Episode of My First Million with Sam Parr and Shaan Puri.
Transcript
Note: This transcript was auto-generated from YouTube captions. It may contain errors and lacks speaker identification. A full Gemini audio transcript will replace this.
Kind: captions Language: en this one is very interesting have you ever heard of this guy before don’t don’t google i want to tell you the story so don’t don’t google this guy all right let me tell you the story i’m just i i google them i’m just thinking oh wow okay yeah uh young guy young guy 29 years old i don’t know name is wow sam bankman freed i think it’s the way you say his name and uh when you if you heard him talk like i actually want you to listen to a youtube video for a second because he sounds like you know an absolute dweeb and i loved it i was like oh this guy sounds like he would be a self-made billionaire by the age of 29 because he sounds like a genius he sounds like a tech genius have you brought this person up to me before no i just discovered him like two days ago okay so what’s this guy’s story so this guy you know i’ll just come sam for short but uh so this guy’s sam he’s a he he’s a young guy he’s very smart um he takes a job as kind of like a hedge fund trader or something like that with a group called jane street i guess and uh i don’t know forget these details they don’t really matter guys got a job in finance and um he leaves and he starts something called alameda research and it’s called alameda research because he needed it to sound as legit as possible and not like what it actually was so what was it so what this guy did was he was into crypto and there was this known thing in crypto where as crypto was getting popular this is around 2017 when the first big run-up happened and bitcoin went you know from three thousand dollars to twenty thousand dollars and it crashed later but during that time 2016 2017-2018 bitcoin was emerging and there was this as any new thing there’s these like kind of uh it’s like the wild wild west a little bit and so there was this thing where in the u.s the price of bitcoin was let’s say ten thousand dollars of bitcoin and in other countries where um the exchanges weren’t built or the com the country had some regulations or whatever there was like a premium for bitcoin there was more demand than there was bitcoin available to buy in those countries uh because you need like let’s say like in korea there was a famous uh thing called the kimchi the kimchi premium and the kimchi premium was that in korea there wasn’t uh kimchi like the like the the food so this was known as the kimchi premium and basically it was like uh whatever bitcoin was selling for here let’s say it was ten thousand dollars in korea it was trading for fifteen thousand dollars because it was that big it was about 50 premium and it fluctuated obviously and i think 30 was kind of like the average of the kimchi premium over time so everybody wanted this so everybody you know any smart person saw oh wow there’s an arbitrage what if i could just buy it in the u.s for 10 grand and immediately sell it in korea for 15 grand or for 30 you know 13 grand and so you had this like ability to flip it and so a whole bunch of people were trying to do this but there was all these problems right like well the reason you know the reason wasn’t the reason there was this premium is because it was hard to buy bitcoin in korea so one idea was you buy it in the us off the us exchange you go to korea and you sell it but you’re gonna sell it for in the korean you know wan which is like the local currency but now you need to like for the for the arbitrage to continue you have to convert the korean wan back to dollars to go buy more go buy more bitcoin in the u.s the problem was you can’t convert the korean wand back to dollars easily because the government was very like tight fisted regulations you couldn’t funnel large amounts of money from the korean wand back to dollars very very easily so a whole bunch of people were trying to get this like pinata of money and they couldn’t crack it and what this guy did was he was like okay the kimchi premium he went for the japan premium which was far less appealing it was only 10 but he’s like still if i can if i could trade a us bitcoin for 10 more in japan every day i’m making 10 compounding daily and so he went through this like odyssey where for like a year all he’s doing is setting up this trade so he like for actually by the way first when he was trying to figure out could i capture the kimchi premium he was like doing calculations like if i filled up if i charted a private plane and i filled it up with a hundred people and i flew you know they buy bitcoin in the us i flew them all to korea and then they you know sell it there and then i could each one of them could convert some amount of that money and i could fly them back and every day i could fly this plane back and forth between us and korea like could i make it work and he was like i don’t think it works so wait so you had to be there physically it’s not that you had to be there physically you have to do all like all legs of the transaction so you have to be able to buy in korea or like sell your bitcoin in korea at the premium but now you have korean won now you need to convert that to dollars and so how do you do that you need to convert it there but there’s caps they won’t let you convert it because the way he