Who is Sam Bankman-Fried?
Sam Bankman-Fried is the current Chief Executive Officer of FTX crypto derivatives exchange and the crypto trading company Alameda Research. Like other significant personalities on crypto, he manages a Twitter account followed by many digital currency enthusiasts.
The 29-year-old Physicist has a great interest in decentralized finance. In 2021, he launched the Serum project on the Solana blockchain. He is a seasoned expert on liquidity matters following his stint at Jane Street Capital trading firm and then Alameda Research. He is also a talented programmer and helped the firm develop its OTC trading system.
SBF (as he’s informally known) believes in philanthropy and lives by the maxim “pursuing earning to give.” He likes helping charities. Furthermore, he was one of the top donors for Joe Biden’s political campaign in 2020.
Early life and Career Path
Sam Bankman-Fried was born in 1992 in Stanford, California, USA. He graduated from the Massachusetts Institute of Technology in 2014 with a Bachelor of Science degree in Physics.
After college, he worked for New York-based Jane Street Capital. At the firm, he acquired diverse expertise ranging from trading a variety of crypto ETFs to futures and equities. Further, he developed the company’s OTC trading system.
In 2017, he left the Capital firm and co-founded Alameda Research, a quantitative trading firm, with Gary Wang.
The investor admits that there was a massive demand for cryptocurrency from different places globally when the cryptocurrency ecosystem was in its infancy. It could not handle colossal customer volumes.
He claims he started Alameda Research to provide liquidity, a service, which the existing providers found overwhelming.
Two years after starting Alameda research, the duo saw an opportunity in the derivatives space. The market had few big players like BitMEX, and their services were below par. They launched the FTX derivatives exchange in April 2019. Sam Bankman-Fried remains the CEO of both.
— SBF (@SBF_Alameda) March 30, 2021
Sam and Alameda Research
Bankman-Fried and Gary Wang co-founded the financial services company in 2017. They named it after Alameda County in California, the home county of Sam.
Though based in Hong Kong at inception, its services now have an international reach with the ability to operate on every market and crypto exchange.
What Services does Alameda Research offer?
The trading company deals with quantitative digital currency trading alongside offering liquidity services. Some of the strategies it uses are direct trades between two parties (OTC) and arbitrage trading. In the latter, traders move an asset from one market to the other to cash in on tiny price differences between markets.
However, the very foundation of the firm was quantitative trading. Sam Bankman-Fried discloses that he started it to help solve the liquidity problems troubling the young crypto industry.
However, according to Sam, the very dominant activity at the start was arbitrage trading.
Towards the end of 2019, the firm had a 5% slice of all global crypto trading volumes. Sam’s experience on liquidity acquired from his previous role at Jane Street trading firm blended well with his Alameda teammates, whose competencies ranged from engineering and technology to trading on traditional markets.
The company has a portfolio of over 100 million USD and trading volumes of between 0.6-1.5 billion USD per day. Alameda provides liquidity for the major digital currencies, altcoins, and derivatives on the leading crypto exchanges.
On quantitative trading, the firm mainly relies on mean reversion and machine learning to maximize its returns. Their robust trading system offers zero fees, no trade size threshold, tight spreads, and swift onboarding and settlement.
Alameda adopts a market-neutral position that powers them through bull and bear market conditions, especially when prices are significantly volatile and the trading volumes are enormous.
Alameda and WBTC
One of Alameda Research company’s striking DeFi investments was on the Wrapped Bitcoin (WBTC). In the middle of the third quarter of 2020, they held close to 70% of all minted WBTC. The significant holding came after they successfully lobbied for a 0-40% increase of the yield-earning collateral locked on the Compound protocol.
Alameda Partnerships
Alameda has entered into several collaborations to boost its operational synergy. Most of them have happened within the last eight months.
Partnership with Fantom
In February 2021, Alameda Research placed 35 million USD worth of capital on the Fantom Foundation by purchasing the FTM token. The investment would grant them access to Solana blockchain, Serum, among other cross-chain protocols that the Fantom team is trying to bring together. Moreover, it will run its validator node on Foundations’ mainnet to help strengthen its network security.
Teaming up with Ren
In the same month, Alameda Research joined hands with Ren Protocol. The plan was to integrate the Solana blockchain’s digital assets into Decentralized Finance (DeFi) and make them more accessible.
It will be easier for the RenVM protocol to achieve decentralization with support from Alameda. Further, the protocol’s liquidity and the number of assets hosted will also increase. The coming together will ultimately make it possible to move digital assets hosted by the Solana blockchain to any other chain. The price of REN shot up by 20% within 24 hours of making the news of the partnership public.
