#389: Sam Bankman-Fried On Capturing Profits In Crypto

Sam Bankman-Fried is the CEO of crypto derivatives exchange FTX and Alameda Research. He majored in Physics at the Massachusetts Institute of Technology. In this conversation, we discuss crypto exchanges, DeFi, yield farming, governance airdrops, toxic environments, SushiSwap, and the Effective Altruism Community. ============================== Smart investors know being early is critical to success in crypto. CoinList is where early adopters invest in, earn, and trade the best new crypto assets before they list on other exchanges. Try CoinList Pro and be first to trade Filecoin on network launch. Sign up via coinlist.co/pomp and earn $10 in BTC after you trade $100 ============================== Athletic Brewing is re-imagining beer for the modern adult. We love beer. But we also love being healthy, active and at our best. No matter your motivation, if you want to keep a clear head and drink healthier, we are here for you. Athletic makes non-alcoholic beer that you don't have to compromise to enjoy. The beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out www.athleticbrewing.com for more details and free shipping nationwide. ============================== Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off.

• 0:11Anthony Pompliano?

  Sam Bankman-Fried is the CEO of crypto derivatives exchange FTX and Alameda Research. He majored in physics at the Massachusetts Institute of Technology. In this conversation, we discuss crypto exchanges, DeFi, yield farming, governance airdrops, toxic environments, sushi swap, and the effective altruism community. I really enjoyed this conversation with Sam, and I hope you do as well. Before we get into the episode though, I want to quickly talk about our sponsors. First up is Coinlist. Smart crypto investors know that being early is critical to success. Coinlist is built for early adopters.

• 0:51Anthony Pompliano?

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• 1:30Anthony Pompliano?

  Again, you can sign up for Coinlist using coinlist.co/pomp to earn $10 in Bitcoin after you've traded your first $100. So on Coinlist, you'll never be late to the party. Go check it out. Next up is Athletic Brewing. At Athletic Brewing, they're all about reimagining beer for the modern adult. They've got great tasting beer that also happens to have no alcohol and be a mere fraction of the calories of even the light spears. In today's modern, mindful, performance-driven world, there's just no time for hangovers. With Athletic Beer, you can have the full relaxing ritual of drinking a great beer to wind down the day, or do it with dinner, or have a day. Day drinking without derailing the rest of your day or week.

• 2:13Anthony Pompliano?

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• 2:54Anthony Pompliano?

  And now you can also pay with Bitcoin or other cryptocurrencies. So if a Bitcoiner is running the company, you know they're good people. Go check them out at athleticbrewing.com. Lastly, don't forget that I write a daily letter to over 50,000 investors about business, technology and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. All right, let's get into this episode with Sam. I hope you guys enjoyed this one.

• 3:29Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 3:54Anthony Pompliano?

  All right, guys, bang, bang. I've got Sam here with us. Thanks so much for doing this, man.

• 4:00Speaker 02

  Yeah, I mean, thanks for having me.

• 4:02Anthony Pompliano?

  Absolutely. All right, so I think that you are one of the most fascinating people at all of crypto and many people don't know your story. So let's just start with kind of where you grew up, where you went to school, and then how you got into crypto.

• 4:18Speaker 02

  Yeah, I grew up in the San Francisco Bay area on a Stanford campus and had a, you know, really nice sort of quiet, you know, suburban upbringing, so to speak. And I, yeah, I mean, it served a good early life. Parents are both law professors and sort of thought, you know, maybe I was gonna do math or physics or, I don't know, it wasn't, the plans were sort of very nonspecific. You know, it's sort of like, select whichever subject I was doing best at in school. And like, that's what I'm gonna do, you know. And I, so I went to MIT and I quickly learned there I wasn't gonna be a physicist. I mean, it's like, the sort of least favorite things

• 5:00Speaker 02

  that I'd done were try and do physics research. So that's, you know, that that wasn't gonna be the answer. But that doesn't sort of answer the question of what the answer will be, you know, what I will do. And I, you know, spent some time in college trying to think about what I could do that sort of have the most impact. And ended up at, I thinking about how I could donate, you know, as much as I could. And that sort of led me to quant finance. So I was a trader at Jane Street Capital for about three years in New York, which is a blast. And he's really had fun there. It's really, really nice. And then, you know, sort of after three years or so, I had a, you

• 5:42Speaker 02

  know, sort of a fork in the path of like, you know, am I gonna sort of do this for the rest of my life? Or am I gonna try and do other stuff? And it was a tough call. I really liked it. But sort of felt like I wanted to explore. I wanted to try other things. I want to see what, you know, that that maybe there is huge upside to doing other things too. And so that sort of, you know, I left and shortly thereafter, I mean, checked out crypto markets, which is late 2017. And I mean, markets were completely insane then, like, is, and the arbitrages were just gigantic. And that served my background. And so that's sort of how I ended up in crypto.

• 6:19Anthony Pompliano?

  All right. So when you're in school, obviously you're smart. You got a bunch of smart classmates. Everyone is kind of going into all these different things. The kind of classic tale is people gravitate towards Wall Street because that's where you can make the most money. But I think one of the most interesting parts about your story is this idea of how do I make as much money to give it all away? So maybe let's just start with, kind of, where did that idea come from? And kind of, how did you formulate, you know, a strategy to go do this?

• 6:52Speaker 02

  Yeah. So I mean, it's sort of like a wandering path to get there. Started with, you know, what can I do that I'll have impact? Went through a bunch of random things. I, you know, went, got into animal welfare. Thought about global poverty and stuff. Ultimately, met a group of people who were thinking about similar things, the effective altruism community. Sometime around my junior year, sophomore year, I guess, of college. And they sort of said, like, suggested, like, you know, hey, if this is what you're thinking, like, you know, obviously, there are a lot of things you can do, but one thing you should ask is like, if there's some charity you think is cool, like, would they rather have, you know, you working for them or you donating money to them? Like, which, and obviously, again, for different people, it's different, but like,

• 7:37Speaker 02

  you know, it's sort of, given my background, it sort of seemed like, well, actually, like, you know, quantitative skills are a pretty good fit for,

• 7:48Speaker 02

  for at least what nowadays is often lucrative careers. And I had some friends who had interned at Jane Street, said good things about it. And so I just sort of sighed, I don't know, let's, you know, try and, you know, try interviewing, see how it is, see if it seems like a good fit and sort of really like the interview. And it wasn't so much I like calculated out every path and was like, this is the highest E P, which, to be clear, maybe I should have done. But, but I didn't. Instead, I was sort of like, oh, wow, I had no idea what he's doing. And now all of a sudden, this seems like really high value. Like, seems like I could potentially donate a lot of money this way, and that seems great.

• 8:22Anthony Pompliano?

  Got it. And so that's a very unique way of viewing the world, right? Kind of talk through.

• 8:31Anthony Pompliano?

  How you think about it from you have seen money to live, right?

• 8:35Speaker 02

  Yeah.

• 8:35Anthony Pompliano?

  There's a story recently, there was a, I think a multi billionaire who basically had amassed a fortune of like eight billion dollars and he has now successfully given it all away. He literally lives in like a shoebox San Francisco apartment, says that he's incredibly happy. And his entire life goal was to give away his fortune and he's now done that. But he amassed the fortune and then gave it away. Are you kind of, as you're making money, giving it away? Or is this a, let's get as much money as possible and give it away?

• 9:05Speaker 02

  It's a good question and I sort of think if you can do it, the ideal thing in some ways, there's a lot of activity about this is sort of the actual answer. And here are sort of two ways to think about it, right? One is like, well, if you amass money, you can grow that money, you know? And like, then you can give away way more than if you'd been giving away the whole time. Because, you know, you get interest on that money one way or another. The other way of thinking about it is, sure, well, also the charities could have been doing things with that in the meantime. And, you know, they could have been saving people's lives who have been contributing to the world. And like, doesn't that have some compounding effects too? And sort of the answer is, yeah, actually most things that are really high impact have compounding effects. The compounding is sort of part of what makes them high impact. And you have to sort of think about which is bigger.

• 9:51Speaker 02

  And so I think, you know, part of how I think about it is like, given where I am right now, you know, what's, what's sort of relatively larger? And I mean, I think for people who are in crypto right now, it's not going to shock them to hear that like, returns on capital can be pretty significant. And, and, and, and, you know, I think that you just have to look like what's happened in DeFi over the last, you know, four months to see that like, that's going to outstrip a lot of things. Um, and so part of my answer is like, well, if you think you have unusually way, you know, unusually good ways to grow money, which you probably do if you're in the business of growing money. I then that's like a decent argument towards, towards sort of growing it over time and then donate. On the other hand, and these, a lot of people would say this, and I think they have a real point.

