Bankless - Why Isn't Sam Bankman-Fried in Jail?

Starting point is 00:00:04 Why isn't SBF in jail already? Right. What the hell's going on? What's happening? Is anything happening? Is anyone doing anything about this? And I think this is a topical issue, of course, because your crypto is really having sort of some introspection in itself and asking itself, like, why do scammers keep invading this space?

Starting point is 00:00:26 Why do we keep falling for it? How does this keep happening every time? David, I've been kind of a little bit relaxing over Thanksgiving. So not quite as tuned in, but I know you've been a hard at work preparing this agenda. So it's kind of like, I want to throw it over to you, man, and just get me up to speed. But the basic question is the same question I think in a lot of bankless listeners' mind is like, what is SBF still doing? Is anyone going to bring some accountability to this situation?

Starting point is 00:00:54 What does this look like? It was really the video that surfaced that somebody took of SBF in the Bahamas, like running around in his backpack in a cargo shorts. And like it was something like 12, 13, 14 days. The boy went to the Bahamas, right? I think I saw it. That wasn't BitBoy that recorded that video. But Bit Boy is now in the Bahamas.

Starting point is 00:01:13 But like we saw this video of SBF just like running around in the Bahamas. Like, all right. Like why? And why is he not in jail? Why? So like we know he did a bunch of illegal things. We're going to go through all of the illegal things that he did. But there's this big question is like, why?

Starting point is 00:01:30 isn't anyone outside of crypto taking this seriously. People in the chat, David, right now are saying jail isn't for rich people, right? And this is this common sentiment. Is this part of the story here? It's just like, have we grown that cynical? Rich people just don't go to jail and he's rich, so he's not going to jail? I think that definitely plays a very significant role in this. But it's not just like, oh, if rich, then no jail, there's more to that story,

Starting point is 00:01:54 which is a part of the story that we're going to tell here today. Are you going to talk a little bit about mainstream media's coverage about this, because that's been a piece on my mind. Like, why mainstream media is giving him so much positive coverage, not all mainstream media, but like some outlets certainly aren't. I don't understand this. Yeah, and there are some outlets that are giving Sam Bankman Fried the time of day. And also those same outlets also are running, like, pretty good reports, pretty good account.

Starting point is 00:02:22 So it's very mixed. Like, the New York Times and the Wall Street Journal are definitely the big, like, culprits here. Like these articles that ran pieces as to, like, oh, like, Sam Bankman-Feed says he's sorry and, like, forgets about the whole theft of customer deposits. And then that same outlet will actually run a decently well, like, research report on the whole thing. And so, like, what the hell is going on with that? And so there's a lot to unpack there. Part of this answer, of course, goes into the hundreds and hundreds of millions of dollars that Sam Banking Fried has donated,

Starting point is 00:02:54 not just to the Democrats or even the Republicans or to political organizations, but non-profits as well. And so there's just going to be this massive, like, audit of the state of money that Sam Bankman-Fried and FTCS slashed around everywhere. And, like, what do we do about that fact? Because that's a very relevant part of the story, too. Well, we're going to talk about all that. And I know toward the end of this episode, you're going to put on your therapist hat a little bit as well. And because I think there's some psychology here. That's made a persistent psychology that we've seen a pattern emerge across many of these folks that have scammed the industry, really. So I want to be. get to that too. Guys, before we get in, I want to tell you about our friends and sponsors. This is Infura. They are calling all Web3 infrastructure providers to get early access to their decentralized infrastructure network. Thinking Fuera has been criticized as being a centralization vector of Ethereum in the past. And of course, they don't run your individual Ethereum node, but they run a lot of

Starting point is 00:03:54 the archival nodes. So they would be, like, Infura would be maybe behind a metamast transatl transaction or something like this. Well, they are taking steps to decentralize the Infura network, which is pretty key if we're going to build a decentralized future on top of this crypto money system that we have rather than rely on SBFs of the world, we need to decentralize our data providers, infrastructure providers. I think there's some early access people can get here. David, what are we looking at on the link? Yeah, there is the early access program to the decentralized version of Infura, which exists in the future if we help it come about. There's been a bunch of controversy in Inferra in the news lately about just like