Partnership with Efficient Frontier
In mid-March 2021, the Sam Bankman-Fried-led trading company also partnered with Efficient Frontier by investing 2 million USD into the Israel-based company.
The capital is expected to grow the trading volumes to around 10 billion USD in a single month. Trading is likely to spread to 50 cryptocurrency exchanges. The investment would positively adjust Efficient Frontier’s balance sheet and stabilize its position in the digital asset sector. Alameda Research CEO was optimistic about the partnership and lauded its able team, outstanding technology, and general outlook on the cryptocurrency industry.
Sam Bankman-Fried and FTX exchange
Sam and Gary Wang co-founded FTX, a digital currency derivative exchange, through the Alameda Research crypto firm in April 2019. They proudly referred to it as the crypto market “built by traders for traders.” However, there were no operations on the platform until 8th May 2019.
FTX’s success is attributable to the talented duo. Both Bankman-Fried and Gary graduated from the Massachusetts Institute of Technology. The former with Physics and the latter with Mathematics (with Computer Science) degrees. Sam worked as a liquidity expert at Jane Street, whereas Gary had a stint at Google as a software engineer. Their competencies were a match enough for the expertise needed in such a financial solutions platform.
Binance bought FTX shares in the same year and, at the last quarter, marveled at its daily trading volume of close to 0.5 billion USD on all its products. Binance hoped that the FTX token would grow in value in the future and thus took a long position in it.
Mid 2020, FTX bought Blockfolio to help its users manage their digital currency portfolios. FTX has grown to be one of the most popular crypto market places, hitting average trading volumes of beyond 250 billion USD per year. Moreover, it’s among the fastest-growing.
Tokyo premium
Sam Bankman-Fried, owner and CEO of FTX trading, made his first millions thanks to the existence of Kimchi Premium in fact.
Back in 2018, much of the cryptosphere was distracted by the 30 percent price gap between South Korean and American Bitcoin, known in the annals of crypto as the Kimchi Premium.
Due to regulation, you couldn’t profit from it though. Bankman-Fried found a loophole and was able to trade the 10% premium on the Tokyo crypto exchanges and sell it for a guaranteed profit over in the US.
Only problem was that you had to buy it in-person in Tokyo to sell it in San Francisco afterwards, which means the man crossed the Pacific by plane more times than most business people have done in their lifetime.
Services offered by FTX
FTX has expanded to earn a slot among the top ten derivative exchanges in terms of the trading volume. Since it’s a trading platform, it allows the trading of a range of crypto products.
The products are:
- Futures,
- FTX leveraged tokens
- Move contracts
- Options
- Spot markets
- Prediction markets
The futures product involves perpetual futures available for 20+ digital currencies and the index futures. The exchange supports 30+ digital currencies and allows fiat deposits and withdrawals for a small number of cryptocurrencies.
FTX also runs an OTC desk for those crypto traders purchasing an enormous number of digital assets and are afraid of being limited by the order book’s depth on the markets without the “over the counter” capability. They don’t charge any fees apart from the spread fee.
The FTT Token
FTT is the exchange token that’s hosted by the FTX exchange. Holders of the FTT enjoy lower trading fees and insurance funds on the FTX platform.
FTT is also unique because it can be repurchased after an initial “burn” and subsequently “burned” in the market.
Moreover, holders of the token on the platform enjoy friendlier OTC spreads and can also use it as collateral for futures positions.
Sam Bankman-Fried is confident that FTX will increase the number of uses for the FTT token soon. Currently, the token supply is capped at 350 million, and there’s no plan of adjusting the supply.
FTX Lawsuit
In November 2019, FTX was the target of a 150 million USD lawsuit by Bitcoin Manipulation Abatement Ltd. FTX was accused of making two unfruitful attempts to alter BTC futures prices on the Binance platform on 15th September 2019.
However, the chief executive officer of Binance, Changpeng Zhao, retaliated by discrediting the allegation. Both parties confirmed there was a misunderstanding but resolved it a long time ago.
Why FTX needed Alameda Research
Sam Bankman-Fried admits that derivative exchanges have high barriers to entry as compared to spot exchanges.
During an interview on the “Insane Growth of FTX,” Sam disclosed how derivatives exchanges, unlike spot and futures exchanges, need a high liquidity level, which is tricky to maintain.
He further disclosed how Alameda Research came to their rescue on the liquidity aspect. He calls it a top liquidity fighter in their back pocket.
