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    Spellcaster: The Fall of Sam Bankman-Fried

    Deleted from Reality

    Mon Jun 12 2023
    Alameda ResearchSam Bankman FreedFTXCrypto Trading

    Description

    The episode covers Caroline Ellison's introduction to Alameda Research, the challenges faced by the company, Caroline's life at Alameda, the rise of FTX and Sam's secrets, and the fall of Sam Bankman Freed.

    Insights

    Alameda Research's Profitable Trading Strategy

    Sam and his team made profitable trades by exploiting price differences between Bitcoin in Japan and the US. They would buy Bitcoin in the US and sell it in Japan for a higher price repeatedly, converting their yen profits back into dollars as fast as possible.

    Challenges at Alameda Research

    Mistakes in trading resulted in significant losses for Alameda, causing motivation to decline. Sam's unpredictable behavior and refusal to work with the management team led to a revolt, with senior executives giving him an ultimatum.

    Sam's Secrets and the Rise of FTX

    Sam proposed a secret venture capital deal to Alex Pack, which raised concerns about his integrity. Alameda started losing money due to Sam's focus on building FTX, a crypto exchange. Sam approached Binance for support and successfully built FTX.

    Chapters

    1. Caroline's Introduction to Alameda Research
    2. Challenges at Alameda Research
    3. Caroline's Life at Alameda Research
    4. The Rise of FTX and Sam's Secrets
    5. The Fall of Sam Bankman Freed
    Summary
    Transcript

    Caroline's Introduction to Alameda Research

    00:00 - 07:51

    • Caroline Ellison was hoping to get advice from an old colleague, but he seemed distant and distracted.
    • Sam had found a way to make millions of dollars a day and wanted Caroline to join him.
    • Sam's new company, Alameda Research, was buzzing on Christmas Day in 2017.
    • The office experienced power outages due to excessive computer usage.
    • Sam couldn't bear to stop trading and risk missing out on good trades.
    • Tara McCauley, the CEO of the Center for Effective Altruism, convinced wealthy EA followers to lend money to Sam's company.
    • Sam made profitable trades by exploiting price differences between Bitcoin in Japan and the US.
    • The team would buy Bitcoin in the US and sell it in Japan for a higher price repeatedly.
    • They would convert their yen profits back into dollars as fast as possible.
    • Sam had a contact at a bank in Japan who helped transfer the converted dollars back to the US before closing time.

    Challenges at Alameda Research

    07:22 - 15:16

    • Sam had a contact at the bank in Japan who would transfer converted dollars back to the U.S. before closing time.
    • Sam made money by correctly reading off a series of digits on his screen.
    • Alameda employees worked long hours and had no accurate data about their transfers or balance.
    • Mistakes in trading resulted in significant losses for Alameda, causing motivation to decline.
    • Sam showed signs of wanting to expand and raise more money, but became unpredictable and difficult to work with.
    • Senior executives gave Sam an ultimatum, but he walked out and registered himself as the sole owner.
    • Management team resigned along with half of Alameda's staff and investors followed suit.
    • Sam spun the revolt as a good thing and declared that the new Alameda was fixed.
    • Caroline, a promising trader from Gene Street, joined Sam after meeting him at a coffee shop.

    Caroline's Life at Alameda Research

    14:48 - 21:59

    • Caroline moved to the Bay Area to work at Sam's startup Alameda
    • Half the company was leaving and Sam was struggling to retain investors
    • Caroline settled into her job as a trader and enjoyed her new life in California
    • Caroline started a romantic relationship with her boss, Sam
    • Sam unexpectedly left for a conference in Asia and didn't return for six months
    • Sam announced that he was moving the company's headquarters
    • Sam met Alex Pack, a crypto venture capitalist, in Hong Kong
    • Alex agreed to invest in Alameda but needed to conduct due diligence first
    • Sam became evasive and provided incomplete answers during due diligence
    • Alex discovered losses, employee revolt, and other concerning information about Sam's leadership

    The Rise of FTX and Sam's Secrets

    21:32 - 29:00

    • Sam proposed a venture capital deal to Alex, but suggested keeping it a secret from his early backers
    • Alex became concerned about Sam's integrity and what he might do in the future
    • Alameda started losing money due to Sam's focus on building a crypto exchange called FTX
    • Alex walked away from the deal with Sam due to the conflict of interest
    • Sam approached Binance with his FTX exchange idea and secured their support
    • CZ, the CEO of Binance, saw potential in Sam's proposal and helped him raise more funds
    • Sam built FTX and became successful as interest in crypto grew
    • Alex questioned whether he made a mistake by passing on the investment opportunity with Sam
    • The truth about Sam's secrets and relationships remained hidden

    The Fall of Sam Bankman Freed

    28:36 - 31:39

    • Sam Bankman Freed still had no idea of the truth
    • The mask hid deep secrets about Sam's relationships with Caroline and FTX
    • Sam's allies could both make him a billionaire and destroy him
    • Next episode: The fall of Sam Bankman Freed on Spellcaster
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