Starting point is 00:04:36 reporting IP addresses and mapping Ethereum addresses. There was a bunch of nuanced threads that came out of Dan Finley and Joseph Lubin. But this is actually not about that. This is about taking the Infura stack, the very important role of RPC endpoints in the way that we broadcast transactions to Ethereum and doing the thing that we love to do in this space, decentralizing it. So if you have skills that Inferra might want or need to help decentralize their own stack, there is a link in the show notes where you can sign up to help that effort proceed into the frontier. David, as you were talking about that, I was reading the chat window, someone said, David looking jacked. Man, you've been working out over the holidays,

Starting point is 00:05:16 that turkey treating you well? I have set a goal to climb a mountain in 2023, and so yeah, I've been going to the gym. There you go, climb a mountain, not metaphorically. You're talking about I'm talking a literal mountain, yeah. That's cool. David in his spare time, went away from crypto, goes and, you know, does ice climbing up glacial sheets. All the risks I don't take in crypto, I take in my outside adventures. Oh, that's great. Stay healthy, my friend.

Starting point is 00:05:42 That's all I'm going to say. This show would be pretty boring if it's just me. No one would tune in. All right. So let's start at the high level of this story. And here's kind of the question. Maybe we need a reminder of. like obviously people have banning about the word fraud and talked about, you know, scammer.

Starting point is 00:06:01 There are some legal definitions for what SBF actually did. We could get into the story. But I want you to kind of remind us because this is the topic of why isn't SBF arrested? And the question of, okay, some people are saying because rich people don't go to jail, others are saying because he didn't do anything illegal. Can you just remind us of what SBF actually did? And we'll talk about whether it's legal or whether it's not in the nuance there. Yeah, yeah.

Starting point is 00:06:24 We got the receipts, of course. course, and as if anyone listening to this episode, like, needs to be reminded. But we're going to go through all of the illegal things that SBF did. Some things aren't technically illegal, but they are downstream of illegal things. And so we'll get into all those as well. But I want to start before we get to all of that with this article out of Fortune, Fortune magazine, which the title of this is just like, could SBF go to prison for the FDX disaster? Which, like, the answer is yes. You don't even have to ask the question. question. Yes, he could. But, yes. To be fair, this is November 13th. This was a while ago.

Starting point is 00:07:00 Sure. And also the audience to this article are like not bankless listeners. They aren't on crypto Twitter. They aren't familiar with FTX. So like this is still coming from like going out to people that are still trying to get up to speed with the article or with with the events. And so this article gives out two reasons about like perhaps what like what it would take to get SBF arrested and two complications, if you will. First, there's jurisdiction. So since FTCS is an offshore business with headquarters in the Bahamas. And, and and did not cater to Americans, defense lawyers could argue that the actions of FTX executives are beyond the reach of U.S. law enforcement.

Starting point is 00:07:34 I'm sure people listening to that are like, hmm, that doesn't sound like that'll hold up. But the Bahamas has jail. Yeah, the Bahamas also has a jail, yeah. Okay. And then the second would be intent. So, like, you know, mismanaging your company and losing a bunch of other people's money is technically not criminal. Mismanagement happens all the time.

Starting point is 00:07:53 For a criminal case, there has to be, like, deception, right? And so these are the two things that we would need to get over in order to prove that SBF needs to go to jail. You have to prove these in court, you know, all of these things, of course. I feel like, Ryan, that these are easy things to prove. Surmountable obstacles. Very surmountable obstacles. Because, like, reminder, SBF isn't American. FTX totally serviced American customers.

Starting point is 00:08:17 It marketed to Americans. You remember the Super Bowl ad? Remember the FTX Arena? Oh, yeah. I remember that. Like, yeah. They had the best Super Bowl ad. So it's like no question.

Starting point is 00:08:29 Actually coming out of that, it was our favorite. It was, yeah, it was our favorite. Yeah, it was hilarious. Yeah, Larry David, who is now being sued for doing that, which is ridiculous. But like, okay, so like jurisdiction and intent. Like, jurisdiction, I just covered that. We don't need to go over like how many Americans lost money in FTAX. Some intent there.

