All while FTX had a Chief Regulatory Officer who was basically a career white-collar criminal. It beggars belief that anyone who dug half an inch into this story wouldn't have seen 90,000 watt flashing red warning signs.
Crypto turned into a haven for replaying every form of financial fraud ever invented on an epic speedrun against retail "investors", and a whole lot of powerful people and institutions have dirty hands. The idea all of this could be adequately explained by stupidity rather than malice strains credulity.
https://www.nytimes.com/2022/05/14/business/sam-bankman-frie...
It's hard to tell if the media has gotten worse at their jobs or they've always been this bad and I'm just getting older. There are plenty of earlier scams and bubbles (Enron, dot-com bubble) that slipped under the radar until thing went to shit, so I suspect the latter.
It's not that "the media" has gotten worse at their jobs. Rather, there simply a lot less funding for reporters. The hit in funding has become much worse in local reporting -- especially local newspapers. However, if this is viewed as a training ground for the few large national/international news organizations, it's easy to see how this has a profound impact for even the large and well funded publications.
There's simply much less reporting happening than their used to be, and it's a real problem.
https://www.pewresearch.org/fact-tank/2021/07/13/u-s-newsroo...
https://www.statista.com/statistics/626459/number-employees-....
Serious investigative reporters with the smarts and experience to dive deep were always the exception, maybe a handful in the world at any given time.
So IMO, “they’ve always been this bad” is the answer, but it’s not entirely fair. Kind of like saying the cooks at McDonald’s have always been this bad; in fact it has never been their job to do world-class work.
Yes, true investigative reporting is rare (and expensive), but good work is still being done.
For the media at large, given the volume of stuff you can read, much of it is plain "story-telling" or "narratives", and I do think the media is more likely to go with things that fit the narrative of the day than look at things with a critical eye.
With Theranos, the media absolutely wanted to highlight a "female Steve Jobs", and Holmes used that to her advantage. Similarly, with SBF, given all the smarmy characters in crypto, he fit the narrative of "the good guy", "the next JP Morgan" coming to save the financial system for good.
With Enron, they were very very good at obfuscating their scam. But it was the WSJ affiliate that was the first mover on Enron being fishy. A major short seller saw that article and shorted the stock, then turned a tip into another reporter. That reporter then pretty much started its downfall. It was, possibly, the best example of the media being the guardians against a scam since the internet started.
Not to mention the fact that a lot of investigative leads likely either don’t pan out, are not newsworthy, or ruffle feathers better left unruffled (news media relies on connections and access for leads on stories, and their customers are advertisers, ie large corporations).
There is not much of a market for investigative journalism. IMO tort law or class-action suits could fill that niche too if the incentives were more aligned (gotta be a lawyer to make anything off a class action) and the playing field were more even - arbitration clause says what?
So lacking an incentive for either of those the next best thing is short selling, which also sucks because it’s time-based, risky, requires capital, and isn’t relevant when something doesn’t have a direct link to a tradable security
It's stunning to me that that interview didn't crash FTX by itself, and it indicates that the industry (fintech, VCs, crypto) is engaged in a huge pump and dump. It's legitimately criminal.
[0]: https://archive.ph/fGLat#selection-3973.7-3973.12 (27:13)
No, sorry, that is their job description. But since we're using radar as analogy, let me introduce to your new friend, IFF (Identify, Friend or Foe).
And the public doesn't help with their hero worship of tech douchebags.
> The laughter has faded. Over the last few days, the collapse of a so-called stablecoin called TerraUSD has sent the crypto market into meltdown, accelerating a dramatic sell-off that tanked the price of Bitcoin and Ether, the two most valuable cryptocurrencies. At Baha Mar, Mr. Bankman-Fried was throwing a giant party for the industry; this past week, he was attempting to restore calm, tweeting long threads about the state of the market.