• 10:35Speaker 02

  Like, yeah, sure, I've heard that one before, you know, like, like person says, oh yeah, don't worry. Like this is, you know, I'm, I'm one of the good guys. Um, and, and I think that that's like, you know, that that's a real worry that you can have about other people and it's a worry you can have about yourself, even if you're not. You know, even if you're not selfish, it's a sort of drifting way, forgetting about why you got there in the first place. And so what I actually do, and I'm not saying this is the perfect thing, like there's things pulling in all directions here, but, you know, I sort of give away enough each year that it's sort of a real amount. That's a significant amount and that it sort of keeps me honest.

• 11:14Speaker 02

  And, and you know, keeps me, I, I, yeah, sort of keeps me, um, keeps reminding me of like, why I did this in the first place, keeps me in touch with people who are thinking about it, keeps me in the loop about things. I can do, keeps me thinking about what I can do with money. And, and so even if it's not like most of my money each year, even if a lot of it is, is, you know, the goal is to compound it and give it later. Um, I, there's a lot of good that, that I think you can, there's a lot of good you can do now, and I think that there's a lot of value to at least giving something away to keep yourself honest.

• 11:51Anthony Pompliano?

  Absolutely. And so let's talk about what you've done to, uh, grow wealth, right? So you've got kind of two separate things. You've got FTX and then you've got Alameda Research. Jane Street is a pretty legit shop, right?

• 12:04Speaker 02

  Yep.

• 12:05Anthony Pompliano?

  That's a pretty good job. Um, when you decided to leave, did you know that you were going to go, uh, into crypto? Or was this more of you left and then as you were exploring things to do, crypto kind of caught your eye?

• 12:16Speaker 02

  Yeah, like when I left, there are like 12 things. I, I sort of didn't know exactly what I was going to do. And actually it's like, gonna try working at a charity was one of, one of the things that added an effective Altruism strategy. And, and I think that like, sort of, there are all these paths and they're so hard to think about, right? Like, you know, here's one thing that like, you know, and there's so many things you think about, and you're like, oh boy, who the hell knows how valuable that is, you know? Like you go campaign for policies that you think are good, or for politicians who you think will implement them. Or you could go work on climate change, you could go work on third world developing diseases. Some of these turn out to be somewhat analyzable. Like you can look at sort of a classic example is like, how many lives per dollar can you save donating to third world health charities?

• 13:01Speaker 02

  And you can actually ballpark that, right? You can just do trials, right? You can go into a village, you can give malaria, treat bed nets, um, and, and see what happens to the malaria rates. And there's a lot of complications, but like, You know, that's sort of an inanalyzable thing, but many of these things are really hard to to ballpark. You know, if you're gonna like, how much impact can you have on the world as a journalist? The answer has to be a lot, like clearly they have impact on the world. But it's really hard to think about how much and what the right thing to do is so. Sort of my thought was like, boy, there are all these things I want to try doing. Some of them I can sort of think about, some of them I have a lot of trouble estimating. And it's just gonna be hard to know how big they could get until I try. And and so that was sort of the thought was try a bunch of things and like, see what sticks.

• 13:45Anthony Pompliano?

  Got it. And so when you eventually discover crypto, was it literally just the arbitrage opportunity? Uh, was just so big that like it was hitting you over the head and saying you have to go do this? Or was there other things that uh, that that kind of dragged you in?

• 13:58Speaker 02

  Yeah, I mean, that was the first thing that dragged me in was just, you know, looking at literally, I like literally just looked at coin market cap, you know? And I clicked on Bitcoin. I saw these numbers like those aren't the same numbers, you know, like I see a list of exchanges and prices and the prices are different. And like, and that's not like complicated arbitrage or so I thought. I was like, literally that like nothing that simple ever happens, you know? But the numbers that weren't even a little bit different, you know, they're like five, 10% different. And and so sort of my first thought was like, that's fake, like, I don't know why yet, but that's fake. That can't be real. And and then I sort of investigated and the answer is half of it was fake, you know? But half those exchanges were not real. But half them actually were, and there were some real arbitrages sprinkled in with the fake ones.

• 14:41Speaker 02

  Um, and the real challenge back in 2017 was not finding a good trade. It was being able to do it. Um, and the operational setup involved in it was just massive.

• 14:54Anthony Pompliano?

  Okay, explain this, because I think a lot of people don't understand. We're talking about like, super simple arbitrary arbitrage is basically just you go to one exchange, you buy Bitcoin, you move it on to another exchange, you sell it. There's literally two different prices and you take the difference.

• 15:09Speaker 02

  Exactly. This isn't some weird derivative, you're not thinking about interest rate, literally it's a Coinbase and Bitstamp have different prices for Bitcoin. Right? Like, that shouldn't be too hard. So what happens? I'll explain maybe one of the more complicated, simple arbitrages.

• 15:25Speaker 02

  And I think sort of rolls into one all the different things you have to think about. And this is I the Japan art. So I was, you know, late twenty seventeen, early twenty eighteen. Japanese Bitcoins are just trading like five to fifteen percent higher than American Bitcoins. Meaning you go on Bitflyer or Coin Checker, Bitbank or one of the Japanese exchanges. And, you know, it's an eleven thousand dollar Bitcoin and you go on Coinbase and it's a ten thousand dollar Bitcoin. As it's sort of like, you know, there's, there's, there's an arbitrage. And that was big. There's billion dollars a day trading on each side. So if you could do it. Sort of seemed like maybe you could do it big, which is pretty exciting. It's also like ten percent a day. I don't know. It's a lot, you know.

• 16:09Speaker 02

  So then you try and do it and you fail for twelve reasons. And like so many reasons, it's so over determined. So what happens? Well, first of all, you realize you don't have a Coinbase account and there's a three month waiting list. You realize you don't have a Bitflyer account and you have to be Japanese to get one. And there's a three month waiting list. You get those, then you wire a hundred dollars as a test transfer to your Coinbase account. And your bank shuts down your bank account because they don't like crypto. Then you realize that you can only withdraw to a Japanese bank account from Bitflyer and you need to be Japanese to have a Japanese bank account. So you get a new bank account and you find a Japanese person or company or something. Now you have a Japanese bank account.

• 16:50Speaker 02

  Then you realize you have three thousand dollar a day withdrawal limits on Coinbase. And again, there's a three month waiting list to get your withdrawal limits raised. Then you realize that I your Japanese bank account can't do international wire transfers. So it's not clear how you're getting the money out of Japan. And she's like, you go through so many things here. And thing after thing after thing is like, I guess I have to learn how to start a company in a foreign country. And hire people there and get a bank account and lawyer. And then you go to do a wire transfer in Japan. You realize you don't speak Japanese and that's going to be a problem because their website doesn't, there are no online, there weren't. You couldn't do it online. You had to go, okay, also I'm not in Japan. And I don't speak Japanese, but I have to do it in person in a branch of a Japanese bank. So there are two more problems they have to solve somehow.

• 17:35Speaker 02

  And you finally get someone there and and the banker is like, what the fuck is this? Like, this is definitely money laundering. You're like, no, no, it's not. It's arbitrage. Like, no, you don't understand. You're wiring millions of dollars every day from crypto to an overseas bank account in a different name. Like, this is like, that's, it's a sketchiest thing you can be doing. It's always in the same direction. It's not like you're moving it back. It's all only going one way. You're like, no, you don't understand. On the back end, I got Bitcoins going from G-Dax to BitFlyer. And like, I didn't understand any of that, but this checks all the boxes of a sketchy transaction. And also remember, you don't speak Japanese and they don't speak English. And so now you go hire Japanese lawyers, not to like, not to like, for a court case or something. You hire them to go talk to a banker.

• 18:18Speaker 02

  Cause like, they're like a trustworthy person. Who can, who speak the line? So it's just like, it was, it's months and months of setup that went into like all of these different pieces. And the problem is if you have all but one, you have nothing, right? What you end up with, you end up with a ton of Japanese and pooled in a bank account in Japan that you can't do anything with. And it's not like you're cycling and arbitraging every day, just sitting there. So it's like, you need to put, you know, 12 pieces together to do a single round of arbitrage. So that, that's sort of the, the problem that you've run into is just like, you know, it's crypto is incredibly logistically complicated because it's decentralized. And like, you think about, well, how about, how about normal finance?

