor #1: John Ray’s Investigation

After Bankman-Fried declared bankruptcy, FTX’s lawyers from Sullivan & Cromwell appointed John Ray as interim CEO of FTX. Ray’s task, Lewis relates, was to find as much of FTX’s missing funds as possible to return to its creditors. And, according to Lewis, Ray managed to find significant portions of the missing funds even though he lacked experience with cryptocurrencies. For example, Ray found the billion dollars stolen by a rogue hacker in Mauritius, and by his own report, he recovered a total of $7 billion by June 2023. In light of Ray’s success, Lewis concludes that the money might not be missing after all.

(Shortform note: It’s unclear how, according to Lewis, Ray has already recovered $7 billion (with several billion more on the way) given that FTX was only $6 billion in the hole by Lewis’s own account—if so, then Ray has actually found additional money beyond what FTX was missing. However, one possible explanation that Lewis doesn’t explore is that FTX’s accounting data was so muddled that it’s difficult to determine exactly how much was missing in the first place.)

Factor #2: Bankman-Fried’s Decision to Go to Trial

Further, Lewis suggests that Bankman-Fried’s willingness to stand trial is evidence of his innocence because it’d be irrational to stand trial if he were guilty. Lewis explains that, in December 2022, Bankman-Fried was extradited from the Bahamas to the US, where he demanded to go to trial rather than accept a plea deal.

(Shortform note: Although Lewis writes as if a plea deal was a viable option for Bankman-Fried, the prosecutor for Bankman-Fried’s case has clarified that the two parties never discussed the possibility of a plea deal, much less had an official plea deal on the table.)

Lewis points out that, of those who go to trial against the US government, less than 1% are acquitted, with 90% instead opting to take a plea deal. For Bankman-Fried’s decision to go to trial to make sense, he would need a compelling defense. So, although Bankman-Fried’s critics act as if his conviction was an unsurprising verdict, Lewis suggests that their faith in Bankman-Fried’s guilt might have been mistaken.

(Shortform note: Months before Bankman-Fried was found guilty of fraud, he was sent to jail for witness tampering—Judge Lewis Kaplan revoked Bankman-Fried’s bail in August 2023, finding probable cause that Bankman-Fried had intentionally tried to discredit Caroline Ellison, a key witness against him, by leaking entries from her private journal to members of the press. Consequently, Bankman-Fried had to spend his pre-trial period in jail, albeit with internet access to prepare for his defense.)