Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud
by Ben McKenzie and Jacob Silverman · 17 Jul 2023 · 329pp · 99,504 words
his mission in life: Make a bunch of money and then give it away. Or as MacAskill put it: “Earn to give.” In order to advance Sam’s EA aspirations, MacAskill offered him a piece of advice: Apply for an internship at Jane Street Capital. The prestigious Wall Street trading firm is known for
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hiring the most brilliant grads from elite universities. Sam got the internship, excelled in it, and was offered a full-time position following graduation. At Jane Street, Sam could apply his considerable quant skills to
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of that field are not important for us here, just the obvious: At Jane Street, Sam Bankman-Fried was still playing games. These games involved real money, and Sam was very good at making money. But playing the same game over and over again made Sam bored. He wanted to do something else, so
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it. Sam recruited a few close friends from MIT, including roommate Gary Wang, whom he had known since meeting him in high school math camp, and Jane Street colleagues like Caroline Ellison, with whom he had become close. They began operating out of a small space in Berkeley, not far from where Sam
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FTX’s cofounder, had known Bankman-Fried since math camp in high school. Caroline Ellison, the CEO of Alameda Research, worked with him at Jane Street. Caroline and Sam occasionally dated. All nine of the roommates were thirty years old or less. Another troubling aspect of Sam’s operations was the size of
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“Your belief system seems to have been driven by the fact that you have made so much money. You were a trader before, and you were making money [at] Jane Street, and now you’re in crypto. Isn’t it still driven by the same thing? I mean, you are making a lot of
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“innovation” as a magic societal cure-all. But the previous decade of Sam’s life had also been instructive. From his time at MIT and then at Jane Street, he had learned how to speak the language of complex financial engineering—the lingua franca of Wall Street. His ability to execute quantitative, bloodless
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knowingly commingled funds. It was virtually impossible for that to be true. He owned 90 percent of Alameda and lived with its CEO, whom he had known—and occasionally dated—since their days at Jane Street. The once-billionaire shrugged his way through Andrew Ross Sorkin’s questions. Sam said he “had a bad
Number Go Up: Inside Crypto's Wild Rise and Staggering Fall
by Zeke Faux · 11 Sep 2023 · 385pp · 106,848 words
: “He basically said, ‘Yep, that makes sense.’ ” Another young MacAskill acolyte had gone to work for Jane Street Capital, a stock trading firm. It was one of a handful of companies that had used mathematical models and computer programs to take over the business of making markets on Wall Street. Anytime someone bought or
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sold a share of a stock or exchange-traded fund, there was a decent chance Jane Street was on the other side. Entry-level jobs there
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glide path into the 1 percent, and he was thinking he should find something riskier to do. But, like he always did, Bankman-Fried evaluated the decision by expected value. Expected value is a weighted average of potential outcomes. Let’s posit that his Jane Street career was 100 percent sure to generate
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journalist, where a well-written story could influence the world’s thinking on the most important issues. Then, in late 2017, he quit Jane Street, moved back to California, and took a job as director of business development for MacAskill’s Centre for Effective Altruism. He said that his idea was that he
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for way more on some exchanges than others. This was the kind of buy-low, sell-high arbitrage opportunity he’d learned to exploit at Jane Street. At the firm, he’d built complex mathematical models for trades that aimed to make money off tiny price differences. On crypto exchanges, the
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-Fried knew he was on to something. He rented a three-bedroom house in Berkeley, and started recruiting more friends to help. They needed a coder to create the kind of trading systems they had at Jane Street. Bankman-Fried wasn’t much of a programmer himself, but he knew a prodigy named
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manage the other programmers. A few months later, Bankman-Fried recruited another young mathlete whom he’d worked with at Jane Street. Her name was Caroline Ellison, and she was a soft-spoken redhead and a Harry Potter superfan. The daughter of MIT professors, she’d grown up in Newton, a suburb of Boston
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the poor quality of the business plans too. I had hoped to finally meet Gary Wang, FTX’s star coder, or Caroline Ellison, the former Jane Street colleague who was by then the head of Alameda. But I didn’t see them anywhere either. * * * — A DAY BEFORE Crypto Bahamas, Sam Bankman-
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ignorance of what his own hedge fund was doing. In other words, an alumnus of both MIT and the elite Wall Street trading firm Jane Street was arguing that he was just dumb with the numbers—not pulling a conscious fraud. Talking in detail to journalists about what was certain to
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unrealistically low cost per life saved. GO TO NOTE REFERENCE IN TEXT He was a trader on the international ETF desk: Joe Weisenthal and Tracy Alloway, “The Ex-Jane Street Trader Who’s Building a Multi-Billion Crypto Empire,” Bloomberg, April 1, 2021. GO TO NOTE REFERENCE IN TEXT in Oregon when they
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Stelle, 43–44 “initial coin offerings” (ICOs) as bust, 87 described, 35 Ethereum and, 113 “pump-and-dump” schemes and, 49–50 Internet Gaming Entertainment (IGE), 34 J James, Letitia, 64 Jan, Richard, 193, 195 Janczewski, Chris, 104–105, 106 Jane Street Capital, 83, 84 Jeter, Derek, 129 K Keeton-Olsen, Danielle as scam compounds guide