• 19:00Speaker 02

  What happens? The answer is all US exchanges clear under the same clearing symbol with a centralized clearinghouse. You store everything with a centralized custodian or clearing firm who also stores all your money in and has connected to all the exchanges for you and could do foreign currency transactions and everything. Like, it's, it's all in one place, you know? But in crypto, because of decentralization, one of the sort of side effects of this is that if you have to do something that touches a lot of different companies, you have to separately figure out logistics for every single one.

• 19:34Anthony Pompliano?

  And so as you're doing this, the name of the company is really interesting to me. So Alameda Research, the research component is not what I think most people would expect.

• 19:44Speaker 02

  No.

• 19:45Anthony Pompliano?

  Basically, a trading shop. And so tell the story, Alameda, I've heard where that comes from. So explain that one, because that's just cool. And then the research, what was the logic there?

• 19:53Speaker 02

  Yeah, so Alameda, you know, started out in Berkeley, California, which is in Alameda County. So that's where Alameda comes from. Research, 10% of it came from the fact that there is some research there. There's like, you run studies, you know, and like one example of this would be, you want to figure out. Arbitrages are simple when I describe them the way I described them, at least to think about. But let's say that you're in the middle of a market move. It's like a two-second-long market move and everything, every exchange is reporting a different Bitcoin price. And you have to figure out if there's a trade to you, but all the exchanges data is lagging. So you don't know if it's really an arbitrage, or if this is just like one exchange is pre-move and one is post-move. But you can't actually trade on the pre-move ones, it's post-move now.

• 20:38Speaker 02

  And you might have to do a lot of statistical studies and a lot of data analysis to try and figure out what's actually going on there. So there is some research in it, but that's not really where the name came from. Really where the name come from, we're trying to think of a name for the company. And we're not good at naming things. I mean, it's just like a weakness of, I'm not good at, I don't like. But we needed a name, like we're sort of like, at some point, our corporate development is blocked on having a name. And what were the criteria?

• 21:12Speaker 02

  The criteria were not like, you know, Bitcoin arbitrage trading shop. What variant of that should we use? So we took a step back and we're like, all right, we want a bank account. And if we're Bitcoin arbitrage trading shop founded by a bunch of 20-year-olds, if that's the name of our company, we're not getting our bank account. Like, the compliance department's going to take one look at that and just like, that, that's it, right? And so we're like, all right, what's like, what's, what name is never going to give us grief? You know, what name is not going to stop us from being able to do anything like research? No one doesn't like research, you know? No one's like, I don't know, research, I don't know if we can deal with that. That's where it came from. It's completely an offensive name.

• 21:53Anthony Pompliano?

  That is an amazing story. So give us an overview of kind of what you guys are doing today, right? So you, you guys are based in Hong Kong, I believe.

• 22:02Speaker 02

  Yeah.

• 22:02Anthony Pompliano?

  Kind of what exactly does Alameda Research entail?

• 22:07Speaker 02

  Yeah, it's I. The core way to think about it is it's a liquidity fighter. And what does that mean? A crypto liquidity fighter? What does that mean? Well, one of the things it means is like, you know, if is it does arbitrage? And what's the connection between those? Well, if there's buyers on Bitstamp and sellers on Coinbase of Bitcoin, then you provide liquidity to the sellers on Coinbase by putting out bids. You provide liquidity to the buyers on Bitstamp by putting out offers. You make money by doing arbitrage and you help tighten spreads and you help keep, you know, keep things in line and provide actual coins for people to buy and dollars for people to sell into. So that's sort of like the classic, you know, simple like liquidity fighting via arbitrage connection. And that's, that's a lot of what Alameda does.

• 22:52Speaker 02

  But, but increasingly as crypto branches out, it does too into all the wacky ways that crypto demands liquidity. And so, you know, then you get to futures and derivatives, right? Like frying liquidity on futures, you know, if you want to go trade on, I, you know, let's say that you want to go, I, I don't know, you know, pick your favorite exchange with futures, right? You want to go to, to, to Binance or Huobi or Bitmex or, or whatever. And you want to buy a Bitcoin future. I, someone has to be on there, they're on the other side, so we're keeping it at about the price of a Bitcoin. And so that's sort of another thing is like, you know, futures versus spot arbitrage. But then there's sort of, you know, there's, there's fiat arbitrage, right? So keeping Japanese and US exchanges in line with each other is sort of another branch of this.

• 23:37Speaker 02

  And recently, I mean, what's been, you know, what's a thing that crypto certainly needed liquidity Friday to in the last few months? Well, it's DeFi. That's where all the activity is, you know? And so it's like, for dying liquidity in all the wacky ways that you couldn't buy or sell comp, you know? Like, it's not just like Binance to Coinbase liquidity. There's also like, you know, Uniswap and all the borrow lending protocols that have it. And, and, and OTC and, and then there's like yield farming. And, and so basically wherever there's trading activity in crypto, there's, you know, there's sort of. A place to provide liquidity and there's a place to make money by doing arbitrage if there's sort of enough demand and not enough supply.

• 24:20Speaker 02

  And so, you know, what Alameda is sort of spending its time on varies from month to month, depending on what crypto is spending its time thinking about.

• 24:28Anthony Pompliano?

  Got it. And then where does FTX come in?

• 24:31Speaker 02

  Yeah, so, you know, Alameda had been going for about a year, this is like late 2018. And, I mean, something that had been clear from the beginning was that exchanges make a lot of money in crypto, seems like a good business to be in. The product, there's a lot of complications on the outside, but if you think about the really core product of like a matching engine, that is not that complicated. Like, that is sort of like, well, you can place a bid and you can place an offer. If they cross, then you match them, you know, that that's like, and so we're sort of like, okay, like, we can do that. That's not that hard. That's a lot easier than the bots we're building. And they seem to be doing quite well.

• 25:13Speaker 02

  But the problem is that a lot of other people can do that too and have done that. And we don't know any customers. We don't have a network. We don't like, so, yeah, we could launch yet another Bitcoin tether exchange and hope people used it and no one would. That that's sort of like where we were for a while and where we were stuck on. And what sort of finally got it out of that, that rut to some extent, was I, a few things happening at once, I moved to Hong Kong and I had a lot of meetings with people here. Alameda built out NoTC Desk and I built out a network in crypto from that. So all of a sudden, we had some institutional connections, had some personal connections.

• 25:58Speaker 02

  And then the other thing was all the derivative exchanges sort of shit the bed at the same time. And, and it's sort of like, you know, there's the overload problems, there are massive clawbacks everywhere. It's like hundreds of millions of dollars a year being lost to this. And so it's sort of like, okay, like, a derivative exchanges is harder. There's more that goes into it. There's a risk engine, margin leverage, the matching engine's harder because of the risk engine. A lot of the players right now seem to be having a lot of trouble with it. There's a ton of volume going in in them. And now with a bit of a network, and that was sort of enough to make us feel like we had a plausible path forward there. And so, you know, started building out FTX sort of late 2018, early 2019.

• 26:43Speaker 02

  And I, and yeah, went live spring of 2019. And at the very beginning, we started an experiment of like, we think we can build a good product like that. We think we can do.

• 26:56Speaker 02

  Um, is that enough? Like a good product and a little bit of a network? You know, can that become a big exchange? And the answer is no, that's not enough to become a big exchange. That fails. Um, but if you take those and then you just like push a lot, you, you do a ton of work at everything from recruiting users, everything from retail customers to large institutions, um, to making a ton of UI changes to doing customer support. Um, and all the, the random crazy things that come up that you have to deal with. Um, and then you just push really hard on building out a user based network while simultaneously building out the product.

• 27:40Speaker 02

  Then yeah, you can do it. And, um, and so that's sort of, you know, what we've been doing over the last year at FTX. And it's, you know, it's, I grown to roughly the fifth biggest exchange. Uh, which is, which is pretty cool. Um, it's still sort of derivatives first in that like, you know, the majority of its volume and, and sort of it's like most well-known products are derivatives. Um, but you know, it has spot markets as well, tokenized products, fiat and, and a bunch of other things.

• 28:11Anthony Pompliano?

  Got it. And all of this has been self-funded or you guys have raised capital outside? How have you built all of this?

