There's so much shit to link. I will freely admit to being laser-focused on this, in no small part because I spend about an hour a day in deep investigation about whether or not to sell anything. Did I watch the liquidation on Friday night in real time? Goddamn right I did.
This isn't a crypto thing, this is a banking thing, and it's gonna be in your face for a long time. When Michael Lewis is hanging out with you for six months and he doesn't see the twist ending? When the tinfoil hatters have already linked in Epstein and Davos?
FTX’s Collapse Leaves Employees Sick With Anger
- The implosion of FTX was financially ruinous for some employees. Outside the U.S., many staff were paid via direct deposit to their accounts on the cryptocurrency exchange, so when FTX froze customer withdrawals last week, these employees couldn’t access their funds, people familiar with the matter said.
“You have to understand just how devastated the average FTX employee was,” said Nathaniel Whittemore, a former FTX marketing specialist who quit last week. “Not only did it seem they might be out of job, but they also were potentially facing the total loss of their savings. All I could think of was rage and white-hot anger.”
It was also common for employees to hold FTX equity or get part of their pay in the exchange’s FTT tokens, the people said. Last fall, Mr. Bankman-Fried offered employees the opportunity to buy shares in FTX at a 50% discount to what venture capitalists had paid in a recent funding round, the people said. Now, that equity is worthless and the price of FTT has crashed 90% since the start of November.
Mr. Tackett—who continued to tweet updates to FTX customers last week even after quitting his sales job—said he had lost 80% of his net worth in the collapse. “I kept nearly all my money on FTX,” he told the Journal.
...
FTX also hired dozens of Bahamian citizens, largely for logistics, compliance and partnership roles. Excited to be part of what seemed like a promising new industry in their island country, some local hires spent thousands of dollars to buy FTX equity earlier this year, they said.
lmao if this guy isn't prime "i am very smart" material, i don't know who is
Dude the fact that there are Erowid trip reports on this shit makes me so happy
- For me it was money; there was a huge desire for me to make as much money as possible.
It's a big part of it for me, frankly. It's obviously going to happen, it's obviously going to happen soon, it's obviously going to fuck over a lot of people who don't deserve it, it's obviously going to be bad for people, and it's obvious that if you swim in these waters, you'll protect yourself and your friends from the sharks because fuck, you're just some dude and he's on the cover of Fortune and he has hella more friends than you.
That was my abyss-staring moment with Harvey Weinstein: I was, for approximately 2 minutes, deeply incensed that the whole world decided that Harvey Weinstein was evil. I mean of course Harvey Weinstein was evil. Everybody knew it. Everyone had stories. Everyone accepted that predators like Harvey Weinstein were the cost of doing business in Hollywood, and that part of your due diligence in operating in Hollywood was protecting you and yours from monsters like Harvey Weinstein, where the fuck were all you people for the past fifteen years
...and then you realize that you, yourself, are perpetuating the system that allows Harvey Weinstein to flourish, and you are incensed that someone is challenging it.
- "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented."
Said the guy who took apart Enron
- The exchange lacked accounting controls and expenses were approved on an internal chat, where “supervisors approved disbursements by responding with personalized emojis.”
I don't know many of the relevant details, but I am not at all surprised that this happened. If you look at the comparators in the tweet above, they share a common bottom line, which is that someone figured out how to use the opacity of a new and poorly understood technology to bilk people out of money, thus making an entire industry look bad, even the guys who are trying to play by the rules. With Enron, it was energy deregulation; Lehman, financial derivatives; and Theranos, biotech, which is probably the easiest to bullshit about, because it's about as transparent as a brick wall to those who aren't in the industry.
I think Crypto probably falls somewhere in between derivatives and biotech, given that it has the obvious financial engineering aspect, but wrapped in a tight shroud of techno-Utopia, which is exactly the place you expect bad actors to act. I don't think veen's Mt. Gox comparison is apt, because IIRC that was a hack...some suggestion of an inside job maybe, but a hack/theft nonetheless. That's an easy to digest, a story as old as time. This is deeper by a long shot, and I say that as someone who has barely scratched the surface...he had a sports arena named for his company FFS. In the popular domain, it was.