Going Infinite: The Rise and Fall of a New Tycoon
by Michael Lewis · 2 Oct 2023 · 263pp · 92,618 words
firms. Jump Trading, Tower Research Capital, Hudson River Trading, Susquehanna International Group, Wolverine Trading, Jane Street Capital: all these Wall Street companies Sam had never heard of came to the job fair that year inside the MIT gym. And he became just a little curious about them. Even a few months earlier his curiosity
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what it was remained a mystery, even after the firms had reached out to him. You couldn’t just google “Jane Street Capital” and learn anything useful about the place. There was hardly anything about Jane Street Capital on the internet.¶ “I had no idea what to expect,” said Sam. “I didn’t even know what types
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of interviews these were going to be.” He had three phone interviews with Jane Street traders, and they were like no interviews he’d ever heard
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minimize the amount of valuable time the traders spent evaluating applicants. The moment any interviewer disapproved of Sam’s play, the games would end, and he’d be sent packing. The Jane Street trader who handed him a stack of a hundred poker chips explained that this was his stake for the day
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all their chips playing the games he was about to play had ever been given a job at Jane Street. For the first game, Sam was grouped in a room with two other applicants and a Jane Street trader. The trader dealt out a hand of poker, then asked them each to reveal a single
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information: when he sought it, how he sought it, how he updated his beliefs in response to it. Jane Street poker wasn’t normal poker, and Jane Street coin flipping wasn’t normal coin flipping. None of the Jane Street games were even games, exactly, so much as games within games, or games about games. The most
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realize that there was information in the question I was asked?” In the end Sam put the odds at one in fifty. And it turned out that the Jane Street trader did indeed have a second cousin who had played professional baseball. But none of that was the point of the problem.
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than every other applicant that there was no longer any point in watching him play. Later, on the Jane Street trading floor, one fellow trader still enjoyed dreaming up games and puzzles and putting them to Sam, just to watch him play. Other people would have no idea what she was talking about—
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be coming up to speak with him: the sort of person who scored an 800 on their math SAT, and understood that the test was too crude to capture their full aptitude. Like Jane Street Capital, the effective altruism movement had come to Cambridge, Massachusetts, for a reason. Roughly three in four of the
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knowledge, to take a job on Wall Street for the express purpose of making money to give away. His name was Matt Wage, and he’d been hired by Jane Street Capital. In the presence of strange new games, the relevant thought processes just seemed to come to Sam. In the presence of strange
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new people, not so much—though it took Jane Street Capital a bit longer to figure that out. That’s something they hadn’t tested for in the interviews. But at the end of the summer
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to think quantitatively about qualitative things. To think rigorously about everything—even a jelly-bean-eating contest. After all, what Jane Street was looking for were traders who could think faster and better than everyone else in global financial markets. On the day in question, Sam hadn’t been looking for trouble.
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market how many? The interns, primed to gamble, were also eager to impress full-time Jane Street traders. And so some less savvy intern might actually do it. He’d think it over and (because he’d read the Jane Street guide on how to make markets) say something like, Two at five, one up. (
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learn how to read other people. Sam believed the opposite was true. “I read people pretty well,” he said. “They just didn’t read me.” * * * ¶ Jane Street Capital, like the other high-frequency trading firms, felt very strongly that it was better off if the public did not know what it did. “The
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first time a New York Times piece appeared about them, there was like a nuclear meltdown,” recalled one former Jane Street employee—who, like the other ten current and former Jane Street employees who helped me to understand what went on there, prefers to remain unidentified. * He’d later change it to Will
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which, beginning with the third number, is the sum of the preceding two. 0 1 1 2 3 5 8 13, and so on. 4 THE MARCH OF PROGRESS The Jane Street trading floor was one big room with lots of weird sounds. The sound effects were selected to alert traders that there
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become clunkier and more heavily regulated. They were being shoved into the boring Wall Street role once played by the big commercial banks. The trading action had moved into a new class of private trading firms shrouded in secrecy. By 2014, when Sam started as a full-time trader at Jane Street Capital, the
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financial institutions at the center of markets—those setting the prices of global assets—were not the old investment banks but opaque high-frequency trading firms, like Jane Street, that basically no one had ever heard of. The sums of
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for its handful of partners. “By 2014 you just had to look at the average IQ of the people going to Morgan Stanley and the people going to Jane Street to know what was happening,” said Sam. The new financial markets had some peculiar properties. For a start, they were increasingly automated.