Then discussing how his awkward, unkempt appearance is actually calculated and intentional. And look at the final paragraph:
> Outside, the convention center was emptying, as hundreds of crypto enthusiasts headed for the airport. It was the calm before the coming meltdown. To leave the resort, guests had to walk through the Baha Mar casino, the largest in the Caribbean, a brightly lit hall of flashing slot machines.
The whole thing is framed around this guy hanging out with celebrities and lobbying government officials while his market crashes. Reading it for the first time 6 months after it was written, I think it holds up as an accurate profile with a bit of foreshadowing of what was to come.
I don't think they did.
To check my memory, I clicked on to the "Cryptocurrency" keyword to see the crypto-related stories going back. It's mostly reporting news (which is mainly bad) and skepticism.
Is the next crypto narrative is going to be "why didn't the media save us?" I guess it makes about as much sense as all the previous crypto narratives.
It's not specific to crypto. Theranos was a similar fraud, and so was WeWork.
They can make a public spiel about how they were deceived as long as they want, but to anyone following them at the time it was obvious they were going in with their eyes open. Whether the product works or not is simply not their top priority when making an investment.
edit: I'd like to point out to the people who clearly disagree with the above that the dude running this scheme from Bahamas was openly taking drugs and playing videogames in meetings with investors. It's even mentioned in the VC material. Yet they did shower him with money. Please do tell what kind of due diligence could possibly miss the warning flags that maybe this company wasn't completely honest?
HSBC teaches us that the US govt happily approves of financial crime as long as it's large and they get their cut: https://www.investopedia.com/stock-analysis/2013/investing-n...
Madoff's mistake was probably not sharing with the right people, and that the optics were a bridge too far.
" The $69 million spent by Bankman-Fried and his deputies on the 2022 midterms likely would’ve done little to plug FTX’s reported financial hole, but it couldn’t have hurt. Bankman-Fried told Forbes last month that “in the end, I care about policy more than politics,” adding that “my giving has been bipartisan, and my goal is to help support great policy makers.”
Bankman-Fried has supported Republicans during this cycle, primarily through his $2 million contribution to the blockchain and cryptocurrency-focused GMI super PAC. But the bulk of his giving, including $27 million to the Protect Our Future super PAC and $6 million to the House Majority super PAC, has gone to support Democrats. Bankman-Fried told Forbes last month that “much of this was for primaries, rather than D vs R general elections” ($33 million of his contributions were made during the first four months of 2022.) "This whole crypto failure is going to act as a bit of an 'innoculant' for any relaxation of financial laws. If anything, it should lightly strengthen support for further financial regulation of Wall Street and the like. All responses to any loosening up of the banks can reasonably be countered with 'Yeah, but look at what happened with Crypto.' So I guess that's at least something.
Best description of all that is wrong with crypto. It's a human problem, not a tech problem.
This was clear years ago. That is why I've been avoiding crypto like the plague.
sbf was giving tons of cash to the democratic party so NYT cant find anything bad to say about him
https://www.forbes.com/sites/michelatindera/2021/10/21/the-w...
This is the basis of NYT Pitchbot.
A growing force in political fund-raising, he has a super PAC that recently gave more than $10 million to a Democratic congressional candidate who supports some of his philanthropic priorities.
In public, Mr. Bankman-Fried can sometimes seem uncomfortable, tapping his foot or twirling a fidget spinner. But the awkwardness is part of a calculated self-presentation. Over countless tweets, interviews and TV appearances, he’s positioned himself as a mad-scientist-cum-diplomat — a straight-talking brainiac willing to embrace regulation of his nascent industry and criticize its worst excesses.
Now Mr. Bankman-Fried is trying to leverage his fame to set policy in Washington, at a moment when the risks of crypto trading are growing increasingly stark; he makes regular trips to the Capitol from his base in the Bahamas, meeting with regulators and testifying in Congress. If he’s successful, he could become one of the most influential figures in the new era of technological experimentation that supporters call web3, writing the rule book for a slew of risky investment products that are increasingly reshaping the internet, finance and even the arts.