Starting point is 00:08:50 I mean, the stories of him like cooking the books behind the scenes, having backdoor access from like one set of books to the other. And by the way, if he did that, I think that's maybe legally technically, like fraud, the bar of fraud. But what are we looking at here? Is this a police arrest? Yeah, you've got a statement from the police public affairs and communications department of the Bahamian police saying, in light of the collapse of FTX globally and the provisional liquidation of FTX, a team of financial investigators from the, again, Bahaman financial crimes investigation brands are working closely with the Bahaman Securities Commission to investigate. investigate if any criminal misconduct occurred. November 13th, 2022. Reminder, criminal misconduct definitely occurred. So, I mean, we're about to get into all of the people that SBF paid money to.

Starting point is 00:09:41 And I would just like to raise the possibility that if SBF donated to both political parties, a bunch of nonprofits, the New York Times, a bunch of media institutions who are going to, again, we're going to go through all of these, is it also possible that FTX also pay, paid off Bahamian regulators. I don't have the answer to that question. I'm just posing that question. I don't know what the police are like in the Bahamas, but I don't know why I have this stereotype of them being super chill.

Starting point is 00:10:08 I don't know. I don't know that that's the case, though. But what are we looking at here? One million creditors in their bankruptcy filing. So, you know, when this public affairs communication from Bahamian police was released, two days later, we got the actual bankruptcy filing. bankruptcy filing, which indicated how many creditors were out of money here. Why are we pulling this up? Well, because it would imply that if there are over one million people or entities who are owed

Starting point is 00:10:37 money by FTX, it's like a, you know, what's the word, smoking gun, that criminal activity definitely occurred. If like, if you owe one million people money, like, people can find, what did you do? People can find something. We can find something illegal that you probably did. So the likelihood is very, very strong. The vast majority of these one million creditors are, again, customers. Retail. Who did not consent to their money being sent to Alameda Research, which is like the main bit of fraud that happened here. And so there's a bunch of other, like, things that we're about to go down.

Starting point is 00:11:15 SBF used Alameda research for customer, for trading of customer funds, the illegal backdoor and a bespoke bookkeeping system, FTCS buying $19 million. properties in the Bahamas worth $121 million. That's not illegal. Unless you do it's someone else's money that you stole? Yes.

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Starting point is 00:14:39 And of course, this is the big one. This is the big thing. The umbilical cord between FTX and Alameda is the illegal thing. There's a bunch of other things as well, but this is a matter of like setting up an exchange. And then when you have an exchange, if you are ever interested in starting an exchange, Ryan, here's how you would do it. You would take in like one customer's Bitcoin and then you would have a one Bitcoin liability to that customer. You would also have one Bitcoin. And so that matches.

Starting point is 00:15:11 And so you should never ever not have the funds that customers deposit. You are meant to be a full reserve institution. These are the words that I remember coming out of a Nick Carter's mouth when I was listening to his podcast. You are meant to be a full reserve institution. And so the fact that Alameda had this pipeline of money to trade customers' funds is the first obviously very illegal thing to do. According to U.S. securities loss, right? In this same article, Sam Bankman Free told CNBC, our margin position took a huge hit, implying that FTX sent money to Alameda, who then used it on leverage to gamble on the market.

Starting point is 00:15:53 Right. Perhaps there might be some laws inside the United States that say that that might be illegal. And then in the same article, Alameda was allowed to post the FTT tokens. It held as collateral and barred. And so this is the insane thing. Alameda research had FTT tokens, which it sent to FTCs to post as collateral when it it was borrowing the funds. And so it was like, okay, like, we have this collateral, which FTX totally has the money printer for, but we'll use this collateral as like legitimate

Starting point is 00:16:26 justification to buying, to borrowing customer funds. That's insane. It's pretty fresh. So, so that's the big one. There's also the backdoor bespoke bookkeeping system that FTX made themselves. And so there was a backdoor in their own accounting system that allowed Sam to execute commands that could alter the company's financial records without alerting anyone else in the company, including external auditors. And this was what allowed for the movement of $10 billion in funds to Alameda that didn't trigger any internal or compliance red flags at FTX. I bet you they didn't even have any internal compliance teams. But, okay, so that is, what is that? That is like, there's intent there. If you create a backdoor

Starting point is 00:17:11 in a bespoke bookkeeping system, I feel like that is evidence of intent, right? Am I crazy? It seems like it. I mean, that's pretty intentful. I mean, that's called cooking the books, right? Right. This is Enron level fraud.

