Going Infinite: The Rise and Fall of a New Tycoon

by Michael Lewis

John Ray expected to see evidence of a crime. To our meetings he always brought new and seemingly damning pieces. One time, he’d found Alameda Research’s US tax forms from 2021, for instance. Alameda had reported a loss of more than $3 billion. If it was what it seemed to be, it would help to explain the hole in my private balance sheet; but it was actually just a piece of a bigger and more complicated puzzle. That year, Alameda Research had sold short FTT at the same time an entity it controlled bought the same quantity of FTT. The price of FTT had gone up, a lot. Alameda Research suffered a multibillion-dollar trading loss; the second entity had taken in a precisely corresponding multibillion-dollar gain. The accounting rules for Alameda Research allowed it to report unrealized market losses as tax losses; the accounting rules for the other entity did not require that it do the obverse with its gains. Alameda’s tax lawyers, a group that included Sam’s father, had argued for taking the tax loss, as it could be offset against current gains. It was, as one of the lawyers put it, “a fake loss.”