• 28:19Speaker 02

  Yeah. So Alameda was a combination of I self-funding in lines of credit from like friends and family and stuff. Um, to bootstrap, which was a sort of a high wire act for a little while, um, but set us up really well for the future. Um, I

• 28:36Anthony Pompliano?

  By the way, hold on, hold on a second. That's a great way to say you raised no outside capital.

• 28:41Speaker 02

  That's right. Yeah. I mean, it's never raised any outside capital and, and that's sort of important to it because anyone who has investors is aware of the pain of having investors, you know, and I

• 28:57Speaker 02

  It's just even if they're the best investors in the world, there's a pain associated with it, you know? Um, and just to give one trivial example, let's say you want to open up a bank account for your company. You go to the bank and they're like, can we have a signature of all of the owners? And you're like, no, I am not all of the owners. Some of them are thousands of miles away. They're like, great, come back when you have their signatures. And that doesn't sound that bad because you email them. You're like, please sign this. Um, but all of a sudden you sort of like doubled the work it takes to do a lot of administrative actions. And once you do that, a lot of them like it just slows down a bunch of things and not having that's been really great for Alameda. Um, FTX started out the same way. Um, although there was FTT, a token sale.

• 29:43Speaker 02

  Um, but, uh, but since FTX has taken outside investors. And so FTX, it's still majority internally owned, but, uh, but does have outside capital.

• 29:54Anthony Pompliano?

  Got it. Um, you mentioned, uh, DeFi earlier. And so, uh, I think what most people are wondering is just you have a fantastic, uh, trading business with Alameda. You've got a fantastic, uh, exchange business with FTX. Quite simply, just what the hell are you doing playing around with all this DeFi stuff? It just talked through just how you see DeFi and kind of what I'll call a lot of kind of like the financial engineering and experimentation and kind of all the wackiness that's going on there. In light of the greater kind of crypto, uh, industry, how do you view DeFi? And then we could talk about some of the things you're doing there.

• 30:31Speaker 02

  Yeah. So I

• 30:35Speaker 02

  it, I sort of stumbled into it at the beginning. Um, and you know, a lot of where this came from was that's where the winds were blowing. That's where crypto attention was turning and it's really important for FTX. Um, to be responsive to that, like it's, you know,

• 30:55Speaker 02

  It's three months earlier, everyone was asking about options and wanting us to improve our options offering. No one's asked about options in the last three months. Like, no one cares anymore. Probably they will again in four months, you know? And when was the last time you heard about Deribit? Right? Like, probably like April. Um, that doesn't mean it's dead. It means like, you know, in six months, maybe Deribit's all people are going to talk about again. Like, it's sort of like, you know, Deribit's best known for its options and so. But so anyway, you know, one of one of what we're trying to do with FTX is is to be

• 31:29Speaker 02

  to be offering customers sort of whatever they want, you know? What they want it as much as we can. And I, you know?

• 31:44Speaker 02

  What that means is basically like, well, I

• 31:50Speaker 02

  it means that when the world's moving to DeFi, we try and offer DeFi products. It's a little bit tricky. Um, it's like, you could do some of that with FTX, right? Like, we listed compound markets, sure. You know, you can list DeFi tokens on the exchange. And we're sort of one of the first exchanges to start doing that. Um, because we got a lot of interest and demand in it. Um, but there's a problem. Like, the problem is that, like, FTX is not DeFi. It's essential, so it just is. And what that meant was like, anything FTX action was, that's where customers' demand was. Um, you know, we wanted to be able to fill that.

• 32:33Speaker 02

  And, you know, so pivoting FTX as much as made sense for its product. Um, I sort of did a deeper dive in. And I basically came out with with two main thoughts. The first is that a lot of the products had serious shortcomings. Um, but the second was that there's some really cool shit there. And, you know, some things that sort of, I first of all, just found like the on-chain governance. Uh, the idea of that really cool and really powerful and sort of surprisingly sleek. And like, I sort of like surprised that that just worked. Now you could make it just work, although obviously theoretically you could.

• 33:16Speaker 02

  Um, but second of all, I think the thing that really grew on me over time was composability.

• 33:22Speaker 02

  And if you if you ask me like what the biggest advantage of DeFi is, it's that it's composability. It's the fact that if you have, if two different people make two different products in DeFi, you can glue them together. And and what that means is like, you know, let's say that you take a DEX and you take a borrow lending protocol. Um, you know, so you take like you swap plus compound or something like that. You know, sushi swap plus off air, you know, whatever you want, like, um, you can in one transaction, do a margin trade on the DEX.

• 34:01Speaker 02

  And the way you do it is, I mean, you sort of like, it the leverage from the borrow lending protocol and the deltas from from from the DEX. You know, basically you send one thing to borrow lending protocol, use it for another thing, send it back to the DEX and buy the first thing with it. And now you got levered in it. But the really cool thing about that is that you can just do it by gluing those two together, even though they're totally separate projects. And if you imagine doing that, I, you know, you imagine doing that. In in centralized finance, you can do it, but it's a hell of a lot more annoying and harder. Like you're ping ponging between multiple exchanges, you have to deal with withdrawal limits and withdrawal times, liquidation on both sides and like,

• 34:41Speaker 02

  it, it, you know, you sort of have to have like an automated trading system set up to be able to really do it realistically. Whereas in DeFi, you can just glue all the shit together and that that's just really cool. And it's super powerful and it means that like you can have a lot of people working on a community kit together and all building useful things for it. And not independent things where just the best one wins, like things that that add together. Um, so anyway, that's that's sort of like what what sort of struck me is like one of the most powerful things about DeFi. But also just, yeah, the products were not were like a little underwhelming.

• 35:18Anthony Pompliano?

  Um, And so recently you talked a little bit about kind of this like toxic DeFi environment. So kind of talk through like, it feels like there's a lot of potential with the direction the technology is going. Then there's all kinds of craziness with like the people, the projects, the tribalism, like just talk through that a little bit.

• 35:38Speaker 02

  Yeah, it's, um, I mean, it's it's weird because it's in some sense the most.

• 35:47Speaker 02

  In some sense, it's a lot more cooperative than CFI is like people are all building together. But in some sense, it's also a lot more toxic and at least in places and I don't know. There's sort of been a bunch of things that sort of combine to do that. But but just sort of throwing some of them out there like I I. One thing obviously is protocols like there are big believers in a lot of protocols. Um, you know, Maxi's is often the like, I don't know if it's quite derogatory. Some people I think use it derogatorily, some people use it non derogatorily, but you know.

• 36:29Speaker 02

  Bitcoin maximalists, Ethereum maximalists, um, you know, I'm sure that there's some maximalist for. You know, pretty much every project, although you know, those are those are the two biggest communities by far. Um, I and I, you know, they don't get along so well, they don't get along so well with other. Protocols and that's sort of independent of whether they're right, like, you know. I mean, they can't all be right, like maximalist for two different communities is a little hard for those to both be. Right, at least in the strong version of them, but um, but you know, maybe one could, but but sort of one way or another like. There's a lot of flaming that goes on from adherence to one community towards other communities and other.

• 37:12Speaker 02

  Projects again, which isn't to say like one of them might be right, but one way or another, there is a lot of toxicity there. Um, there's also, um, yield farming is weird. It's, I mean, I so I sort of, I don't know, I I did the math and it was like, I actually kind of surprised at like. How legit some of it was in that like it's, I think there's a version of yield farming, which which is actually. Sensible sort of, which is basically like you build a valuable product and. Want customers and sort of the and want people to build on it and stuff. And the the deal you make is you're going to hand out most of the value of it.

• 37:54Speaker 02

  You're just going to drop the token on its users in order to get other people to use it and incentivize to build on it. Um.

• 38:03Speaker 02

  And yeah, you give them yield for that. And that vision is not crazy. And if you think that DeFi is worth tens of billions of dollars, then it could be a fair bit of value that you get out of this.

• 38:18Anthony Pompliano?

  All right, so I want, I want to take a second for you to explain exactly how this works. Cause I think there's a lot of people who listen to this, who they've heard of yield farming, like the terminology. They have no clue how it works. So kind of just walk us through exactly what's happening when people are doing this.

• 38:35Speaker 02

  Yeah. So first I'll just say mechanically here's, there's a lot of different versions of it. I'm just gonna like, talk about sort of a really simplified version of it. And you can put as many knobs on it as you want. But at its heart, what is it? You build a product. And it's a product people can use. You know, maybe it's a borrow lending protocol, maybe it's a DEX.

