Crypto Arbitrage Framework

A detailed breakdown of how Sam Bankman-Fried built a billion-dollar crypto empire by exploiting international price differences in Bitcoin.

Core Arbitrage Strategy

• Identified price differences between US and Asian crypto markets
  • US Bitcoin price: $10,000
  • Asian markets (like Korea): $15,000 (50% premium)
• Named company "Alameda Research" to appear legitimate to banks
• Focused on one specific arbitrage opportunity for 18 months
• Traded approximately $25M per day
• Made roughly 10% margin daily through compounding

Key Implementation Challenges

• Banking relationships were critical
  • Major banks wouldn't work with crypto traders
  • Solution: Targeted rural banks instead of city banks
  • Hired local language speakers to communicate with bankers
• Currency conversion obstacles
  • Had to convert large amounts of local currency back to USD
  • Needed to handle $5M+ daily conversions
  • Required careful structuring to avoid appearing as money laundering
• Technical execution
  • Required monitoring 6 screens simultaneously
  • Tracked spot prices across markets
  • Monitored currency conversion rates
  • Managed bottlenecks and trade flows

Business Evolution

• Started with pure arbitrage trading
  • Made hundreds of millions in initial profits
• Expanded into creating FTX exchange
  • More sophisticated version of Coinbase
  • Offers derivative and options trading
• Total value creation
  • Built $10B net worth in approximately 4 years
  • Combined value from trading profits and exchange business

Risk Management

• Had to ensure trades wouldn't get blocked
• Managed risk of currency seizure
• Required constant monitoring of all positions
• Needed backup plans for currency conversion
• Had to structure operations to appear legitimate to banks