But his detractors say his advocacy is driven by self-interest. His political contributions have prompted complaints that he’s distorting the competitive landscape to advance his own agenda. And the charm offensive in Washington has alarmed consumer advocates who argue that FTX is exacerbating the volatility in crypto markets and putting investors at risk.
FTX serves as a portal to the crypto world. With the click of a button, a curious investor can turn dollars into Bitcoin, Dogecoin or Ether. It’s as simple as buying paper towels from Target — except that the value of a digital asset can be wiped away overnight amid the types of market gyrations that have sent cryptocurrency prices crashing over the past month. In the United States, crypto exchanges occupy a regulatory gray area: It remains unsettled whether the tokens are securities, commodities or something else entirely. Mr. Bankman-Fried has been pitching a regulatory structure with expanded authority for the Commodity Futures Trading Commission, which is smaller and less aggressive than the Securities and Exchange Commission and has traditionally been more sympathetic to the crypto industry.
FTX is headquartered in the Bahamas partly because 80 percent of its $1.1 billion in global revenue stems from a trading instrument that remains illegal in the United States. On the FTX platform, investors can borrow money to make enormous bets on the future prices of cryptocurrencies, leading to potentially astronomical gains — or catastrophic losses.
So not only is the article extremely up-front about the fact that SBF donated to the Democratic primaries (and as far as I can tell, none at all to the general election), it's far from "glowing" (it's a banal, if colorful, profile) and, contrary to the parent commenter's claims, nowhere does it claim that he is a "do-gooder", rather using the phrase in the context of how EA advocates think of themselves.
The sheer irony of people railing against misinformation in media while willfully misinforming people on social media.
That's the real story here.
I transcribed a discussion between Chamath Palihapitiya and Brian Armstrong and others talking about this. Here's what he was saying about all these people who've been very blind and didn't do any due diligence:
"I just want to say the second uncomfortable thing out loud which is there are a lot of venture firms in SV in this period of both not doing any work or due diligence who also took the extra step and actually created classes and teached teams how to create these tokens.
And those artifacts --those video links and artifacts-- are sometimes on their website, they're still on YouTube, they're inside of Twitter, and what these folds would do when we talked about this, the game that they played was they would get a team they would create a token, they would also buy equity at a crazy valuation, the equity was locked up but the tokens were not, and then they would put them on an exchange and sell them to unsuspecting people and they would be able to dump these tokens and if you look inside that trend those were the trend of "securities" instead it was done in an unregulated way.
They're going to start to look at a bunch of other tokens and token sales and you're going to end up looking at some very well known venture firms in silicon valley.
That token is not the only token that's been engineered by SV firms and it is also no the only token that's going to zero that's been engineered by SV venture firms site.
There's videos (still) today on some of the most well-known Venture firm sites on how to do this.
They're instructing people how to do this. It's what they did.
but I really also hope they figure out these other tokens as well ... ... and you will see these are unregulated securities that were sold by our brethren..."
It is, to me, about much more than "cryptocurrencies are scam".
Many in SV are deep into this. There are officials and ex- officials implicated too.
People have been dumping worthless tokens created by the tens or hundreds on people all the while the media were presenting SBF as an altruistic trustable white knight.
That's the real story here.
Complete with SBF being the biggest or second biggest donor to Biden's campain for presidency though a fund which SBF's mom (a lawyer and teacher at Stanford) was running. And SBF's father, also a lawyer and teacher at Stanford, recorded explaining how he's helping FTX with charity and regulations.
> Crypto turned into a haven for replaying every form of financial fraud ever invented on an epic speedrun against retail "investors", and a whole lot of powerful people and institutions have dirty hands. The idea all of this could be adequately explained by stupidity rather than malice strains credulity.
Exactly. I'm glad some at least this for what it actually is.
