The under is a direct excerpt of Marty’s Bent Issue #1282: “The personification of dirty grift.” Sign up for the newsletter here.
Every on occasion, the world is reminded of how straightforward it is for some folks to get utterly duped by a con man. The final week has been one such reminder. Unless you’ve been dwelling beneath a rock, you are most likely conscious of the epic blow up of FTX and the abject fraud that led to it. We gained’t bore you with a rehash of the token mechanics of FTT or dive into the deplorable nature of FTX and Alameda overtly stealing person deposits and setting them on hearth with dangerous investments and trades. Your Crazy Uncle Marty gained’t even dive into the fallacious theories surrounding Sam Bankman-Fried’s (aka “SBF”) monetary help of the Democratic get together and buddy-buddy relationship with the regulators who ought to have most likely been investigating him. What I’d like to deal with is how the hell so many supposedly clever folks acquired duped by such an apparent con man.
The story of FTX has all the time been a bit perplexing to me. They seemingly got here out of nowhere in 2018/2019 and shortly rose to “prominence” as some of the revered exchanges on this planet. SBF was vaunted as a lovable autistic wunderkind who in some way, on the ripe previous age of 25, found out a method to benefit from a worth arbitrage alternative that existed between Western and Asian bitcoin change charges that many institutional traders couldn’t. Pictures of Bankman-Fried pretending to sleep on a bean bag chair settled under his desk which included ten outsized screens created a notion of legitimacy that gave each buying and selling degen and crypto VC a tough-on. They had been all on his facet, as was a lot of the monetary media. At one level, the annoying uncle, Jim Cramer, claimed that he believed he was speaking to the world’s first trillionaire throughout an interview with SBF. Everyone appeared to be caught — hook, line and sinker by this lovable autist.
This appeared actually odd to me as a result of if you happen to really listened to him communicate, it was apparent that he was a bumbling fool who didn’t actually grasp the trade he was supposed to be a site professional in. Nothing made this clearer than an interview Bankman-Fried did on CNBC in July 2021, the place he tried to clarify proof-of-work to Joe Kernen. His cluelessness was made clear when he cited the utterly asinine “electricity per transaction” metric that has been completely debunked.
In the spring of this 12 months, Bankman-Fried hosted a convention within the Bahamas that included keynote audio system Bill Clinton and Tony Blair. An extraordinarily odd duo to be headlining an occasion that was supposed to be a couple of expertise that defangs the state. At the time, I had this to say concerning the convention:
At this level it turned clear to me that one thing about FTX and its anemic frontman, Bankman-Fried stunk to excessive heavens. And then this summer time, within the aftermath of the Terra/LUNA, 3 Arrows Capital and Celsius blowups, SBF went on a shopping for and bailout spree for distressed corporations that tallied properly over $2 billion solely six months after elevating $400 million in fairness, which prompted this query:
This shopping for spree turned much more perplexing when considering of all of the advertising cash FTX had spent: naming a number of arenas, shopping for Super Bowl advertisements, getting a celeb endorsement from Tom Brady and getting their emblem on each umpire’s jersey within the MLB.
We discovered final week that SBF and FTX didn’t, in reality, have wherever close to $2 billion. It has turn into clear that they had been within the means of destroying between $10 billion and $50 billion of worth that included investor capital and shopper deposits. I had a hunch this man wasn’t operating a reputable enterprise, however even I couldn’t think about the carnage it could create all through “the industry.”
This begs the query, if I, a lowly e-newsletter peddler, had good-sufficient instincts to snuff this out, how on this planet did a few of the “most respected” and seasoned cryptocurrency merchants and enterprise capitalist funds who had been given the accountability of managing different folks’s cash fall for this con man? How did Sequoia put its stamp of approval on this firm? How did the Ontario lecturers’ pension fund supervisor okay the writing of a $95 million examine to this firm? How did many enterprise funds within the house really feel snug parking materials quantities of their AUM on this change? How did none of those folks ask rudimentary due diligence questions like: How do you monetize? Can you present me the receipts of the arbitrage commerce that made you wealthy? Where is all of this cash coming from?
How did nobody outdoors of some Bitcoin Maximalists and a few Wall Street quick sellers establish this as being an enormous rip-off?
I don’t know if we’ll ever know all of the solutions to these questions however one factor is for positive: complacency and laziness guidelines the day. So many in “crypto” assume they are geniuses who’ve found a brand new paradigm that may make them insanely wealthy, however the actuality of the state of affairs is they have found a method to recreate the corruption that exists within the incumbent monetary system for less expensive and in a really quick period of time. Shitcoins are nothing greater than corrupt seigniorage that has been ported to the digital realm. And as we’ve seen within the incumbent monetary world, seigniorage is very worthwhile for a choose few insiders whereas it lasts. The shitcoiners and the enterprise funds who allow them have made the aware choice to turn into the benefactors of this new type of seigniorage on the expense of retail traders. Luckily for us, they have destroyed their personal reputations and collective internet price within the course of.
Everyone ought to use the blowup of FTX to pay attention to the swindlers caught up and the way they’re reacting. Many of them are claiming to be shocked that one thing like this might occur, however anybody with {a partially} functioning bullshit meter might have seen this coming from a mile away. The indicators of malfeasance had been all there. One simply had to open their eyes.
If they did, they would discover that Sam Bankman-Fried was fairly actually the personification of soiled grift and he has smeared his shit all around the “crypto industry.”
Here’s to hoping this blowup leads to a transparent distinction of bitcoin and “crypto” transferring ahead. Bitcoin is the sign. It is the one sufficiently distributed peer-to-peer money system that has any probability of releasing humanity from the yoke of the state. Bitcoiners are constructing merchandise and instruments with precise utility that makes folks’s lives higher off. “Crypto” is nothing greater than an affinity rip-off making an attempt to leverage Bitcoin’s model to swindle away folks’s hard-earned cash beneath the guise of “innovation.” The sooner this is made abundantly clear, the higher.
