A Lever Long Enough (Draft Excerpt, Stealing the Future)

Forensic details of Sam Bankman-Fried's comically rampant thievery.

Welcome to another draft excerpt from “Stealing the Future,” my forthcoming book on Sam Bankman-Fried, the FTX fraud, and its roots in Effective Altruism, Rationalist, and Longtermist philosophies.

The following excerpt is a portion of a chapter that dives into the gritty details of various transfers made from the FTX Group to an array of recipients. It draws heavily on Duke professor Peter Easton’s forensic analysis of dollar flows, presented under oath at Bankman-Fried’s criminal trial, which specifically identified the movement of customer funds out of either cash depository accounts or crypto wallets, through Alameda Research, and onward to entities including Anthropic AI and Michael Kives’ K5 group. It also incorporates civil lawsuits filed by the FTX estate and seeking clawbacks from recipients including the Center for Applied Rationality and its subsidiary, Lightcone. Future additions will grapple with political donations, including those laundered through Barbara Fried’s Mind the Gap.

Like all excerpts, this one is explicitly a draft, which means it’s both messy and incomplete. For this reason, most of it is behind a paywall. I appreciate any suggestions and comments from supporters as I continue to refine it.

If you are a new or recent paid subscriber, you can also access these previous drafts and excerpts:

The Racehorse Who Gambled: On Expected Value and Discounted Future Cash Flows

Effective Altruism and Jean Baudrillard’s Logic of the Code

Stealing the Future: From the Horse’s Mouth

Prompt: a famous technology and cryptocurrency founder with a huge sphere of curly black hair uses a long lever to roll the earth over a cliff

It is clear from Sam Bankman-Fried’s public and private statements, and from his understanding of leverage itself in the context of FTX, that from the beginning the goal of his massive embezzlement was to grow his empire as fast as possible. Caroline Ellison testified that Bankman-Fried told her customer funds were “a good source of capital.” Even as the depths of the crisis became clear in November of 2022, when a panicked Nishad Singh confronted Bankman-Fried about the growing hole caused by Alameda’s “allow negative” exemption, Bankman-Fried responded that the “main plan remains, making FTX successful and growing it.[ Trial transcript: Id. 1411:3–1412:10]” Former FTX.com General Counsel Can Sun testified to hearing Bankman-Fried tell Singh that the hole “is what it is and there is nothing we can do about it. The only thing we can do is grow the company and fill the hole.[ Id. 1964:12-1965:5. Trial transcripts]”

That the hole he believed he could fill was greater than all the money Alameda had ever earned trading, and more than FTX had ever earned in legitimate fees, highlights just how far in the future Sam Bankman-Fried’s mind was. But this was no surprise to Sam - the panoply of expenditures funded with customer property amounted to long-term bets on the growth of FTX, and they were already unbelievably risky. Most obviously, the deployment of billions of dollars on venture capital was a wild gamble on absolutely nothing going wrong: even successful venture-funded companies are generally “illiquid” for years before an IPO or acquisition turns their notional equity value into real cash. This is why most formal venture funds lock investors into their positions for years, and why there was no cash left when withdrawals began. The implicit belief backing those bets was that FTX would see no major obstacles, and that the market itself would experience no major downturns, for at least half a decade.

Bankman-Fried’s other bets, though, were even more deranged. Rather than any financial position at all, they often amounted to leveraged bets on Bankman-Fried’s own stature and influence, such as the tens of millions spent on electoral campaigns, from professional sports endorsement deals, for networking with celebrities, or in donations to nonprofits. Notionally, these were also part of the strategy to grow FTX, build up its revenue, and pay back the borrowed customer funds. But the value of this sort of influence-investment is even harder than a venture investment to reliably turn into cash.

To be quite clear, this was never a truly viable strategy. The idea that cryptocurrency markets would continue rising in both value and trading volume had no historical precedent whatsoever - every peak like the one that fueled FTX to such heights circa 2021 had eventually retrenched. Moreover, this boom-bust cycle has been true of every innovative technology in the modern era. Bankman-Fried’s behavior despite this reflected his ignorance and naivete, but also other factors: a cultural obsession with youth that convinced him he had only a short window for success, and most of all, a worldview premised on mathematical certainty and deterministic human behavior that gave him false confidence in his own predictive and analytical powers.

Bankman-Fried had practically no checks on his authority to spend any of the money across the FTX and Alameda. FTX had no board of directors to check his total authority, and no Chief Risk Officer with the official duty to supervise his choices. In part through a purge early in the life of Alameda Research, he had surrounded himself with compliant yes-men and -women, most notably within the inner circle of his confessed co-conspirators. Even on the rare occasions when a member of his inner circle objected, as Caroline Ellison did when Bankman-Fried decided to allocate $3 billion to illiquid venture capital investments, he routinely, casually overrode them.

So his theft-fueled expenditures reflected his sole vision of the future, for himself, and for the world. Both in their direction and their fundamental fraudulence, they are a map of Bankman-Fried’s mind and thinking. What is most clear is that he saw himself not merely as a financial titan, but as something far grander: as a savior of society itself, ready to take the reins of wealth and power and do things better. While he stated this outright in the grade-school fantasy of becoming President of the United States, [He gave himself, with typically improvised precision, a 5% chance of becoming President someday: https://www.businessinsider.com/sam-bankman-fried-wanted-president-caroline-ellison-testimony-2023-10], in practice he knew that the power of money trumped any democratic institution.

As we will see in more detail, this authoritarian impulse is deeply embedded in Effective Altruism and its affiliated movements. It is overt in EA cofounder Toby Ord’s call for a ruling council of experts who would have veto power over the actions of world governments. Only slightly more subtle are para-academic institutions, such as Eleizer Yudkowsky’s Machine Intelligence Research Institute, structured to assert the inherent authority of a “rational” approach to the management of society.

The various expenditures, investments, and donations made with stolen and commingled FTX customer funds broadly fell into five categories:

• Illiquid Venture capital investments, including into firms closely associated with Effective Altruism via work on artificial intelligence;

• “Philanthropic” donations to organizations that either claimed to operate according to Effective Altruist principles, or directly worked on developing Effective Altruism and affiliated movements including rationalism, longtermism - and, in at least one case, eugenics;

• Marketing and networking efforts designed to build the public profile of FTX and Sam Bankman-Fried personally;

• Political donations and campaigns nominally intended to further Effective Altruist goals in the political sphere - but with the added, and eventually superseding goal of shaping cryptocurrency regulation.

• Funds lost to bad trades, hacks, and sheer disorganization.

In addition to the lack of any internal voices to countermand his chaotic whims, the total internal financial chaos described by FTX liquidation and recovery CEO John Ray III enabled Bankman-Fried’s unconstrained spending. Movements of customer funds were authorized via Slack messages and tracked in Quickbooks, if at all. Unravelling this chaos in any final way even now seems like an impossible task - Bankman-Fried was seemingly correct when he once commented that Alameda Research was “unauditable.”

Bankman-Fried mistook this lack of constraints for something else: He told Michael Lewis that at some point it began to feel like FTX had “infinite money.” This confession of a mind untethered from reality is the source of the strangely laudatory title of Lewis’ book, “Going Infinite.” That infinitude itself was implicitly based on an assumption of rapid future growth. As with much of his behavior, Bankman-Fried spent other people’s money as if that infinite future had already arrived.