Mt. Gox was inexperienced kids with two weeks more insight into the process than everyone else fucking up. The end result was normies lost money. Was there a hacker on the inside? Probably.
FTX is inexperienced kids with two parents' more nepotism into the process than everyone else fucking up. The end result was rich fucks lost money. Was there a hacker on the inside? Probably.
A better comparison is Madoff - Madoff's clients thought they had an edge because Bernie Madoff was an insider (he was the chairman of FINRA's predecessor), FTX's clients thought they had an edge because their money was next to Sequoia's.
The funny thing is that this isn't a crypto problem - all the shadiness has been normie bank money while all the transparency has come from the blockchain. If you aren't on FTX none of this matters. If you weren't so stupid that you bought Solana, none of this matters.
And that's really the bottom line for me - I am becoming increasingly frustrated by the amount of world process controlled by rich kids who face no fucking risk. The rest of us have to work at it and most of our shit will never be seen because we didn't go to summer camp with Chelsea Clinton or some shit.
- The funny thing is that this isn't a crypto problem
Yeah agreed, and that was kind of the point I was trying to make. Theranos has fuckall to do with blood biomarkers per se, but that's how people see it next time someone comes up with an idea for how to do blood biomarkers better. Rinse and repeat. People always end up hating the game and not just the player.
It’s the best time to be hanging in Mexico with a dude from cali deep into the crypto game, with the never ending twitter memes. I get the insider play by play - but still not buying the perspective since he’s a die hard orange piller.
It all feels like a bunch o kids playing banker. I’m having a hard time assessing the real impact of this, since it really doesn’t even break news in any of my regular circles/news outlets. A Macdonald s bankruptcy would be more newsworthy. But it’s also reveling so much shady dealings we all knew were going on in the rich circles, and now they’re undeniable. Wonder if it’s gonna matter tho, doesn’t feel like anyone is paying attention besides a few techies…
You know? that's the first time I've heard the phrase "orange pill."
It is a bunch o'kids playing banker, except they're doing it with realreal money. They're blowing up a lot of grownups, and they're doing it in a truly florid fashion. And I think it's going to matter, and it's going to matter a lot.
There are two groups in crypto. There's the group of nerds who are into all the cool things you can do with it, and there's the group of bros who are into the fact that they bought it before you and can sell it to you for a profit. The former group has definitely taken a back seat for the past couple years, despite the fact that absolutely seismic developments are taking place. Did you know that the Federal Reserve started a central bank digital currency pilot? PBS just released a Nova about crypto that blithely points out that as far as on-chain activity, it's been Ethereum and only Ethereum for quite a while. They spend time on ridiculous energy wastage and then go "oh and Ethereum drops that by 99.95%." It's fucking boring, as most major advances are.
The latter group is anything but boring, and is 100% of the "crypto is a ponzi" "I hate NFTs" "progress bad" mentality that is absolutely the conventional wisdom right now. They need to be punished. They need their air taken away. They need to be roped into the exact same kind of stringent regulation we do with everything else that touches money, and we need to do it in 2015.
'cuz that's the thing. Ethereum delayed nine months while they sorted out regulatory. They wanted to make sure what they were doing was legal, was not going to face any headwinds, and could not be stopped by injunction once it launched so they could use their momentum to build. And that was the first and last time anybody did that. Compare and contrast with Paypal: yeah it was illegal, who cares we're rich. Uber: yeah it was illegal, who cares we're rich. AirBnB: yeah it was illegal, who cares we're rich.
I think we might have just landed at a crux where the Republicans get to beat up Democratic operatives for being shady fux. And here's the thing about being Democrats: you aren't allowed any scandals. This thing is basically Pizzagate for money except it's true. There will be a purging. It will matter.
My advice to anyone that would ask, for the past 5 years, has been to buy Ethereum and hold it in cold storage. Don’t trade. No other coins. Just eth. I still think it’s very good advice. There are earnest people, ethical people building interesting projects and companies on Ethereum. I remain bullish.
