2min chapter

The FTX catastrophe (with Byrne Hobart, Vipul Naik, Maomao Hu, Marcus Abramovich, and Ozzie Gooen)

Clearer Thinking with Spencer Greenberg

notes

CHAPTER

Is That What Created Sam's Early Wealth?

SPF desperately wanted to do the Korea arbitrage, and we spent quite a bit of time coming up with any number of outlandish tactics that might enable us to do so. The best we could do was predict which direction the premium would go and trade into KRW and then back out of it accordingly. We were able to get a Japanese entity set up, and we did successfully trade on the Japan arbitrage. As far as I know, we didn't break any laws in doing so, but I wasn't directly involved in the operational side of it. My recollection is that we made something like 10 to 30 million dollars, approximately 90 percent CI off of that arb in total.

00:00

Transcript

Episode notes

What the heck happened with FTX and Sam Bankman-Fried? Were there early warning signs that most people failed to notice? What could've been done differently, and by whom? What effects will this have on the EA movement going forward?

Timestamps:

00:01:37 — Intro & timeline
00:51:48 — Byrne Hobart
01:39:52 — Vipul Naik
02:18:35 — Maomao Hu
02:41:19 — Marcus Abramovitch
02:49:38 — Ozzie Gooen
03:21:40 — Wrap-up & outro

Byrne Hobart writes The Diff, a newsletter covering inflections in finance and tech, which has 47,000+ readers. Previously he worked at a hedge fund covering Internet and media companies. Follow Byrne on Twitter at @ByrneHobart or subscribe to The Diff at thediff.co.

Vipul Naik holds a PhD in mathematics from the University of Chicago and is currently the head of data science at Equator Therapeutics, a drug discovery startup. He previously worked at a tech startup called LiftIgniter and then at The Arena Group, a media / tech company that acquired LiftIgniter. Learn more about him at his website, vipulnaik.com.

Maomao Hu is a blockchain, fintech, and AI entrepreneur and thought leader. He has been involved in organizations ranging from leading investment banks to new startups, to solve both microstructure problems like market surveillance and macrostructure problems like capital allocation. Currently, he leads development and quantitative research at asset manager Zerocap. Learn more about him at his website, thefirenexttime.com.

Marcus Abramovich is a managing partner at Enlightenment Ventures, an EA-aligned cryptocurrency hedge fund. Marcus also leads a Facebook group and Discord community of effective altruists focused on accumulating capital to donate to EA causes, and advises several cryptocurrency projects. Marcus discovered effective altruism as a PhD candidate at the University of Waterloo and professional poker player. Email him at marcus.s.abramovitch@gmail.com.

Ozzie Gooen is the president of The Quantified Uncertainty Research Institute. He has a background in programming and research. He previously founded Guesstimate and worked at the Future of Humanity Institute at Oxford. Follow him on Twitter at @ozziegooen or learn more about his current work at quantifieduncertainty.org.

Further Reading:

"Clarifications on diminishing returns and risk aversion in giving" by Rob Wiblin @ the EA forum on why he disagrees with the SBF's risk-taking approach [link]

References:

0xhonky. (November 13, 2022, 03:12 AM UTC). https://twitter.com/0xhonky/status/1591630071915483136. Twitter. [link]
alamedatrabucco. (April 22, 2021, 10:37 AM UTC). https://twitter.com/alamedatrabucco/status/1385180941186789384. Twitter. [link]
Allison, I.. (November 2, 2022). Divisions in Sam Bankman-Fried's Crypto Empire Blur on His Trading Titan Alameda's Balance Sheet. Coindesk. [link]
Austin. (November 14, 2022). In Defense of SBF. Effective Altruism Forum. [link]
autismcapital. (November 12, 2022, 07:33 AM UTC). https://twitter.com/autismcapital/status/1591333446995283969. Twitter. [link]
Berwick, A.. (November 13, 2022). Exclusive: At least $1 billion of client funds missing at failed crypto firm FTX. Reuters. [link]
carolinecapital. (April 5, 2021, 11:41 AM UTC). https://twitter.com/carolinecapital/status/1379036346300305408. Twitter. [link]
corybates1895. (November 10, 2022, 10:37 PM UTC). https://twitter.com/corybates1895/status/1590836167867760641. Twitter. [link]
cz_binance. (November 6, 2022, 03:47 PM UTC). https://twitter.com/cz_binance/status/1589283421704290306. Twitter. [link]
cz_binance. (November 8, 2022). https://twitter.com/cz_binance/status/1590013613586411520. Twitter. [link]
Faux, Z.. (April 3, 2022). A 30-Year-Old Crypto Billionaire Wants to Give His Fortune Away. Bloomberg. [link]
Ellison, C.. (September 21, 2021). https://worldoptimization.tumblr.com/post/642664297644916736/slatestarscratchpad-all-right-more-really-stupid [deleted]. World Optimization. [link]
ftxfuturefund. (February 8, 2022, 05:32 PM UTC). https://twitter.com/ftxfuturefund/status/1498350483206860801. Twitter. [link]
Gach, E.. (November 14, 2022). Crypto's Biggest Crash Saw Guy Playing League Of Legends While Luring Investors [Update]. Kotaku. [link]
Hussein, F.. (November 16, 2022). House panel to hold hearing on cryptocurrency exchange FTX collapse. PBS News Hour. [link]
Jenkinson, G.. (November 17, 2022). SBF received $1B in personal loans from Alameda: FTX bankruptcy filing. Cointelegraph. [link]
Kulish, N.. (November 13, 2022). FTX's Collapse Casts a Pall on a Philanthropy Movement. The New York Times. [link]
Levine, M.. (November 14, 2022). FTX's Balance Sheet Was Bad. Bloomberg. [link]
Ligon,C., Reynolds, S., Kessler, S., De, N., & Decker, R.. (November 11, 2022). 'FTX Has Been Hacked': Crypto Disaster Worsens as Exchange Sees Mysterious Outflows Exceeding $600M. Coindesk. [link]
Morrow, A.. (November 18, 2022). ‘Complete failure:' Filing reveals staggering mismanagement inside FTX . CNN. [link]
Nick_Beckstead, leopold, ab, & ketanrama. (November 10, 2022). The FTX Future Fund team has resigned. Effective Altruism Forum. [link]
Partz, H.. (November 9, 2022). FTX founder Sam Bankman-Fried removes “assets are fine” flood from Twitter. Cointelegraph. [link]
Piper, K.. (November 16, 2022). Sam Bankman-Fried tries to explain himself. Vox. [link]
Regan, M.P. & Hajric, V.. (November 12, 2022). SBF vs CZ: How 2 crypto billionaires' social media “bloodsport” went from keyboard warrior shenanigans to a $32 billion blowup. Fortune. [link]
Rosenberg, E., Khartit, K., & McClay, R.. (August 26, 2022). What Is Yield Farming in Cryptocurrency?. The Balance. [link]
sbf_ftx. (December 2, 2020, 09:25 PM UTC). https://twitter.com/sbf_ftx/status/1334247283081138178. Twitter. [link]
sbf_ftx. (December 11, 2020, 04:19 AM UTC). https://twitter.com/sbf_ftx/status/1337250686870831107. Twitter. [link]
sbf_ftx. (November 8, 2022, 04:03 PM UTC). https://twitter.com/sbf_ftx/status/1590012124864348160. Twitter. [link]
sbf_ftx. (November 10, 2022, 02:13 PM UTC). https://twitter.com/sbf_ftx/status/1590709195892195329. Twitter. [link]
sbf_ftx. (November 11, 2022, 03:23 PM UTC). https://twitter.com/sbf_ftx/status/1591089317300293636. Twitter. [link]
Sigalos, M. & Rooney, K.. (November 9, 2022). Binance backs out of FTX rescue, leaving the crypto exchange on the brink of collapse. CNBC. [link]
tara_macaulay. (November 16, 2022, 08:57 PM UTC). https://twitter.com/tara_macaulay/status/1592985303262072834. Twitter. [link]
taylorpearsonme. (November 10, 2022, 10:00 PM UTC). https://twitter.com/taylorpearsonme/status/1590826638429650944. Twitter. [link]
Tsipursky, G.. (November 16, 2022). SBF's dangerous decision-making philosophy that brought down FTX. Fortune. [link]
whalechart. (November 15, 2022, 06:46 AM UTC). https://twitter.com/whalechart/status/1592408565402464259. Twitter. [link]
Wiblin, R. & Harris, K.. (April 14, 2022). Sam Bankman-Fried on taking a high-risk approach to crypto and doing good. 80,000 Hours. [link]
Yaffe-Bellany, D.. (November 14, 2022). How Sam Bankman-Fried's Crypto Empire Collapsed. The New York Times. [link]
yashkaf. (November 12, 2022, 07:18 PM UTC). https://twitter.com/yashkaf/status/1591606925149540353. Twitter. [link]
FTX (company). Wikipedia. [link]
Sam Bankman-Fried. Wikipedia. [link]