Oh No Crypto Bro

I’ve followed this story with some delight. Apparently Michael Lewis, who wrote The Big Short, has been trailing FTX guy Sam Bankman-Fried around, so we’ll certainly get a kick-ass film out of it someday. Among many, many remarkable facets to the tale is that the crypto market has supposedly lost $2 trillion of valuation this year… and Wall Street has barely flinched.
When Sequoia Capital – allegedly the most intelligent venture capital firm – invested $210 million in FTX last year, it asked to see financial reports and instead was told “we’ll send you a few bullet points.” It’s traditional when investing that much into a firm to have someone on the board, but Bankman-Fried wouldn’t let anyone on the board of directors, which was him, an attorney, and an FTX employee.
For a company “worth” $32 billion at one point.

Zero oversight! What could go wrong?

I’ve followed developing news with Patrick Redford of Defector, who is typically hilarious. But there are several excellent reporters and twitter feeds. Ed Zitron on Twitter is great.

Here, a professor of finance at King’s College splains it to us. He keeps showing photos of Phil Spector for Sam Bankman-Fried, so gotta respect his game:

It’s an exciting time to be in the crypto world.

10 Replies to “Oh No Crypto Bro”

  1. I love this guy.

    To some of the big institutions who lost money on this, some advice: you could start by asking the founder his favorite book. If he says Harry Potter, The Cat in the Hat, or The Very Hungry Caterpillar, and he plays a videogame while chatting with you, you only have yourself to blame.

    Per today’s WSJ, SBF has made large donations to legislators who “would be crucial to enacting crypto legislation” (see article if you want a list) as well as schmoozing SEC chair Gary Gensler. Apparently the CEO of Binance felt that SBF was gunning for regulation that would disproportionately benefit himself, which inspired him to fuck over FTX by selling off Binance’s FTT tokens.

    I’ve never trusted crypto or anyone who blabs about his own altrusim, saving the world, etc.

  2. Yeah I have to watch it a few times before I begin to grasp the complicated schemes.

    Another fun aspect of the whole situation: the on-site life coach who enjoys talking to everyone in the press.

    I considered but then thought better of posting this, which must be the apex of crypto cringe.

  3. It’s nothing more than a classic bait and switch: claiming to offer a safe investment, then secretly blowing client funds on risky investments. Then there’s crypto itself, which is sort of a Ponzi scheme; theoretically you’re ok as long as there’s a steady stream of other suckers buying in. The only value is the buzz.

  4. Jeez, this story gets more incredible by the day, certainly one for the history books. The new CEO of FTX says it’s by far the biggest shit show he’s ever seen. And he’s the guy who cleaned up the Enron mess. Then there’s SBF himself, admitting that his altrusim was fake all along. He figured out that spouting woke pieties was a good way to deflect scrutiny, and it worked. More on that here. I’d been wondering how people more financially literate than I am (pretty much everyone) could be fooled by all this. His altruistic halo was part of the reason, along with groupthink, FOMO, hubris, and too much easy money.

    It also turns out that FTX audits were so sloppy becuase they were carried out by shills for the whole crypto metaverse, just a huge tangled web of self-dealing and conflicts of interest.

    There’s good reason to think that regulation might have come sooner without crypto guys greasing beltway palms, but there’s only so much government can do to protect people from themselves. Big investors got what they deserved, but I kind of feel bad for the average schlumps who invested in this because they like Tom Brady or some YouTube influencer. But seriously…would you buy crypto because Ray Davies did? (Just an example of a blargh hero; I have no idea how he invests, and I don’t care.)

  5. A couple of years ago, we did a tech project based on blockchain. At some point one of the devs said of blockchain, Its cool. It’s programmable money. And another dev said it’s cool if you’re the one programming it. That stuck with me.

  6. This story just keeps on giving. The WaPo quotation about how he doesn’t really care about people, it’s just a “dumb game we woke Westerners play” – wow.

    I realized what really pisses me off now. Or one thing that really pisses me off.
    In the superb documentary Inside Job, the first five minutes describe how a formerly idyllic Iceland decided to deregulate its energy and banking. Three small banks were allowed to borrow $120 billion (10X Iceland’s entire GDP) with no regulation. They made risky investments and the entire economy crashed within five years.
    It was narrated by Matt Damon.

    GODDAMMIT YOU SHOULD KNOW BETTER

    1. My favorite quote this week was a Sequoia rep saying they’d done “careful due diligence” on FTX. Of course they did! Sultry wood nymph on staff? Check.

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