Watching the MSM’s reporting on this has been telling. It may be the straw that breaks the camels back regarding my total distrust of media. No longer do I just think they can be lazy and click-baity, I think they’re a propaganda tool. M
Also, hi KB. It’s been a minute. Hope you all are well.
Yeah, that’s what they call bitcoin maximalists from what I gather. Saying btc is better than Eth cause of the proof of work/stake difference? “Meritocracy “ vs “stakeholder power” apparently? And that Eth enabled the technology for scammers to scam easier since shit coins are built on top? I think I’ve learned more in the past week about crypto with this whole thing unfolding, but still have a pretty basic understanding of it all. Certainly made following this shitshow of news more exciting.
lol
I have amassed a reasonable collection of personalities to follow on Twitter. They were, to a man, deeply arrogant and self-confident. Now? Now they're mostly silent. Some of them have been very performatively, heart-rendingly skint.
You start to realize that these people with 100,000 followers were nine years old when Mt.Gox went down.
I’ve been trying to read up on this whole thing and I barely understand what’s going on. What’s the ELI5 here?
"Rich connected kid leverages his week in traditional finance to convince a bunch of venture capitalists to give him money. He uses a lack of regulation to turn their money into 1000x leveraged loans that he then uses to buy politicians, regulation, and other crypto projects. Bet goes south, shit gets ridiculous, Capitalists Everyone Hates get skint, exciting Michael Lewis movie forthcoming."
- Capitalists Everyone Hates get skint
Don't we want to see more of this? A collection of greedy, nepotistic fucks taking a hit for their greedy, nepotistic fuckery?
Edit: I'm assuming the concern is the knock-on effect it's going to have elsewhere?
In all honesty, I have no concerns. I think this is an incredibly positive event.
- It's entirely banking shenanigans. These banking shenanigans are substantially more prevalent in the frothy world of venture capital, and venture capital plus crypto has been an abjectly miserable combo. The more what get skint the better for democracy.
- One of my least favorite projects, Solana, is getting punished. It deserves to. It's a miserable scam. Do not ask me to rag on Solana unless you've brought a lunch.
- It exposes the chummy Democratic friend network right at the time the Republicans need a witch hunt. There's a lot of Republican fuckery, too, which means a great deal of distance-dancing right as the Republicans are walking into a razor-thin majority in the house. Now - will they sink their teeth into fucking Hunter Biden's laptop? Or maybe go after the good ole boy network that tried to lock up a monopoly for a power-broker's son? As far as I'm concerned the Republicans will have an opportunity to do actual objective good at a time when they could really use the votes. It gives them an opportunity to define themselves away from Trump. Will they take it?
- mutherfucking regulation is sorely needed. Here's the dumb thing: if you live in New York or Washington State, you've been subject to this regulation for like seven years. I live in WA; I can interact with Coinbase and Gemini, both of whom did the due diligence to comply with banking law. If I were in NY I could also interact with Kraken but fuck Kraken, who went "waaaah these laws are too hard." Here's the thing, though - nearly every institutional fund trades with Coinbase because they support institutional level custody and reporting... and they worked with FTX, because FTX had a fuck-ton of derivatives.
- and if you really wanna play with crypto derivatives? If you really wanna play games with risk squared or risk cubed? guess what mutherfucker. I can't even find my world's tiniest violin.
Here's the excruciatingly frustrating thing. There are crypto projects out there with an eye to the future, who recognize the utility of blockchain, who put one foot in front of the other and innovate. And then there are vipers fleecing suckers. And the thing that pisses me off the most is the vipers are trained not to bite rich people, and the rich people know it, they can snake-handle all day long and hand the asp to some retail robinhood reject fully knowing that they got theirs and it's bitin' time.
And I want them to burn.
My twitter timeline is full of hyperconfident children who made a "ten bagger" or some shit last year and are now the seasoned captains of industry imperiously passing judgment on one and all AND THEY GOT BLOWED UP AND REVEALED THEMSELVES TO BE THE LUCKY CHILDREN THEY COULD HAVE BEEN IF THEY WEREN'T SO BUSY HYPING BULLSHIT TO SUCKERS THAT THEY HAD ALREADY EXITED.