described it is like look he’s like what i wanted to do essentially was to be you know selling five million dollars of bitcoin for the local currency and converting five million of local currency back to us dollars every day it’s like if you if you just go to like go to korea go to japan go to wherever and you say hey i’d like to it’s like a one-way flow of money i have five million dollars of your local currency i’d like to convert it to dollars and exit the country um and they’re like okay but where are you getting all this money and why are you doing such a large amount like what is this yeah he’s like you know if you if you go to bank school 101 that’s like money laundering that’s what money laundering looks like that that is what money laundering that is exactly what money laundering looks like so he’s like even though i’m not money laundering i’m buying and selling a good that’s differently priced in different regions to them on the ground to the bank on the ground where i need to do these conversions it’s shady it’s too shady they won’t let me do it so he spends like a year of his life where he’s like goes to japan now he’s got to find uh he’s got to do each each one of these was hard so anyways then the net end of this story is this guy’s arbitraging 25 million dollars a day of of this currency he’s making a 10 compounding uh you know margin every single day and this guy you know in the three years basically he’s become a self-made billionaire he’s worth 10 billion dollars now which is a combination of the money he made from the arbitrage trade as well as he then created his own exchange um and like you know so he has a trading company that’s you know has made hundreds of millions of dollars on this arbitrage and then he built he used that to create an exchange which is worth billions of dollars on paper so anyways this guy’s worth 10 billion dollars he and his because uh the currency is called ftx right that’s his exchange his exchange called fps sorry sorry exchange and uh that is is that basically an alternative to basically a more higher end it’s a more sophisticated coinbase where you can do like derivatives trades option trades on all different types of courses internationally and that’s like and that’s like a proper company it’s a proper company with like so follow me on research made hundreds of millions of dollars in the span of a few months just doing this one trade over and over again every day so i’m going to describe a couple things but he got on people’s radar because he was the biggest donor to joe biden this year in the campaign he wrote a he wrote like a five million dollar check at the last hour like at the 11th hour that let joe do like you know as part of this like you know last minute blitz they did on tv ads in all the swing states uh because this is kind of interesting this guy’s like very uh his whole business philosophy is this thing called effective altruism which is basically like go be a greedy capitalist go try to make as much money as you can and your goal is to give at least half of it away while you’re doing it so he’s got like it’s not like a philanthropist giving away one percent of his money or 10 of his money as a tie his goal is giving away like 50 of his liquid liquid like net worth you know like that he makes every year that’s his like kind of like his mindset where did he get the money to start this so he started it with a very small amount of money and it just compounded very quickly because he’s basically like getting 10 extra every day so i i don’t know exactly where he got the initial seed capital or how big it was he hasn’t specified that but he did say at the max they were doing 25 million a day on the trade which is basically like a 2.5 million like you know like profit per day uh that they were making on the trade and so he describes that okay so what he’s like basically if you want to do this you have to like break it down into small chunks he’s like okay so i need on one side i need to be able to go buy a ton of bitcoin in the u.s so how do i get uh exchange in the u.s that’s going to give me really high limits even though i’m this dorky kid who’s got no track record and i have no like collateral or brand name and so he’s like finds a way to solve that problem of like being able to buy 25 million dollars of bitcoin in the u.s then he had to like go to japan and he had to be able to sell a huge amount of bitcoin there then he had to be able to convert it from the japanese yen or whatever to us dollars and he had to do that all in the same day and wire transfer it all back to the us to buy it again the next day to buy the full max amount again the next day so he’s just just like the money every day and so he described like they would just the way that the timing worked it was always in the last hour of the banking day that he would be trying to get all the wire transfers done to get the money back to the u.s so that they could execute tomorrow’s trade and any day that they could what does this sound like you said he sounds crazy like i’m looking at pictures oh my god he sounds extremely genuine humble high-pitched voice kind of like just a nerdy guy um who was like he accounted for about 10 of all the bitcoin trading himself his alameda research during that time period i believe which is just like insane because he was moving so much money dude i love these people i love i love freaks [Music] you