Meet Sam Bankman-Fried, CEO of FTX exchange
- Just 29 years old in 2021, Sam Bankman-Fried (SBF) is already number two on the crypto rich list.
- CEO of quantitative trading firm Alameda Research and FTX, the fourth most popular crypto exchange, the whizz-kid is an entrepreneur extraordinaire.
- Betting on people is a classic in investment lore. FTT tokens allow easy access to FTX’s success.
Kimchi - all the nutrition needed for healthy growth
Snuggled in a blanket, 10,000m above the freezing Pacific, Sam Bankman-Fried fell into a short slumber on a flight to Seoul in January 2018. He had flown this route more often in the last year than most business travelers, with operations spanning the US and Korea, fly in their lifetime.
And all for the love of Kimchi…
Well not exactly Kimchi, the fermented vegetables, but the arbitrage opportunity presented by a significant difference in the price of bitcoin between Korea and the US, that was called the ‘Kimchi premium’.
Like few others, Sam had grasped this arbitrage opportunity ruthlessly and with aplomb. Fueled by youth and a mission to “earn to give”, he traveled to Seoul to purchase bitcoin and sell them in the US. He would sell cheaper than US prices, but afford a decent premium for his enterprise. These bitcoins had to be bought and sold in person as over-the-counter (OTC) deals; where money was exchanged for a transfer of BTC or a note containing the private keys of a wallet.
For someone who could stomach the uninterrupted flying and knew how to lay out a clear deal, this business represented sizable cheques. Still, Bankman-Fried had his sights set much higher. Dealing with large holders and buyers of bitcoin allowed him access to something that was exceedingly rare at that time: liquidity. The ability to move large amounts of cryptocurrencies when you wanted.
Sam was the man who could make it happen. And the requests kept piling in.
Hotel California - the making of a quant
Sam Bankman-Fried was born in 1992 in Stanford, California. He graduated from MIT in 2014 with a Bachelor in Physics.
Sam met Will MacAskill, co-founder of the Centre for Effective Altruism, in 2013. MacAskill had given a talk about “earning to give”. Earning to give is a resolution to pursue maximum earning power so you’re in a position to affect positive change in the world by giving to NGOs and charities. Based on utilitarian philosophy, it is closely related to effective altruism.
Bankman-Fried was convinced that it mattered less to drive positive change directly than to enable positive change to happen. He figured that it would be more impactful to hire multiple people, aligned on a positive mission, than to do everything himself. Others in the effective altruism community told him about Jane Street Capital, a quantitative trading firm with high salaries.
The young graduate got an internship and found the work an excellent fit. It involved the use of statistics and economics to create automated trading systems, which matched his maths skills and affinity for bets.
At Jane Street Capital, he acquired expertise trading a variety of ETFs, futures and equities. He also developed the company's OTC trading system.
In 2017, he left Jane Street and co-founded Alameda Research, a quantitative trading firm, together with ex-Googler Gary Wang. The company is named after Alameda County in California, where he grew up.
Alameda Research and FTX exchange - coming of age
SBF, as Bankman-Fried is informally called, saw a jumbo-sized opportunity for a company that provided liquidity, OTC deals and arbitration services for cryptocurrencies This company became Alameda Research and has grown into a nuclear-powered juggernaut in the four short years since its founding.
The company has a portfolio of over $100m and trading volumes of between $60m and $1.5bn per day. Alameda provides liquidity for major cryptocurrencies, altcoins and derivatives on leading exchanges.
In an interview with Forbes, SBF recalled: “We were skeptical that there would be enough infrastructure to provide for the crypto market. This meant that demand would probably outstrip liquidity, and could lead to huge spreads on the market and really good trades. I got into crypto to see if what I expected would be true, and it was.”
Another opportunity came with Bitcoin futures. Sam was less than happy with the offers of BitMEX and decided to one-up the game. FTX was founded as a result, and thanks to it’s deep liquidity, ease of onboarding and fast trades, has grown to become the fourth largest crypto exchange according to Coinmarketcap.
The ‘Bentham of Crypto’ and the ‘unit of caring’
Just 29 years of age, SBF is already ranked the second richest crypto owner in the world by Hurun Research and could be the richest man under 30 worldwide.
True to his pledge to “earn to give”, SBF contributes a large percentage of his income to causes he sees benefitting the world. After Michael Bloomberg, he was the second largest donor to the Biden campaign in 2020.
His company, FTX exchange, donates 1% of all profits to the FTX foundation. FTT token holders can vote on the receiving causes of this charitable organisation.
Such magnanimity resonates with FTX’s users, who often pledge additional funds to the FTX foundation. “We’ve been really shocked, in a positive way. Some users have pledged $5.6 million. There are a lot of people in crypto who have made a lot of money over the last decade and they are naturally inclined to think on a global scale about what impact they can have”, SBF told Forbes.
Drawn to a quantitative approach to business and charity, SBF refers to money as the ‘unit of caring’, because it is fungible and adaptable to do the most good where it is needed.
Both of Sam’s parents were law professors at Stanford and leaned towards utilitarianism. Steeped in the teachings of effective altruism, SBF’s generous approach has earned him the title ‘Bentham of Crypto’. Named after Jeremy Bentham, an 18th century philosopher, whose maxim was: “it is the greatest happiness of the greatest number that is the measure of right and wrong.”
Siegfried and the dragons - the case for FTX token (FTT)
Austrian economist, Mark Spitznagel, wrote about ‘Siegfried Investing’ in his seminal book ‘The DAO of Capital. Austrian Investing in a Distorted World’. He refers to especially successful and adept entrepreneurs as ‘Siegfrieds’, after the mythical slayer of dragons from the Nibelungen saga. In his view, investing into Siegfrieds and their enterprises is most likely to outperform the markets in the long term. These entrepreneurs and their tremendous resourcefulness will always find ways to accrue capital at greater rates than their mediocre peers.
Having founded two immensely successful companies and amassed a fortune that nets him places in top-ten lists, just seven years out of college, SBF has more than earned the right to be called a true ‘Siegfried’ in Spitznagel’s terms.
Thankfully it’s quite easy for the individual investor to join in SBF’s success. FTX token is the ERC-20 compliant exchange coin of the popular exchange.
Numbrs has covered the Binance and SushiSwap tokens before. Like its siblings, FTT has multiple functions on the platform. From AtomicWallet.io: FTT serves as the backbone of the FTX crypto derivatives exchange that offers leveraged trading. Since FTX exchange provides futures trading, FTT can be used as collateral, which increases its utility. FTX token has a total supply of 344,446,952 FTT with a circulating supply of 95,375,037 tokens.
FTT price has gone up 10x since the start of 2021 and is an easy way to get exposed to SBF’s entrepreneurial knack. Plus, it is useful on the exchange.
Success stories like Sam’s are rare and far between. FTX and Alameda seem to have just started reaping the fruits of their labour. With impeccable reputation and formidable energy, it’s fair to assume that the world is going to see a lot more of Sam Bankman-Fried.
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