Sam Bankman-Fried further discloses that FTX probably had the best liquidity on their order books than any competitor even before they had their first trade.
Why did Bank-Fried and Gary Wang Start FTX?
Sam admits that back in 2018, the derivatives space had only a few prominent players. However, the few had severe operational problems like loss of millions of dollars of customer funds, inferior matching engines buckling under order load, and unrefined products.
The duo had written white papers on such exchanges. They knew the proper parameters to change to improve existing products.
Their desire to start their exchange was fueled by one of the few platforms’ annual incomes, reaching hundreds of millions on what they felt was an inferior product.
They further analyzed their preparedness. The two investors realized they had a wallet infrastructure in place, a matching engine within their reach and enough experience on traditional financial derivatives, and the know-how to develop the products.
They didn’t see anything to stop them. In late 2018, the duo started developing the project culminating in the FTX derivatives platform launch in April 2019.
Sam boasted that FTX was a redesigned derivatives marketplace that implemented all the changes that they saw necessary in the other exchanges.
7) I'm (in)famous for playing League of Legends while on phone calls.
I'll also try to avoid restarting my RAM if possible.
One side advantage of the bean bags: if I sleep in the office, my mind stays in work mode, and I don't have to reload everything the next day. pic.twitter.com/AKlQm7wneI
— SBF (@SBF_Alameda) February 4, 2021
FTX Partnership with a Crypto ATM Firm
In July 2020, FTX collaborated with Genesis Block, a giant BTC and digital currency ATM operator in Asia, to boost the accessibility of their FTT token.
The Asian company has numerous ATMs strategically located at prime spots in Hong Kong and Taiwan. The TFX native cryptocurrency would be available around the clock.
The FTX Arena
In 2021, FTX became the first cryptocurrency firm to win a famous United States professional basketball arena’s naming rights.
The company was enthusiastic about signing the agreement with NBA’S Miami Heat that would run until 2040.
The rights involved a massive sum of 135 million USD.
Strikingly, this was the first deal between a crypto company and a sports club in the USA and is a clear sign of the fast-growing uptake of cryptocurrency.
The arena will change its name from “American Airlines.”
Bankman-Fried said that the agreement was more than putting FTX’s name on the arena, but an excellent chance to join the Miami championship community and extend some value to them.
FTX and Charities
FTX recently launched a Foundation ready to donate 1% of its platform fees to support charities.
The platform users have the privilege of conducting a poll to settle on the beneficiary charity from a well-vetted list.
The foundation raised more than 2 million USD in its first couple of weeks.
The donations not only come from FTX but also from its partners and employees. The foundation’s primary goal is to save lives, alleviate hardships, and open doors to a brighter future for poor people.
Sam and the Serum DeFi Protocol
Sam Bankman-Fried and the FTX team founded Serum DEX after a thorough brainstorming on a decentralized finance protocol to build, but which stands separate from FTX.
The decentralized exchange runs on the Solana blockchain. Although the DeFi is entirely interoperable with the Ethereum blockchain, they chose Solana due to the network-intensive attributes they wanted to put on it. They believed their choice would pay back with efficiency.
The CEO and the team launched the DEX in August 2020.
Involvement with the SushiSwap DEX
In September 2020, Chef Nomi, the SushiSwap decentralized exchange pioneer, handed it over to Sam.
The transfer of ownership came after he withdrew over $14 million SUSHI tokens on the platform’s development fund. His action incensed the crypto community, especially Andre Cronje, the famous cryptocurrency developer.
Bankman-Fried and Philanthropy
Sam has a big heart for altruism. He lives by the slogan “earning to give.”
He was a director at the Centre for Effective Altruism in 2017. He reportedly slashed half of his salary at Wall Street and gave it away and hopes to do so with his crypto billions in the future.
He has led FTX into the same path by donating to charities.
Strikingly, he was among the biggest of Joe Biden’s Presidential campaign sponsors with a whopping 5.2 million USD. Although he doesn’t foresee a situation whereby the President gives his donation much thought, he feels that the administration could consider him recruiting a talented crypto regulator.
It remains to be seen whether he has a political agenda in all his flashy acts of “philanthropy.”
Bankman-Fried in 2021 Achievements and goals
Sam’s popularity is growing beyond cryptocurrency. For instance, Forbes recently featured his name in “30 under 30” for his notable contribution to the finance sector.
He has an impressive goal of drawing more than 1 billion people to DeFi and crypto. Boosting the adoption of the Serum DEX has to be his priority task now.
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