• 39:01Speaker 02

  Whatever. Let's for now say that it's a borrow lending protocol. That's where this all started.

• 39:09Speaker 02

  And what you say is, all right, I want a lot of people to be borrowing and lending for my protocol, right? And what do we mean by borrow lending protocol? Something like Compound or Ofe where you can basically, it's, you know, put in Ether and take out USDT or whatever. You know, there's sort of like a bunch of accepted tokens and you can lend some of them to the protocol and you can borrow other coins against it. And then other people can borrow the coins you're lending out. And you're paying each other interest for this.

• 39:40Speaker 02

  I, so.

• 39:44Speaker 02

  So you want to incentivize growth in your project. And you want to incentivize people to start using it, building on it, integrating with it.

• 39:55Speaker 02

  And so what you do is you say, all right, first of all, all the revenue is going to go to this token. You know, you create a token, it's the equivalent of, you know, an exchange token, a protocol token, whatever. And you say, all the revenue from my project's going to this token, you know, with Compound is comp. And What we're going to do is for the next three months, we're just going to every day airdrop a thousand tokens on everyone who's using the platform, just proportionally to however much you're using it. So however much you're borrowing plus lending out, you know, that's how many points you get. And then this thousand, these thousand comp tokens just get divided evenly between all those people. And I, what happens then is, you know, a lot of people

• 40:40Speaker 02

  go to use your protocol because they want to get your token for free. So they start borrowing or lending, and they get your token, you give up most of your tokens, or some, or a lot, I mean, depends on the project. And they get yield. And what yield means here is basically like, you know, they're putting up, you know, a thousand dollars of capital, and every day they're getting one dollar of the token airdropped, you know. And so they're getting 10 bips a day, you know, on their capital, just literally putting it there and lending it out. And the yield is coming in the form of the protocol token that's being airdropped on them. And the vision is now all of a sudden, all these people who's borrowing lending protocols have your token, they want yours to win. They want to build on yours, or they're aligned

• 41:23Speaker 02

  with you. And they provided a value by providing liquidity to your protocol, you know, by providing coins for people to borrow. And so all that's great, and helps you out, you help them out, you're aligned. That's the theory behind it. And I'm sort of like, you know, taking sort of like, the positive light, the optimal version of this, and ignoring all the bad shit that happens.

• 41:48Anthony Pompliano?

  Okay, so when people are doing this, just to summarize, the whole idea is to incentivize users to adopt my product or my network over another one, and therefore, basically, I pay some rate of return for them adopting that, right?

• 42:04Speaker 02

  That's right, over another one, or over just doing nothing. But yeah.

• 42:08Anthony Pompliano?

  Okay. The interest, I think, is, or the return on some of these, I think, is where, kind of, especially people who come from the traditional world are like, wait, what is going on? Because, you know, the return can be a thousand percent, right? Or, you know, crazy, crazy numbers. So kind of talk through a little bit. I'm assuming that you believe that, like, that's not very sustainable, and we'll kind of get commoditized down, but maybe not.

• 42:31Speaker 02

  Yeah, that's a really good point. And and that is where a lot of this shit starts to get weird is that when someone says that they have an interest-bearing product for you, you know, like, let's just say, get rid of crypto, right? So it's like, I got some bonds, you know, they're like, I don't know, corporate bonds or something. And they're going to pay you interest each year. And like, great, what's the interest of like 6% a year? Sure, like, all right, you know, that's a number that I find plausible, you know, I'm sort of like, is that better or worse than putting in the stock market? Like, I don't know, maybe it's a little worse, a little safer. Or whatever, anything between like 1 and 15% a year is sort of like normal land. And crypto interest rates are higher. Um, there are a lot of ways to think about this, but just generally crypto interest rates are like

• 43:15Speaker 02

  20% a year roughly. So in crypto, you have something that pays 20% a year, and it's actually kind of reasonable, you know? There are a lot of people who pay 20% a year for capital. There are a lot of people who loan capital at 20% a year.

• 43:29Speaker 02

  Whatever. Um, so, okay, anywhere between like 5 and 30% is like plausible in crypto. But as you said, some of these are 1,000, and 1,000 is equivalent, like, it's just like, that's a ridiculous number, right? Like, like, no one ever pays you 1,000% a year, right? And why is that? Well, first of all, everyone would do it. Also, why are they paying you so much money? Where's it coming from? Like, this is way too much. Like, you could have, you could have said 100, and I would have been amazed at it, like, 1,000, like, that's ridiculous. So, it sort of your thoughts, like, this has to be a scam, like, this is the like, you know, send one Bitcoin to us and we'll send you two back type scam, right?

• 44:09Speaker 02

  Um, and, and what's actually happening there is, I, well, mechanically, what happened was, yeah, they're airdropping the tokens on the users, and just do the math, you know? So like, giving away half of all their protocol tokens in the next two weeks. And that's a quarter billion dollars worth of tokens are given away. And, you know, there's optimistically going to be a billion dollars locked in this protocol. Using it, so then you have 25% over a couple of weeks. That's where you get these insane numbers from. And there are sort of a few ways of thinking about this. The optimistic way is like,

• 44:49Speaker 02

  yeah, time horizons are shrinking. They want their protocol to do well soon. So they're like, we're not going to give it to next, you know, pass out these tokens over the next two years. Let's just do it over the next two weeks. Why wait? So yeah, it's a ton of yield for two weeks. It we're getting away most of the value of the protocols to users and that's, that's the trade we're making in return for getting a lot of users. And I, it's a little weird because people should be putting a shit ton of money in. Like that should be drawing a hundred billion dollars out to make the return more reasonable, right? Like, um, that's sort of the optimistic take. The pessimistic take is like, it's a scam. And or it's not really a thousand percent year. And what does that mean?

• 45:33Speaker 02

  Here's an easy way to give it an insane yield. You just take a token and every day you double the number of tokens. You just mint another entire new set of them and airdrop it on the current token holders. So yeah, you're given a hundred percent a day, but obviously the price is crashing. Like it's just a hyperinflating token. You're not actually giving out value there. And so another thing that might be happening is that the tokens price is actually crashing just as fast as it's paying you. So you don't make money for, for doing this. Um, or maybe it's a scam. They're gonna steal all your money somehow. And so those are sort of the pessimistic takes.

• 46:08Anthony Pompliano?

  Are these just like the new ICOs?

• 46:10Speaker 02

  Yeah, I mean, they're not exactly the new ICOs. Like, I, I mean, there, there's differences and everyone will come up with like their own, you know, sort of reasons for why they're different. And

• 46:28Anthony Pompliano?

  Not, not structurally, but just in a sense of, you know, using a new mechanism for capital markets and incentives and, and kind of, um, you know, acquiring users, you know, ICOs was one version. This seems just like a second version. And that's not passing judgment on good or bad. It just is what it is.

• 46:44Speaker 02

  Right. And, and I think in the end, my answer to you is closer to yes than no. You know, my answer is sort of like, yeah, these kind of are the new ICOs. Like, that's actually not a bad way to think about it. And whatever, there's, you know, a lot else going on there. Obviously, like, it's not that, but, but yeah, at its heart, these bear a lot of resemblances to ICOs.

• 47:04Anthony Pompliano?

  And it also feels like, um, There's this game going on, like in my opinion, there's people who I'm probably closer with that would say, you know, Bitcoin is the only thing, nothing else matters. All this other stuff is, you know, frankly, garbage and like, you know, whatever. What I think is interesting though, is if you say, okay, like that is one view of the world and probably more right than wrong in terms of Bitcoin having immense value kind of moving forward. But there's also this like kind of thought process of, wait a second, there's a whole bunch of financial engineering and craziness going on here. If you're a pure capitalist and you say, I have no emotional connection whatsoever to any asset,

• 47:45Anthony Pompliano?

  you can make a lot of money, right? And drive a lot of returns. If you almost come at like from a hedge fund perspective where a hedge fund says, I don't care what the asset is, all numbers on the screen. And basically I'm just looking for things I can buy low that go up and then I can sell higher and, you know, make a return. That seems to be the people who are thriving in this environment.

• 48:03Speaker 02

  Yeah. And, and you know, there's sort of, I know I've retweeted this a number of times, although it's not actually mine. Quote, I say, Group CMS, I say, cool firm, I, who, I coined this, but, you know, sort of, do you want to be right or do you want to make money? And like, you know, there's sort of this thought of like, all right, you can use your words, you can say whatever you want, you know? And, and I'll be here making money because I'm going to go yield farm and you're not going to yield farm. And like, you know, we'll see who wins. I don't know what winning means, but I've guessed by who's going to end up with more money. You know, that, that's sort of like maybe what you're getting at there, which is like, put aside all the like moralizing and all the philosophical aspects of in the projections.