Thankfully some people warned and described the very scam SBF was pulling the day FTX launched (in 2018 ?). Before that several had already noticed Alameda Research was behind crypto market manipulation and pump and dumps of shitcoins.
The signs were all out there and nobody looked.
Un fucking believable.
Can't make this up. Reads to me like, on the contrary, they couldn't have found anyone more qualified.
That German saying is on point and really sad.
This is actually quite a profound statement.
Is there actually anything in human history that can come close to rivalling this ?
We have everyone from teens promoting shitcoins on TikTok, to household celebrities like Matt Damon, to white collar criminals, to arguably VCs, all the way to nation states like Iran and North Korea.
Is this a soft implication that the same scene should "continue" to exist as it currently is?
(pleasure derived by someone from another person's misfortune).
While this article covers an interesting topic, the title is clearly an attempt to bandwagon on the "Tether is next" narrative while contributing nothing substantial to the conversation
That’s a pretty interesting little side story.
One example blog post: https://csgobetting.com/iesnare-how-youre-being-made-paranoi...
What unique properties does Bitcoin have that makes it useful that other cryptocurrencies don't, beside first mover advantage?
Both Tether and FTX hired former white collar criminals from the same company to head their regulator compliance.
Not all criminals end-up behind bars.
I suspect that some scams can go unnoticed for long enough.
I also suspect that scam opportunities are exploding.
IMO, many startups are scams on some level. VC A funds company X. VC A also funds company Y. Company Y 'decides' to use company X's hot new product and has a lofty enterprise license. This happens a few more times. Company X now has very large revenues, VC's friends at big-nation-bank decide it's time to IPO and cash out.
Source: a decade of VC funded Enterprise saas company selling experience
It seems more to me like governments don't want to take financial crimes (specifically fiditiary duty) seriously, as it would make precedent for bankers who do the same crimes, just less visibly (bailouts).
Keep it low-key, don't get greedy, and you can probably milk it forever.
But when you are selling financial services, this kind of fakery almost always blows up because the accounting is the product. And if the accounts are fake, the thing is fake. Fake accounts always leave a hole that can only grow with each cycle of fraud. Dan Davies wrote a great book titled "Lying for Money" on the whole sorry process[1]. Galbraith called it the "bezzle".
[0] - http://brontecapital.blogspot.com/2011/05/steve-madden-count... [1] - https://www.goodreads.com/book/show/38605195-lying-for-money
http://mungerisms.blogspot.com/2009/09/philanthropy-round-ta...
But, what I am calling for is not a lawless reprisal but something a little closer to appropriate punishment than either is likely to get. Punishment that many people in countries with much more history culture and civilization than ours, like China, would agree is gentle and mild for these kind of crimes. In China someone like SBF would likely just be executed, and yes, this seems on the harsh side of reasonable and deserved - but only just.
> Sam Bankman-Fried stormed on to the US political scene with multimillion-dollar donations that led lawmakers, particularly Democrats, to believe he was ushering in the next generation of donors. But in a matter of days, his business empire collapsed into bankruptcy and the prospect of millions more in donations evaporated.
https://fortune.com/2022/11/10/sam-bankman-fried-ftx-joe-bid... (https://archive.ph/BBpQN#selection-417.0-424.0)
> The 30-year-old Bankman-Fried has been a major force in Democratic politics, ranking as the party’s second-biggest individual donor in the 2021–2022 election cycle, according to Open Secrets, with donations totaling $39.8 million. That ranks only behind George Soros (about $128 million) but ahead of many other big names, including Michael Bloomberg ($28.3 million). What’s more, he had promised to spend far more on Democrats moving forward, predicting in May that he’d fund “north of $100 million” and had a “soft ceiling” of $1 billion for the 2024 elections.
Because he donated money to Democrats it makes people still want to invest in cryptos, is that the message?
Market participants that do this aren't market makers anymore.
Anyone doing international money transfers. Hell, that included intra-EU money transfers not 5 years ago.
