#86: FTX Debacle Part IV
FTX would make for a dull accounting case study, even though it's way worse than Enron.
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:
As I wind down this series on FTX —I bet many of you are ecstatic to hear this!— I am reminded of what my accounting professor said back in 2007:
I never want to see a photo of my students on the front page of the Wall Street Journal.
She said this in reference to a case we were studying that day: the infamous Enron scandal.
Today, 15 years later, I was happy to learn that my former professor is still teaching at the University, but I bet she will not be adding a FTX case study to the class syllabus.
Quite frankly, a FTX case study in an accounting class would be dull.
Not because debits and credits can make students’ eyes explode from boredom, but for a different reason.
A textbook example of embezzlement
I mean that a case study on FTX would be dull as in “not sophisticated”, to quote John Ray III, the replacement CEO of FTX, who famously led Enron’s bankruptcy and restructuring proceedings. In other words, it would not be worth anyone’s time because the moral could be conveyed with a simple statement: don’t embezzle money.
During last week’s Congressional hearing on FTX, Ray said that although the FTX fraud was unsophisticated, it was “worse than Enron” because:
there was absolutely no record keeping;
a multibillion dollar company used Quickbooks;
there was no independent board
Ray called this an “old school” fraud that was “sophisticated perhaps in the way they were able to sort of hide it from people, frankly, right in front of their eyes.”
Effective Altruism and celebrity endorsements
SBF successfully hid his evil intentions in two ways (I’m sure more will come to light as the investigation begins):
By pretending to be a “good” person, a white-knight and a savior, SBF won people’s trust and hid behind the facade of effective altruism.
By paying high-profile celebrities a lot of money to endorse FTX, creating an elaborately deceptive marketing and advertising campaign that featured the likes of Tom Brady, David Ortiz, Stephen Curry, Larry David, and Kevin O’Leary.
Gisele Bündchen, Tom Brady’s supermodel wife, was also one of FTX’s celebrity endorsers. According to her Wikipedia page, “Bündchen believes in astrology, manifestation, and witchcraft. According to Tom Brady, she has used these methods to successfully predict when he would win or lose the Super Bowl.”
Come on, with those powers how could she have not predicted the collapse of FTX?!
Tweet, tweet, to 2023
As I was reading through a class-action lawsuit filed by Edwin Garrison, an attorney, against 20+ celebrity defendants (including Bündchen), I kept thinking about all of the Twitter screenshots embedded throughout the legal document, starting from the very first page.
You can’t make this up….
That got me thinking about how Twitter’s leader, Elon Musk, is an erratic, unstable, eccentric billionaire who, like SBF, seems to be on his own Muskian version of a self-incrimination tour.
And then I thought about how 2023 will be an interesting year (to say the least!).
Stay safe out there, friends, and, as always, do your due diligence on crypto projects.