• 48:49Speaker 02

  And you say, like, can you make money yield farming? The answer is yes, you can make money farming. You make a lot. You don't have to lose a lot. I mean, it's, you know, if you just yield farm scams, then you're just going to lose all your money. And if you don't understand that tokens can crash and that their prices can move, even if they're not scammed, then you're going to end up yield farming and all the pools are probably going to crash. So it's not like you could only make money doing it, but there are, were ways that were actually just not that risky.

• 49:20Anthony Pompliano?

  And so how much money can be put to work in these strategies, right? There's a lot of people who, you know, kind of come from the traditional Wall Street world and they say, hey, if I can't put, you know, $50 million into the trade, then it doesn't matter. Hundreds of millions of dollars. My understanding is you can't do that, but you also can do more than, you know, $10,000. And so kind of talk through your experience with how much capital can actually go into some of these trades.

• 49:43Speaker 02

  Yeah, it's a really interesting question and it's really different for some of them than others. You find a new project that has sort of nothing in it. And like, if you put in a million dollars, you'll double the total amount of money in it. You'll have all the returns and no one's going to be there to buy the tokens they're farming. So some of them, the answer is you can put 10,000 in and if you do a whole lot more than that, you're, you're just killing your return. Like there's, you know, um, others, you know, difference or different sizes. And sort of what you should be thinking is a combination of two things. First, um, how much yield in dollars is being handed out? Not in percent, but in dollars, right?

• 50:23Speaker 02

  If someone's handing out $1 million total of yield ever, there's just a limit to how big you can do that trade, right? If other people are doing it too, you're all fighting over that, like you're not going to have a trillion dollars at work trying to do that. If someone's giving out a billion dollars of yield, I mean, it's worth tying up a lot of capital to get that. The other way to think about it is just like, how big is the world doing this? How much impact will I have doing it? How much liquidity will there be in this token everyone's mining? Can I sell it? Not that you necessarily will sell it, but can you sell it as sort of the ultimate truth of like, is it real money? Right? If you're getting all this yield, but you can't sell the yield, sort of assign me the yield's fake.

• 51:08Speaker 02

  But if you could sell it, then even if you don't, maybe it's kind of real. Um, and

• 51:14Speaker 02

  So anyway, to answer your question, on the low side, almost none for some of these on the high side. Well, you can sort of look at the numbers and there's a lot of different numbers you can look at. One of them, right, you can look at the sushi swap migration and how many funds moved with it. How many funds accrued to how many move back? It's not clear exactly what the right number to use, but they're all in the same order of magnitude. You can look at how many funds got locked up in compound at its peak. When it was like the only one doing this. You can look at how much is in curve. I mean, there's a lot of versions of this. If you look at the biggest ones out there and the number is about a billion. That's about how big the world can do this, probably more, probably a few billion dollars worth of funds.

• 51:58Speaker 02

  And it sort of has to be that big because it's been like a billion dollars sanded out. And if you could have gotten all of that for like a hundred million dollars, that's like a ridiculously good trade. I mean, there's a lot of ridiculously good trades, but 10 Xing in a month is pretty good. And and so then you say, okay, but you couldn't actually put that much at work, right? Like, come on.

• 52:21Speaker 02

  No, I mean, I don't know. I think Kenny could. It's really, it's really big. It's now again, not everything, right? Like only a few of these pools have not be.

• 52:32Anthony Pompliano?

  You you described like, okay, there's something you could put $10,000 from what you've seen like. And you don't have to use names, but just like, what's the biggest single opportunity from a size standpoint you've seen?

• 52:43Speaker 02

  Yeah, a single pool billion dollars. It's that that's about the biggest they've gotten, you know, if you look at how much die was being. And you had many hundreds of millions of die in compound at one point. You had hundreds of millions of dollars of bat in compound at one point.

• 53:03Speaker 02

  You had, you know, you've had a billion dollars in sushi swap. You've had a billion dollars in curve.

• 53:11Speaker 02

  I balance or had hundreds of millions of dollars yield farming. Um, yeah, I think like a billion is about as big as the biggest single pool has gotten. Now, obviously, put another billion in there, you're crushing the market. But I, you know, if the question is like, could you put $50 million to work? Yield farming. Yeah, the answer is yes, you could.

• 53:35Anthony Pompliano?

  Okay, you're saying that with a smirk on your face, so I won't ask any questions.

• 53:41Anthony Pompliano?

  But let's talk about sushi swap.

• 53:43Speaker 02

  Yeah.

• 53:45Anthony Pompliano?

  Absolutely like this to me is like the epitome of just, you know, chaos in crypto.

• 53:50Speaker 02

  Oh, yeah.

• 53:51Anthony Pompliano?

  In every positive way and every negative way combined in one thing. Tell us kind of just your perspective of what's played out so far.

• 54:01Speaker 02

  Oh, it's been a fucking soap opera. I mean, it's insane. It's, I mean, I thought that I'd seen some insane things, but this is so much weirder. So, yeah, it is one of the the yield farming pools. They did their yield farming on on Uniswap. And I think they kind of did two things that other yield farming didn't do.

• 54:24Speaker 02

  Um, one thing is they chose a really good thing to yield farm.

• 54:31Speaker 02

  Most yield farming is not done on Uniswap. Which is weird if you think about it. Because what product is the most used product in DeFi? Like, it's Uniswap. What product would you guess would be the highest revenue product in DeFi? Well, not Uniswap, it hasn't turned on revenue. But if it turned on revenue, then maybe Uniswap, right? Like exchanges, it sort of fits, high volume, it's an exchange.

• 55:02Speaker 02

  I think it's like an underrated point that like, you know, if you look at what like,

• 55:10Speaker 02

  like Curve has maximized the hell out of their position and they've done an amazing job given what they are. What they are is a stablecoin to stablecoin liquidity pool. That's like not an incredibly high grossing field in crypto in general, right? Like, you know, they've done amazingly given that that's that's sort of like what they've done so far. Um, but all right, so first of all, yield farming Uniswap, yeah, okay, that that seems like enticing. And the second thing that they did was they had this cool idea. Well, some people think it's blasphemous, some of the things awesome, whatever. It's whatever you think, it's potentially powerful, which is, um, well, if your goal is to

• 55:51Speaker 02

  incentivize usage and to kind of get a user base and grow it out, what easier place to do that than on a current version of the product? So what it did was it started out not by building Sushi Swap, the exchange, but by just having people farm sushi by using Uniswap.

• 56:13Speaker 02

  And sort of the natural crowd then to give sushi to and then to fork and create Sushi Swap, another DEX. Um, so it made a few interesting decisions, I think, like were powerful if nothing else. And it gained in popularity and it became like the biggest yield farming thing. One of the biggest by returns, but but the biggest by prominence, I think that there's ever been.

• 56:38Anthony Pompliano?

  How much of that is driven by the meme and like the name and kind of the like Twitter, you know, gift lords taking over and really pushing it?

• 56:49Speaker 02

  Well, certainly some of it is like that was definitely a driving factor, but I don't think it was the only thing. I think that was, it took off because it had a really good medium to grow on, which is like, you know, something trying to become one of the preeminent DEXs. Um, and if DeFi is booming, probably DEXs should be, it's actually surprisingly few of them.

• 57:15Speaker 02

  Um, it's, I, you know, you can kind of think about what you think sushi should be worth. Um, I don't fucking know, but like you come up with a big number if you make the right assumptions, you know? It's like, it's, it's not, uh, it's, it's not like it's obviously just a dead coin eventually. Um, sort of backing a real product and type product that has potentially high upside too. So I had a good substrate to grow on, but then also, um, had great memes. Not the best memes, I think based has better memes, but good memes, you know?

• 57:45Anthony Pompliano?

  Memes are good enough.

• 57:47Speaker 02

  A solid A minus on the memes, um, you know, to go with like a solid A on the product. And, and so, okay, sure, you know? As far as food coins go, that's way ahead of the curve. Like the curve is like, you know, B and D minus respectively. So like A minus and A is really good. Um, and I, okay, so it, it got huge. Sushi was huge. Sushi was like one of the most trade points in the world. I second most maybe caught up to Ethereum one day. I know he's like right around Ethereum level, um, and, uh, ran a plot and it was very huge. Um, and everything was, uh, I don't know if humming along is quite the right word.

