#83: FTX Debacle Part I
A cheeky post about the FTX fraud. Skip it if you're bored of hearing about FTX.
This post is part of a 4-part series on FTX that I wrote for the Bankless DAO Writers Cohort. The posts were written in real-time as the FTX news unfolded. My hope is that in the future this series will be a prescient warning for how to stay safe from crypto frauds and fraudsters.
Read the rest of the posts in the series:
I hope you had a wonderful Thanksgiving. I acknowledge that this statement cannibalizes my non-US based readers, but since we (Americans) have a tendency to let our pride and ego get the best of us, I am simply being a Good American.
☝️ This was a joke! 😛🙃😜 (I need to profusely use emojis to help convey my sarcasm. Writing on the Internet can be a treacherous minefield 💣⚒️)
The Internet is buzzing with FTX drama. Like many people, I spent the weeks leading up to Thanksgiving feverishly reading about FTX, in an attempt to make sense of the ridiculous Enron level fraud.
I find the FTX story endlessly fascinating, but if you feel like, ‘oh my god, not another FTX story’, then by all means, skip this post.
For the rest of you, who just can’t get enough of the craziness, please read on. And send me emails with your favorite articles on FTX.
As I muddled my way through the details of the FTX fraud, I realized that the amount of information I was taking in could take up an entire book. I’m not writing a book —this is the Internet, where people’s attention is approximately 179.5 seconds — so I’m instead writing a series of shorter(ish) posts.
Hopefully, these posts will be entertaining and informative, and a little different than what you’re already reading.
If I could procrastinate longer, I would, but I’m participating in the Bankless DAO writers cohort, and today is the publishing deadline, so I have no choice but to slay the procrastination monster.
SBF “The Savior”
Seems like only yesterday, when SBF was called a Savior and compared to J.P. Morgan in 1907 and the Greek hero Atlas, because he swooped in and gave $750 million in emergency aid to Voyager and BlockFi, two lenders that were at risk of insolvency.
In August, DeCrypt publishes a story where in true SBF “win vs. lose fashion”, he pits the two lenders against each other. He told DeCrypt that he was more confident in BlockFi than in Voyager, so he gave only a measly $70 million rescue deal to Voyager, while generously extending a $680 million line of credit to BlockFi.
Voyager’s emergency aid was “basically lost,” SBF told DeCrypt.
The way we structured it was basically there's $70 million that we knew we would maybe never see again. We're not feeling too confident about getting that back.
How lucky we are to live in 2022 amongst honorable billionaires (first Elon Musk, now SBF), who make bad business decisions and buy failing companies, all in the name of altruism (or, wait, is it stupidity…ego…or pride..or all three?)
SBF is No Fortune Teller
For a man of such talent, with a Swiss army knife of endearing and affectionate roles — a white knight, a hero, and a savior — there’s one thing for certain and that is that SBF is no fortune teller.
SBF showcased his egregious pride this Summer when he signed a term sheet, loaning more than half of a billion dollars to BlockFi.
Fast forward four months, to today, and the house of cards has completely blown up, with BlockFi filing for bankruptcy.
“Normies” vs. Effective Altruists
In this post-pandemic time (I will arm-chair expert and say we’re past the pandemic), “normies,” are starting to go out with friends instead of binging Netflix. Effective Altruists, on the other hand, like SBF, are donating millions of dollars to ensure we have a better experience the next time a global pandemic breaks out.
SBF is a long-termist and utilitarian. This means that he believes we should be using “hardcore” data to think about and prepare for impending world crises that will impact future generations.
As a (now defunct) member of the Effective Altruist community, SBF aligns with this kind of thinking (taken from the EA website):
But preparing for the next pandemic was, and remains, hugely underfunded compared to other global issues. For instance, the US invests around $8bn per year preventing pandemics, compared to around $280bn per year spent on counterterrorism over the last decade.
There is currently a lot of fiery debate on the Internet about whether EA, as a philosophy and social movement, is net good or net evil for society. People are asking questions like, do the ends always justify the means? Is it okay to do harmful things to a few people if in the end more people benefit? Should decisions always be data-driven?
(If you want to follow along with the EA moral philosophy debate, I recommend reading Scott Alexander’s post as a launching point).
Although intellectual sparring/debating is fun (and the Internet is a great adult playground to do just this), it distracts from the main issue: that SBF is a sociopath and fraudster who has no moral compass and lacks empathy. His net worth was comprised of shitcoins, created out of thin air, that he used to collateralize loans, rescue (unsuccessfully) failing companies, and give to charities.
Here’s some illuminating evidence, courtesy of a Vox reporter, who posted a Twitter exchange that SBF thought was off the record.
FTX and SBF’s tentacles run deep, the contagion will continue, and more shit is to come, but I heed you against letting these events cloud your perception of blockchain and cryptocurrency.
I agree with Peter Eirle, an economist at the American Institute for Economic Research, who writes:
There are attempts to make this about cryptocurrency and sufficient regulation, but this disaster has nothing to do with crypto in and of itself. It’s about fraud and the power of virtue signaling.
If you feel called to comment, please do so down below, or reply to this post directly. You can also send me your favorite FTX stories. I would love to read them and comment. My door is always open.
This post is part of a series on FTX. Stay tuned for next week where I will dive deeper into the FTX story. My hope is that it will be *slightly* more informative and entertaining than this one, but, who knows, the writing process is strange which is why I set the bar low. (Perfect is the enemy of good enough).
Thanks for reading Sharing is Caring! Subscribe for free to receive new posts and support my work.