Michael Lewis recounts Jump Trading’s $206 million loss in the FTX collapse

The market-maker Jump Trading lost $206 million as a result of the collapse of the Bitcoin exchange FTX. The Block reports, citing Michael Lewis’s Going Infinite.

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The loss proved to be among the largest for firms outside the bankrupt holding company.

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Almost half of the $8.7 billion in assets owed to owners of more than 10 million FTX accounts were concentrated in the 50 largest accounts. However, the real names of about half of this list were redacted, Lewis noted.

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According to him, Jump Trading’s unit Tai Mo Shan Limited lost more than $75 million. The loss of Virtu Financial Singapore, affiliated with the market-maker, amounted to more than $10 million.

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As a source of information, Lewis in the book mentions internal documents discovered by former FTX chief operating officer Constance Wang.

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A significant portion of anonymous accounts on the exchange were linked to its employees. Wang herself lost about $25 million. She managed to keep only $80,000 in a bank account.

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As head of the sales team, Wang was aware of concerns among high-frequency traders about FTX granting Alameda unfair advantages. Although this was not true, the exchange freely lent trader deposits to the affiliated firm, Lewis wrote.

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According to the book, Wang also obtained data on FTX’s sponsorship expenses. Among the striking figures was a five-year deal with Major League Baseball worth $162.5 million. And a seven-year deal with video-game developer Riot Games worth $105 million that Wang linked to the fact that the exchange’s CEO Sam Bankman-Fried liked League of Legends.

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Additionally, advertising agreements were signed with the Coachella festival ($25 million), NBA star Stephen Curry ($31.5 million), the Mercedes team’s Formula 1 entry ($79 million) and Kevin O’Leary from Shark Tank ($15.7 million).

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“I tried to ask myself these questions. But I thought they used Alameda’s profits or Sam Bankman-Fried’s investments brought in a lot of money,” Wang said.

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The other document that drew her attention was an approximate Alameda balance sheet, starkly contrasting with prior versions.

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“When I saw it, I told my team not to disclose this to outsiders, if they didn’t want to lose the name and reputation,” she said.

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In a hastily prepared document on the eve of the collapse, assets from Bankman-Fried’s private investments totaling more than $4.7 billion were listed. The liabilities section showed client deposits of more than $10 billion. These funds were supposed to be held by FTX, but ended up in the founder’s private trading fund.

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As noted in Going Infinite, Lewis also revealed details of the personal relationship between Bankman-Fried and Alameda CEO Caroline Ellison.