• 58:27Speaker 02

  It's like a sort of massive, like volatile, I uncertain kind of clunky thing, but it is big and growing. And then I then, and, and I sort of was on the outskirts of it. In that FTX listed it, um, it listed sushi, um, and, uh, and I made it farm some sushi and, um,

• 58:52Speaker 02

  and then I, it was about to have the great migration, which is like this point at which I sushi swapped the exchange. The, the DEX was going to become a thing. Um, it was going to fork off from you swap and try and migrate people's liquidity from you to swap sushi swap. Um, and like a day and a half before that, um, know me, the, the, you know, face behind the project. He went to founding Philpers, um, I took the treasury.

• 59:21Speaker 02

  And that was not well received.

• 59:24Anthony Pompliano?

  And took the treasury, for those that don't know, means that all of the money that was sitting there was converted into ETH and like took it personally.

• 59:36Speaker 02

  Right.

• 59:36Anthony Pompliano?

  Right.

• 59:37Speaker 02

  And to, right, and to be clear, it's not the, um, it's not the, it's not like the user funds that were there. It's the, it was the, and it's this thing that doesn't exist so much in centralized finance, but it's sort of the project treasury, like the funds to be spent

• 59:55Speaker 02

  growing the project out, you know, so it's not like they stole all the users' money, that would be like really bad.

• 1:00:02Anthony Pompliano?

  Yeah, it basically was the idea of what was being airdropped was coming out of a bank account, right? And they took it account, so it was not something that users had given them. It was something that they kind of had created, but had value and ended up being, you know, what, like thirteen million dollars or something?

• 1:00:18Speaker 02

  Yeah, that's right.

• 1:00:20Anthony Pompliano?

  Was not well received.

• 1:00:22Speaker 02

  That's right. Um, yeah, it was very not well received and the world realized, shockingly, right? The world realized a lot of things at the same time. The first was, oh shit. Um, the second was, oh, we probably should have had a more in-depth conversation about what the purpose of this is the dev fund, the treasury, like sort of, you know, pool of stuff to grow the platform, what it was and whose it was. And maybe we should have rushed to get a multi-sig control of fixes, just no me sig. But also maybe rather than rushing to, at least we should have like clarified the ground rules for it. Um, now, there have been some

• 1:01:08Speaker 02

  sort of informal verification of rough ground rules and is not exactly adhering to them. Like this is, this is not what anyone had thought was, was sort of going to happen or communicated at all. And so it was, I mean, sushi crashed hard. The market crashed hard.

• 1:01:29Speaker 02

  And I the committee was was furious. Nomi seemed a little confused. I I think like certainly reading Nomi's Twitter, like if you take it at face value, like they were not expecting the backlash that they got. Um, they should have been expecting, but they were not. And and I and and sushi is always sort of like nearly dead. And it's weird, like sort of is all it all kept going on as it had before, except the token had crashed and everyone had lost their confidence in the founder and the project. And there's no more treasury. So, okay, not great. Um, and it was like, it's sort of amazing that there hadn't been

• 1:02:13Speaker 02

  huge, like rug pulls or thefts in DeFi so far that like none of these platforms had lost a billion dollars in them. Um, but still, you know, 14 millions, that's not not, you know, that that's real money there. And I, I, and that was, I, yeah, it sort of sushi went from the hottest project in crypto to toxic in, you know, an hour.

• 1:02:42Anthony Pompliano?

  All right. So when all this happens, uh, I was not paying a lot of attention. Then all of a sudden, when it started to like really, really go up, people started tweeting it at me. So I kind of spent my obligatory, like, you know, 20 minutes Googling. Okay, I kind of sort of understand it just enough to to know what bucket to put it in mentally, but didn't really go deep on it. And then all of a sudden, when the treasury was taken, literally my feed was just filled with anger, hate, laughing. I mean, just every emotion in the world coming from different people, the I told you so crowd, the somebody stole my money because I don't understand what actually happened crowd, the, you know, the

• 1:03:23Anthony Pompliano?

  token went down. I mean, it's just everything. Uh, and so I was like, okay, that's probably not a good development for, uh, for, for a lot of people. Um, and then, I don't know, 24 hours later, uh, somebody tweets at me and says, hey, it's been transferred as a project to you. And I was like, wait, what is going on? So kind of how did that happen? And what exactly happened, I guess?

• 1:03:47Speaker 02

  Yeah. Um, that was, uh, that's pretty.

• 1:03:51Speaker 02

  Pretty fucking wild. So, um, yeah, I was, I mean,

• 1:03:58Speaker 02

  I, like many people, were not excited about the developments with the treasury. I think I was like a little more sympathetic than, than some people were, just in that I thought that there is legitimate ambiguity about what had been intended. Um, not that I thought this was an appropriate use of them, but that I also sort of felt like, like legitimately, like,

• 1:04:19Speaker 02

  people didn't quite nail down what the plan was for it. And also that like, Nomi seemed legitimately not to think that this was going to be perceived the way it was. Like, there seemed to be a real, like, this wasn't sort of like him saying lol, bye. You know, there's like a real disconnect here. Um, but I, but also sort of destroyed the project and also was the wrong thing to do. And, uh, and like, you know, it was also not selfishly the right thing to do. I mean, it's made everyone worse off. It's bad, bad for everyone. Like it's, and you know, the honest truth is if like, he had never done that. And he's just like, worked really hard for the project. And made it be a great thing. And then eventually was sort of like, hey, guys, like,

• 1:05:05Speaker 02

  like, I think that, like, you know, I should get a percent of the tokens. I think people have been like, yeah, that sounds right. You know, that sounds like, like you deserve that. And I, and you could have ended up with more than they did. So, um,

• 1:05:23Anthony Pompliano?

  So how does it get transferred to you?

• 1:05:24Speaker 02

  Yeah. So I, I wrote some, some tweet threads expressing, expressing my displeasure and, um, and, uh, you know, basically like, you gotta fucking transfer control this project or it's just dead. Like, no one is gonna have faith in it with you, with the keys, like, sort of like, uh, and, um,

• 1:05:46Speaker 02

  Anyway, I sort of like that socks like that that's sort of it for sushi. And I took a nap and I I was like on a beanbag by my desk and so I just shouted out like, hey, someone just tweeted that no, he said he was gonna give you the keys. Uh, and it's a weird moment, um, but I don't know, I can got up and you know, bolted to my computer and and in fact, someone had 20 tweeted a screenshot of no me saying he was gonna give me the keys to the treasury. Um, so that's pretty weird. And I, and I mean, it was like, I kind of

• 1:06:24Speaker 02

  like, an even more bizarre twist than the previous twist of him having taken like, like you sort of like, you know, was like, a really strong negative twist and then an even weirder positive twist. Um, but I, but yeah, I mean, I don't know, he, he then did it. Like he, he said something that keys to the, the treasury and, um, and that sort of changed my weekend plans. I mean, I, you know, whatever I, I had thought I was gonna do, it wasn't figure out

• 1:07:05Speaker 02

  how to do a sushi migration. Um, but remember the migration hadn't, hadn't happened yet. Like that still had to happen. And it was actually kind of a tricky, intricate process. And I mean, we like I hadn't written sushi swap or anything. It's sort of like, you know, it's all of a sudden. It's like, okay, like, I guess what's happening this weekend is I that we're gonna go figure out how sushi swap works.

• 1:07:33Anthony Pompliano?

  You, you still have control.

• 1:07:37Anthony Pompliano?

  Right?

• 1:07:38Speaker 02

  So we are, so the key was was was passed and it's sort of like technological control over some parts of it, although, you know, as sort of dictated by votes of community members. Um, but that control is transferring to a to multi sig control. I sort of step one and that transference is happening maybe tonight. Um, we, we have everyone's address now and I last I checked in, we're preparing it. So that's going to be sort of the next step for, I, you know, the, the next step for, for sushi swap in

• 1:08:17Speaker 02

  sort of formally, you know, removing me of control, which is sort of important to it because that's not, it's not Sam swap and it's not, you know, I'm not meant to run it. I don't run it. I don't like it's sort of like the, the keys were dropped on me, but it's, that's not, I, it's, it's, you know, meant to be the community's project and so.

• 1:08:37Anthony Pompliano?

