Charles D’Haussy and Jame DiBiasio’s book “Block Kong” profiled Sam Bankman-Fried in the early days of FTX.
“SBF”, as he’s known, was then 27 years old when D’Haussy brought some croissants over to his trading floor. Even then he was cultivating an image of progressiveness.
As we eat at his desk, I see Post-It Notes pinned behind him. What’s that?
He shows me the messages. “1 team, 2 missions / My end goal is to donate.”
D’Haussy did note the discrepancy between a mission of philanthropy by way of setting up a crypto derivatives exchange.
But SBF had other ways of showcasing his forward-thinking ways. The prop trading arm of the empire, Alameda Research, published the team’s trading strategies.
“We are not disclosing anything proprietary,” [SBF] says.
But your strategy is right there for all to see!
“There is no cost for sharing,” he insists.
The firm’s secrets weren’t its trades but its infrastructure, he said.
Bankman-Fried wants the world to know: he has nothing to hide.
This has been the SBF playbook: selective disclosure that made his group appear open as a book. His secret sauce was just “infrastructure”. But advertizing Alameda’s trading strategies was misdirection: what needed transparency were the financials of the interlinked businesses.
Today the rest of the crypto industry is engaged in another form of misdirection: this past week, Binance announced it would produce “merkle-tree proof of reserves”, ie, publish its assets. Transparency! But without producing its liabilities, as a regulated financial institution is required to do, means these exchanges are just showing one side of the ledger. This doesn’t provide meaningful information.
There is no doubt that Bankman-Fried is charismatic.
Bankman-Fried enjoys stepping effortlessly from talks about utilitarianism to very deep tech topics. And he’s taking me with him on his enthusiastic deep dive into how crypto markets operate…
At the time he was a big proponent of Hong Kong, where he originally set up both Alameda and FTX before moving to the Bahamas. He showed off research about the power of Asia-based exchanges.
He recalls a business trip to Macau for a conference. It involved a stopover in Hong Kong. “I called Gary [Wang, his co-founder] and told him this city is the here and now” for crypto.
Hong Kong changed, though. An incubator of many of the leading crypto exchanges and brokerages, its regulators pivoted to focus on a bank-friendly, licensed regime catering to wealthy individuals rather than mass retail.
Many Hong Kong-based firms have since left, although the licensing regime and, more recently, explorations of central-bank digital currencies have put the city on a more institutional, TradFi-friendly path for digital assets.
But SBF doubted that traditional banks would be able to manage acquiring a crypto business such as FTX.
“The compliance officer would have a heart attack,” he reckons.
Block Kong: The 21 Entrepreneurs and Financiers Leading Blockchain in Hong Kong, by Charles D’Haussy and Jame DiBiasio, is available online and in select book stores.