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game was not without its moments. The companies that created ETFs essentially exported the problem of pricing their creations to Jane Street and other high-frequency trading firms. If some investor showed up and said they wanted to buy, say, $100 million worth of some ETF filled with Indian stocks, they’d be
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identifying weighted coins. Collectively they flipped coins millions of times a day. The law of averages would eventually enforce itself. But Jane Street still had losing trading days, and losing trading weeks and even, rarely, losing trading months.‡ “The biggest risk was that we wouldn’t find enough coins to flip,” said Sam.
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a nuclear bomb had exploded in Mumbai after the close of the Indian stock market, you didn’t want a pre-programmed machine buying and selling stock. The Jane Street trader treated the machines as robot arms; they allowed you to do a lot more than you could with your own naked arms
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the markets. Of course, traders have sought patterns missed by markets for as long as anyone has traded anything. The difference between what happened at Jane Street and what happened on, say, a Wall Street trading floor in the 1980s was one of degree rather than of kind. Data had fully replaced feel
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night of November 8, 2016, the machine Sam designed and supervised worked beautifully. The Jane Street traders were indeed able to get a jump on CNN, sometimes by seconds, usually by minutes, and occasionally by hours. “Trump up!” one Jane Street trader would shout, and some other Jane Street trader would sell stocks. Five minutes later John King would
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confirm the fact, and the market would move. As the evening wore on, Jane Street’s worries that other high-frequency trading firms might
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small.” Seven times that evening voting results arrived that swung the odds by as much as 5 percent in one direction or the other, and seven times Jane Street was ahead of the market move. The results from the Florida Panhandle were the most dramatic. After the early votes were counted, it appeared
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without any obvious loss in human happiness. Even the employees who weren’t all that good at their jobs were kept on and made to feel a part of things. “Jane Street never fired people,” said Sam. “It was cheaper to pay them to do nothing than to allow them to take trades
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feel the awkwardness of the moment enclosing on me. The pressure to react appropriately, to show that I love them back. And I don’t, because I can’t.” Jane Street was the only institution Sam had ever had anything to do with that he did not feel at some level disapproving of
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Sam had committed his life to maximizing happiness on earth without feeling any of his own. Between the summer of 2014, when he started at Jane Street, and the summer of 2017, he’d taken no vacation. He’d actually worked ten days when US markets were closed—the action in foreign markets
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was especially great when US traders weren’t paying attention—and so on the Jane Street books he had taken negative vacation days. On the trading floor, he’d found himself asking himself a question: What is the likelihood
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“I tried to estimate the expected value of each, and they were all very similar. A choice between Jane Street and any of them was a close call, but a choice between Jane Street and all of them is not. I was asking, What is the likelihood that Jane Street is the best option? Low. But it was pretty
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t simply buy the advantages offered to high-frequency traders by, say, the New York Stock Exchange. If firms like Virtu and Citadel were playing a speed game, firms like Jane Street were playing a brain game. Act II 5 How to Think About Bob It took only a couple of weeks of
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t sure I was doing that much good.” At the same time, she’d formed an unsettling attachment, at once full of promise and absent of hope, to another Jane Street trader, Eric Mannes. “Looking back on my relationship with Eric Mannes really makes me cringe,” she wrote later, in an attempt to
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talked a while, he said, ‘I guess maybe I could tell you.’ ” By the end of their chat, Caroline thought that maybe she should quit Jane Street and join the crypto trading firm Sam was secretly building. The work felt familiar: she’d be doing the same sort of research in crypto for
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vessel to save some vast number of lives. Caroline told Sam that she’d need to think about it. Thinking about it meant returning to Jane Street and asking Eric Mannes one final time if he loved her. As it turned out, Eric Mannes did not love her—which, though sad in its
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way, freed up Caroline to quit Jane Street and join Alameda Research. Quitting Jane Street wasn’t as painless as Caroline thought it would be. First-year traders whom Jane Street had just paid $200,000 didn’t simply up and quit—especially not to go work for a fly-by-night crypto
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such measurement did exist, it would likely be done best by the market; no one would pay you as much as Jane Street paid you, ergo, your highest value was at Jane Street. And so on. This was a first: a Wall Street trading firm whose business was premised on its ability to hire the