  So you have no plans. This is not going to become the next product line of Alameda is to go and.

• 1:08:42Speaker 02

  No. No, this is not. And it's, it, it sort of can't be because that's not like it would involve fundamentally changing what sushi swap is, you know, like that's, you know, if, if, you know, if, I, like at some point, you know, serum might created or, or, or FTX or something might, might, might create, you know, name, Amadeus, something like that, but as serum did create decks, but, um, I, you know, sushi swap sort of dropped on my lap. And I, I want to be sort of faithful to like what it was meant to be and what people thought it was meant to be when they got involved in it.

• 1:09:21Anthony Pompliano?

  Got it. That makes sense. And, and so let's zoom out for a second. Um, you have your hands in, uh, Alameda, FTX, the whole sushi swap saga. Uh, you kind of have a front row seat to a lot of things that are going on here. Just so people understand kind of where you see opportunity, maybe just talk through like on a percentage basis of your time and mental energy. How much of it is on the exchange? How much of it is on trading? How much of it is on like the DeFi world? Just how do you kind of think through, you know, maybe the prioritization of these different things? And I'll use your time almost as like a proxy for of kind of focus and energy.

• 1:10:06Speaker 02

  Yeah. So, um, basically, um,

• 1:10:13Speaker 02

  it's, I, it varies, right? Like a week and a half ago, the answer was zero percent on sushi. That's not a thing. Um, and, and in a week, it's going to be not zero percent on it, but you know,

• 1:10:26Anthony Pompliano?

  Very little.

• 1:10:27Speaker 02

  Very, very little. It's, it's like, um, so that's, that's sort of like a, a, you know, a little bit of a, uh, that's what's a word like a, you know, yeah, a weird musical interlude in the middle of, uh, you know, but, um,

• 1:10:46Speaker 02

  you know, I, I've been spending most of my time on serum and FTX. And so I, you know, on the, uh, you know, doing, doing sort of

• 1:11:00Speaker 02

  a combination management and in product vision and, and things like that. And also a lot of low level stuff. I mean, you know, sort of like a tricky support ticket comes in and like it's sort of not clear what's going on exactly. I'll often take it.

• 1:11:15Speaker 02

  And, uh, and so I would say, you know, recently it's been majority on serum, some on FTX. And, and then just sort of general oversight of, of Alameda, but not a ton of, uh, you know, day to day, uh, intervention.

• 1:11:34Anthony Pompliano?

  Got it. Where can people find you on the internet and find out more about FTX or Alameda?

• 1:11:41Speaker 02

  Yeah, so I've decided that a good, you know, as someone with recently one too many projects on their plate, a good use of my time is shitposting on Twitter. So that's where you can find me. I'm SPF underscore Alameda on Twitter and I'm tweeting way too much.

• 1:12:05Anthony Pompliano?

  It's okay.

• 1:12:06Speaker 02

  So that's that's easiest way to find me and then FTX is at FTX.com. Serum, if you go to projectserum.com, you'll find a helpful website with a bunch of links to stuff.

• 1:12:20Anthony Pompliano?

  Got it. I end the podcast with the same two questions for everybody and then you get to ask me one.

• 1:12:26Speaker 02

  All right.

• 1:12:27Anthony Pompliano?

  The first is, what's the most important book you've ever read?

• 1:12:31Speaker 02

  Boy, I mean, to be honest, like, I don't really read books anymore. I mean, I think like, I liked fantasy books growing up, but they're they're really long and and I mean, I think that they're,

• 1:12:47Speaker 02

  I don't have that long of an attention span, but even more than that, I think like, the world has sort of decided that like,

• 1:12:55Speaker 02

  there are more efficient ways to convey things often. And I sort of agree. So,

• 1:13:01Speaker 02

  I guess, you know, I'll say rather than that, maybe some blogs that I like,

• 1:13:09Speaker 02

  which are, there is money stuff. So Matt Levine's blog, if you like reading about finance, it's the best. I mean, it's just,

• 1:13:20Speaker 02

  it's in addition to being super helpful and useful, it's

• 1:13:25Speaker 02

  completely bizarre and has like wonderful anecdotes.

• 1:13:30Speaker 02

  And, you know, I think that's probably probably my favorite, you know, regular blog. And then I also like a lot of the like the 80,000 hours, if you're into effective altruism, has a lot of good pieces coming out

• 1:13:48Speaker 02

  about what, you know, you can do with your life.

• 1:13:52Speaker 02

  And yeah, and outside of that, you know, I sort of like, I

• 1:13:58Speaker 02

  Ship posts on Twitter and stuff, but it but in terms of media, I think, you know, it's pretty much that that sports and Netflix. So.

• 1:14:06Anthony Pompliano?

  Second question is more fun aliens believer or non believer?

• 1:14:10Speaker 02

  Oh, God, I mean, it's like, I certainly would not assign a hundred or zero percent probably to it. Although some calculations will give you a hundred percent sort of, I would not say like, I, I, I don't know how to think about this one exactly. And I definitely get like contradictory answers. Like one way to think of this is, is you just sort of like, are like, you know, you serve any reasonable model and then multiply by the number of planets. And you get that they definitely exist like there's no chance they don't. Um, and then you sort of take a step back and you're like, okay, but we've looked at a lot of planets and none of them have it. Like, like you're saying that any reasonable model would have signed effectively zero probability. What we've seen and then you say, no, it's like there, there are these reasons that that makes sense. I, I have not thought hard enough about this.

• 1:14:56Speaker 02

  To reconcile it, I will say that I would say more likely than not that there is something, um, although that something might be like seaweed. Or, you know,

• 1:15:05Anthony Pompliano?

  Yeah.

• 1:15:06Speaker 02

  A variant on it or a more, more likely something even maybe even less like it, but I don't know, I would say, yeah, more than 50% chance that there's some life on some other planet, although probably less than 50% that it's like, like us.

• 1:15:19Anthony Pompliano?

  I think that's a fair answer. You could ask me one question to, uh, to end this. What you got for me?

• 1:15:24Speaker 02

  Yeah. Which I, which I, which coin have you most regretted buying and which coin have you been most proud to have bought?

• 1:15:36Anthony Pompliano?

  Uh, Bitcoin by far, uh, in terms of, um, kind of most proud, I guess, I guess the, the emotion of proud. Uh, I don't know if I necessarily think of that as like a

• 1:15:49Speaker 02

  Right.

• 1:15:49Anthony Pompliano?

  Hey, maybe this financial decision.

• 1:15:51Speaker 02

  Commitment. Right.

• 1:15:52Anthony Pompliano?

  Yeah, but, but Bitcoin would be the positive, uh, answer there.

• 1:15:55Speaker 02

  Yep.

• 1:15:56Anthony Pompliano?

  Um, early on, uh, in like, you know, I don't know, 2017, I actually don't even remember like, I, I, I never really kind of waded into like what I'll call the, the crevices of crypto that, you know, like the super illiquid stuff. But, uh, when ether went from like 10 to 30, 30 to like a hundred in the spring of 17. I just didn't really have nearly as much education and knowledge and like thesis and conviction and you know, all the things that like now, I think if you were to talk to me and say like, why do you believe what you believe? I couldn't have articulated any of it, right then? And to be honest, there are probably things that like I bought and it was never big amounts,

• 1:16:40Anthony Pompliano?

  but it was just like, I was more like buying it because everything was going up. I kind of feel like it's like stock investors today, right? Like you just put money in anything and it goes up.

• 1:16:47Speaker 02

  The index, yeah.

• 1:16:49Anthony Pompliano?

  And so that was short-lived.

• 1:16:53Anthony Pompliano?

  But, but that's probably the answer is just like, there was all kinds of

• 1:16:57Speaker 02

  It's like a coin whose name you can maybe, and maybe not even remember now, like.

• 1:17:02Anthony Pompliano?

  Yeah. And it's like dumb stuff, right? It's like, oh, you know, Bitcoins worth $2,000. So like this other one's worth, you know, 300, like, are they going to go, is it going to go to three, you know, 2,000? So it's just super unscientific, more entertainment than, than investing, frankly. But that's probably it. All right, Sam, listen, thank you so much for doing this. This is absolutely fantastic. I think people will love this and

• 1:17:24Speaker 02

  Thank you.

• 1:17:25Anthony Pompliano?

  You've built some amazing businesses in this space. So well, please, and we'll have to do it again in the future.

• 1:17:29Speaker 02

  Absolutely.