The Warning Signs Were Present: The Collapse of FTX was Inevitable

Below is a direct excerpt from Marty’s Bent Issue #1282 “The personification dirty grift.” Sign up for the newsletter. Every once in a while, we are reminded how easy it can be for people to be completely fooled by con men. Last week was one such reminder. Unless you have been living under a rock for a while, you probably know about the massive blow up of FTX. We won’t bore our readers with a rehash on the token mechanics behind FTT. Nor will we dive into the deplorable nature FTX/Alameda overtly stealing user deposit and setting them on fire by bad investments and trades. Marty the Crazy Uncle won’t even get into the fallacious theories surrounding Sam Bankman Fried’s (aka “SBF”) financial support for the Democratic party and his buddy-buddy relationship to the regulators who should have been investigating him. What I want to focus on is the mystery of how so many intelligent people were duped by such a obvious con man. They appeared to have come out of nowhere in 2018/2019, and quickly rose to “prominence”, as one of the most respected exchanges worldwide. SBF was a beloved autistic wunderkind who, at the age of 25, discovered a way to profit from a price arbitrage opportunity between Asian and Western bitcoin exchange rates. This opportunity was not available to institutional investors. Bankman-Fried was photographed pretending to be asleep on a beanbag chair that was placed below his desk. The monitors, which included ten oversized monitors, created a sense of legitimacy that gave every crypto VC and trading degen a headache. They were all on his side, along with most of the financial media. Jim Cramer, an annoying uncle, claimed that he thought he was talking with the world’s first trillionaire in an interview with SBF. Everyone seemed to be caught by this charming autist. It was clear that he didn’t understand the industry he was supposed be an expert in. This was made clearer by an interview Bankman-Fried did with CNBC in July 2021. He attempted to explain proof of work to Joe Kernen. He was unable to comprehend the concept of electricity per transaction, a completely absurd metric that has been extensively debunked. In the spring of 2019, Bankman-Fried hosted an event in the Bahamas with keynote speakers Tony Blair and Bill Clinton. It was a strange duo to be the keynote speaker at an event about technology that defangs states. I had this to say about that conference at the time: It became obvious to me that something about FTX, and its anemic leader, Bankman-Fried, was not right. Then, this summer, after the Terra/LUNA and 3 Arrows Capital blowups, SBF went into a buying spree for distressed businesses that tallied well above $2 billion within six months of raising $400 million equity. This prompted me to ask this question: What was the marketing budget FTX spent on this buying spree? Name multiple arenas, get a celebrity endorsement by Tom Brady, and get their logo on every MLB umpire’s jersey. We found out last week that FTX and SBF did not have $2 billion. It was clear that they were destroying between $10 billion to $50 billion of value, including client deposits and investor capital. Although I knew this man was not running a legitimate business I couldn’t even imagine the destruction it would cause in “the industry”. This begs the question: if I was a lowly newsletter peddler with enough instincts to sniff this out, how could some of the most respected and experienced cryptocurrency traders and venture capitalist funds, who were given the responsibility for managing the money of others, fall for this con man?” How did Sequoia approve this company? How did the Ontario Teachers’ Pension Fund Manager approve the writing of a $95 Million check to this company How could venture funds from the space feel comfortable putting large amounts of their AUM on an exchange? How come none of these people asked basic due diligence questions such as: How do I monetize? Can you show me the receipts from the arbitrage trade that made your rich? Where did all this money come from? This is a huge scam. How could anyone, other than some Bitcoin Maximalists or some Wall Street short-sellers, not see it? Many in “crypto” believe they are geniuses who have found a new paradigm that can make their insanely rich. But the truth is that they have discovered a way that replicates the corruption in the existing financial system for much less money and in a much shorter time. Shitcoins can be described as corrupt seigniorage, which has been ported into the digital realm. As we have seen, seigniorage can be very lucrative for a few insiders. The venture funds that enable them and the shitcoiners have made the conscious decision not to be the benefactors of this new type of seigniorage at retail investors’ expense. They have, fortunately for us all, destroyed their reputations and collective net worth in this process. Everyone should use the blowup at FTX to observe the reactions of the swindlers caught and how they are reacting. Although many of them claim to be shocked at the possibility of something like this, anyone with a functioning bullshitmeter could have predicted it. All the signs of malfeasance were obvious. You only had to look closer. Sam Bankman-Fried was the embodiment of dirty grift, and he has smeared all over the “crypto” industry. Let’s hope this blowup will lead to a clear distinction between bitcoin and “crypto” going forward. Bitcoin is the signal. It is the only peer-to-peer, distributed cash system that can free humanity from the state’s yoke. Bitcoiners are creating tools and products that actually make people’s lives easier. “Crypto,” is nothing but an affinity scam to take advantage of Bitcoin’s brand to swindle people’s hard-earned money under the guise “innovation.” This should be made crystal clear as soon as possible.

 

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