FTX? FTX is the Tenth Plague, come to smite the enemies of righteousness.
Do not confuse my interest in FTX with concern over FTX.
That Ellison video is gold. A lot of schadenfreude yesterday reading this: https://nypost.com/2022/11/15/crypto-ceo-caroline-ellison-tweeted-about-regular-amphetamine-use/
I have not had the time to figure out what’s happened yet (and it’s not that easy to do because this crisis? has many parts to it).
My surface level impression is that this is a carastrophic failure, but one that will mostly affect those who did anything with FTX. Mt.Gox happened, we all learned our lesson and moved on. What reasons do you/we have to believe this will be more consequential for a longer time perhaps?
Ohhhhhhh shit son
1) Sam Bankman-Fried's parents are tax professors at Stanford and Democratic insiders
2) Sam Bankman-Fried's girlfriend/the CEO of Alameda is the daughter of a statistics professor at MIT whose lab has been financed by Bill Gates and Jeffrey Epstein
3) What money FTX has spent? They have spent on buying Democrats. SBF was Biden's 2nd-largest donor
4) All of their money was created out of thin air - they would make a token, sell 1% of it for $1m, keep 99% of it, and then say they had $100m in assets to get a loan with
5) The only people who could invest were chummy rich people who were basically greater-fool-theorying each other ("I can tell this is a scam, but I am smarter than the average bear, so I just need to sell it before the scam is revealed")
6) The actual failure is Gob Bluth stupidity, over and over and over and over and over again
7) It's a bunch of kids in the Bahamas mainlining Adderal and fucking each other (while also fucking over the banking system)
8) It's the guy who pretended to practice "effective altruism" while also grabbing the money brazenly
9) They were pushing real hard for regulation that would lock everybody else out while allowing them to pursue their shady shit under defacto monopoly status
10) Michael Lewis was embedded in this bullshit for the past six months fanboi-ing the shit out of SBF so of course, not even he saw the surprise ending
11) Jonah Hill looks a fuckton like Sam Bankman-Fried
12) errrrbody hates crypto, and this is crypto that bought naming rights to a goddamn stadium
...that's just off the top of my head. If you would like some hot takes, here's the financial view There was an awesome thread (since deleted) that legit mentioned reptilians.
I didn't realize how big and entangled FTX was. jeesus. Michael Lewis being involved is a breathtaking cherry on top of this formerly 32B-sized cake.
So here's my hope: this event will launch investigations, will shake up the US gov enough to pour more, not less, resources into regulating the crypto space. Ever since the ICO days has the pendulum swung towards more VC money, more centralization, less transparency. This event might be big enough to, on its own, swing the pendulum back towards more accessible, transparent and regulated version of crypto. On a scale from one to ten how naive/starry-eyed is this hope?
The interesting development, as I see it, is Gary Gentsler and the SEC attempting to paint the CFTC with it as a way to distract from how deeply in bed he is with all this. Because ultimately? I think the CFTC has the charter to regulate blockchains and the SEC has the charter to regulate exchanges. But right now? I think they're both trying to avoid the impression that meeting with a large exchange in the course of determining regulation was a bunch of chummy insiders.
I have been maintaining for... six? Seven? years now that any exchange that interacts with Americans needs Bitlicense-level oversight. I think that's gonna be the easy, everybody-approves-it legislation - "hey look in New York State, where all the money wants to play anyway, there have been stringent rules in place for the past eight years. How much contagion spilled over New York? None. How much loss did New Yorkers suffer from New-York-legal exchanges? None. Is the legislation battle-tested, capitalist-approved? Yes.
...and then there's the witch hunts.
Since the tweet is now deleted, here's what appears to be the same story compiled into his newsletter: https://blockcrunch.substack.com/p/the-definitive-post-on-the-ftx-scandal
Guess the dems want to get ahead of this before the committee heads flip flop: https://www.wsj.com/articles/house-committee-to-hold-hearing-on-ftx-collapse-11668612170?mod=mhp