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whom to believe. She felt deceived that Sam had not warned her of how poorly Alameda Research was doing before she quit her job at Jane Street. And yet she didn’t know any of these other people. She thought she knew Sam, but she also thought that if the entire management was
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exploiting the same sorts of inefficiencies in the market for cryptocurrencies that, to exploit in other financial markets, required Jane Street–level talent and speed and expertise. Sam wrote her a check for $50,000 and sent it to her, no strings attached, so she might increase the size of her bets. She never cashed
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re just, like, missing something. Wait until you meet him in person. That happened in October 2017, when Sam and Tara and Gary gathered in a house in Berkeley and used Sam’s Jane Street bonus to make their first trades—with Sam doing all the talking. By then word was spreading through the growing
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questions. The first was: How the hell did the crypto market let you just take forty thousand dollars out of it? Sam explained how Jane Street made money, and added that the crypto markets were dominated by retail traders who didn’t pay much attention to price discrepancies from one crypto exchange to
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the next. To which Nishad responded: Why is it not the case that Jane Street or some other high-frequency trading firm will come along and take over the crypto markets? Sam explained that Jane Street—and likely others—were waking up to crypto, but that it would take them months to ease
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the position of Bob’s friend, in that most of them didn’t understand what had happened. Sam had fully absorbed the Jane Street management technique of letting the rank and file see only their tiny piece of the puzzle, reserving for himself a view of the whole. Gary, though unintentionally, had
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to send it to you until the end.” The turmoil had been stressful for Caroline; but she’d left her job at Jane Street and had no obvious place to go, and so, even though she wasn’t sure whom or what to believe, she’d stuck it out. The dust had settled on
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from. The crypto markets were becoming more efficient every day. The big Wall Street high-frequency trading firms like Tower Research Capital and Jump Trading and even Jane Street were entering the markets and engaging in the same deforestation they practiced in other financial markets. Even if Sam somehow found more capital, there’d be
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lot of whom were furious with him for creating a civil war inside their movement) and another bunch of Jane Street traders (who were massively irritated with him for leaving Jane Street to create a rival firm, and for poaching Jane Street traders). And so, with Sam, Ramnik set out to create new relationships, starting with some venture
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a billion of our stock at a valuation of twenty billion,’ ” recalled Ramnik. “The guy said, ‘We don’t short stock.’ And Sam said that if you worked at Jane Street you’d be fired the first week.”‡ Even if the VCs didn’t all realize that Sam was playing a video game
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interest.¶ Everyone noticed that one of its contributors was the current girlfriend of Eric Mannes, Caroline Ellison’s former boyfriend at Jane Street. The previous month, the couple had visited the Bahamas and stayed with employees of Alameda Research at Albany: Had the leak somehow originated inside the company? There was also the
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inside. A few medals from high school math competitions. A copy of Forbes magazine, with Sam’s face on the cover. And a box of business cards, from his time at Jane Street Capital. It was Manfred that caught Constance’s eye. Manfred was Sam’s stuffed animal. He’d had it since birth
Breaking Twitter: Elon Musk and the Most Controversial Corporate Takeover in History
by Ben Mezrich · 6 Nov 2023 · 279pp · 85,453 words
in the tech press, was considered one of the most brilliant young entrepreneurs of the past decade. After first making a name for himself at Jane Street Capital, then starting his own quantitative trading firm, called Alameda Research, at thirty, SBF had founded FTX, one of the fastest-growing crypto exchanges in
On the Edge: The Art of Risking Everything
by Nate Silver · 12 Aug 2024 · 848pp · 227,015 words
recorder. Finally, there was Sneaky Sam. This iteration of SBF was pedantic and lawyerly. Although Talking-Shop Sam saw me as an equal, Sneaky Sam was full of gotcha questions, quizzing me as though I was his intern at Jane Street Capital. I got the sense that Sneaky Sam was using me to audition
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had something of a falling-out over their competing assumptions about p(doom)—Yudkowsky’s p(doom) is high and Hanson’s is low—and had a debate on AI risk at Jane Street Capital in 2011, the firm that would later employ SBF. Some of the rationalist interest in prediction markets also stems
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Join,” Overcoming Bias (blog), July 22, 2023, overcomingbias.com/p/introductionhtml. GO TO NOTE REFERENCE IN TEXT Hanson and Yudkowsky: Per interview with Robin Hanson. GO TO NOTE REFERENCE IN TEXT risk at Jane Street Capital: “The Hanson-Yudkowsky AI-Foom Debate,” LessWrong, accessed January 2, 2024, lesswrong.com/tag/the-hanson-yudkowsky-ai
Young Money: Inside the Hidden World of Wall Street's Post-Crash Recruits
by Kevin Roose · 18 Feb 2014 · 269pp · 83,307 words
economy.” Another offered students a chance to “bring your career into focus.” Jane Street Capital, a medium-sized hedge fund, had a banner promising its recruits a “dynamic, challenging environment. Rapid advancement. Idea-driven meritocracy. Informal fun and open atmosphere.” (Oh, and last on the list: “Generous compensation.”) I walked around the gym for