Anyone in a bunch of countries. Lebanon being the most recent addition. Venezuela, Columbia, Turkey, Russia, Greece (sort-of-not-quite-anymore) ...
Anyone in legal but unfairly treated business/professions. Situations vary from country to country. From sex work, even website admins, to "the unbanked", who can expect the authorities to impound their money at the drop of a hat.
Anyone who wants to do large cash transactions safely without using a bank. And that DOES NOT mean drugs. Reality: you do this because you're afraid bank transactions can be reversed, which is possible in a bunch of places. Large, in the EU, has now become smaller than the cost of a used car.
Recently, if your transaction involves anyone on social security, your or their bank transactions may be monitored very closely by non-judicial institutions. If this is unwanted (and I guarantee it'll be unwanted) that will means you either use cash or crypto, depending on the amount. Although a lot of people in this segment haven't really discovered crypto yet.
After all, BTC is the reserve currency of all these crypto scams, as you call them.
And no, BTC is not the reserve currency; Ethereum is. Nearly all of these "crypto tokens" are just ERC-20 contracts that run as contracts on the Ethereum network. They're not even cryptocurrencies, just contracts with sets of rules that mimic the properties of a currency.
Using the sticker price to decide if a crypto/stock is a scam or not a very good idea.
The Winkelvoss’s net worth [1] is less than half of FTX’s shortfall alone [2]. These folks didn’t get rich by giving their money away.
[1] https://www.celebritynetworth.com/richest-businessmen/tyler-...
[2] https://www.bloomberg.com/news/articles/2022-11-10/sam-bankm...
So, in terms of "crypto scam," there's nothing to see here.
Even if you have the most cynical opinion of cryptocurrency, you must admit it's alive and well. It is as long as there are enough people who believe that it is - and your honest answer to the above would reveal that you know that to still be very true.
Interrst rate hikes kill zombie companies. Scams put dumb people under the lash of their betters.
Timeline:
- April 25, 2019: Biden announces his presidential campaign.
- 13 days later, Sam Bankman-Fried, son of Barbara Fried (co-founder of political fundraising organizations), launched FTX crypto exchange.
- The exchange is an overnight success. Sam Bankman-Fried (SBM) becomes biggest donor to Biden.
- Most of the FTX team is reported to have flown to Hong Kong now, so China, the CCP is their safe haven?
Quote: “Aid For Ukraine shows how the global crypto community and the traditional financial system can work together,” said Solana Labs co-founder Anatoly Yakovenko. “Crypto donations to the DAO are stored and governed on-chain, then transferred to FTX, a centralized exchange, to be sold for fiat USD sent via SWIFT to the Ukrainian government.”
So basically people in the US (not the US government) sent money to Ukraine using FTX as an exchange to fiat (lol). Seems the whole thing is more like a PR thing than anything else.
Ukraine funding FTX: Mostly false. This appears to be a confusion related to the fact that Ukraine launched a website accepting cryptocurrency donations that were processed via FTX [1]. However, as far as I can tell, there was no funding of FTX by Ukraine other than possibly FTX earning transaction fees for processing the donations.
FTX being 2nd largest donor to Democratic party in the U.S.: Semi-true. SBF was the 2nd largest donor, not FTX the company. [2]
[1] https://www.coindesk.com/policy/2022/03/14/ukraine-partners-...
[2] https://fortune.com/2022/11/10/sam-bankman-fried-ftx-joe-bid...
It doesn't really seem like much of a distinction, since Bankman Fried viewed FTX as his personal piggy bank. Regardless, the DNC will be fine. They're still popular with voters, regardless of what donors are doing. Donor money doesn't actually win elections, voters do.
Ukraine didn't contribute to FTX at all.
Edit: Great timing - DailyBeast literally just published a story exposing how the leader of one of those idiotic COVID misinformation groups spent her millions in ill-gotten gains: https://www.thedailybeast.com/covid-misinformation-group-ame...