Starting point is 00:17:28 Then there's the article about how FTCS bought 19 properties for a total of $121 million. And then inside this article, it says separately attorneys for FTX said that one of the company's units, remember how there's this massive org chart of FTX, spent $300 million in the Bahamas buying homes and vacation properties for its senior staff, and that FTX was, of course, run as the personal fiefdom of Sam Bankman-Fried. Most of these were luxury beachfront homes.

Starting point is 00:17:59 This is insane. $72 million of, like, the most expensive property in the Bahamas. And the deeds of these properties, which were, again, bought by a unit of FTX, said that these were used as residences for key personnel of FTX. Like, I don't think, like, it's just dubious that an exchange or any company would buy this much real estate and for their own, like, C-level execs. But then when you combine that, of course, with, like, the fact that they were just using customer deposits to do this, is, like, it's not only dubious, like, it's illegal to begin with.

Starting point is 00:18:36 There's also the fact that SBF took out a $1 billion loan from Alameda Research, a personal loan from Alameda Research. But where did Alameda Research get that money? Well, they got it from FTX. So Sam Bank for Spree's Exchange, sent it to his prop trading desk. Look, man, it's not too much to say he was basically using depositors money as a personal Pee bank. It's exactly what he's doing. His personal Pity is buying property in the Bahamas for his parents. and himself.

Starting point is 00:19:08 Okay, so beautiful property. Here's my favorite one. This is the, the Coin Desk article. And so, do you remember when FTX raised $420 million, $420,000, $69,000 for the meme raise? Remember that?

Starting point is 00:19:24 It's real funny now, isn't it? Super funny. You know what else is super funny? In that same raise, SBF sold $3 million of his own equity into that funding. No, not $3 million. Oh, excuse me, 300.

Starting point is 00:19:37 300. 300 million. 300. Those are rookie numbers, okay? This is SBF World. You got a 100x those numbers. So while FTCS raised $420,000, $69,000, Sam Bankingfried personally sold $300 million of his own stake in FTX.

Starting point is 00:19:59 Somebody in chat, by the way, saying his parents are lawyers. Isn't that crazy? The guy knows. better than this raised by lawyers and this is what's happening what's going on. Apparently at the time when SBF did this he told previous investors that this was partially

Starting point is 00:20:16 to reimburse him for money he spent to buy out finance his stake in FTX a few months earlier. Dude, like if you're a VC though and you like just put $420 million and the founder takes out 300 million out of that raise. Three quarters of that. Do you think something is happening?

Starting point is 00:20:35 That is the biggest red flag of all time. You think some alarms are going off in your head and you're being like, huh. So we got 120 million of this raise to continue like building the company, but founders just taken out 300 million. Why did this story not come out until now? Because investors at the time knew this. He told investors of FTX during this raise that he did this because that's, that's, why didn't they bring this up at the time?

Starting point is 00:21:00 Look, we'll have to wait for the movie to get all the kind of dramatization details. By the way, did you know that Netflix has signed for the rights of this? Among like Apple's fighting for it, like, there's going to be so much material. Good. What, you want this story to be told? Yeah. Yeah, because if they tell the story right. Dramatized?

Starting point is 00:21:19 Yes, if they tell the story right, hopefully, maybe I'm like, have too much faith in humanity. I don't know that they're going to tell the difference between Defi and FTX. Do you think, am I naive? I expect you to be very pissed off at the outcome of the stories that are told. We will see. But like, let's take our clue from mainstream media coverage right now. Because that has been very much mixed to terrible coverage. Maybe emphasis more on the terrible side of things.

Starting point is 00:21:45 That's the other part of this story. Should we pull up? I actually don't have a subscription to New York Times, David. I forgot to get that prior to the show. But what is this New York Times article? So this is the puff piece that everyone got really, really mad about. So there's this New York Times puff piece that talked about how Sam Bankman-Fried's empire collapsed. And even though you didn't subscribe to New York Times, I still pulled out a couple lines.

Starting point is 00:22:09 One of the reasons why, according to the New York Times, that FTX's empire collapsed, was that it expanded too fast and that they failed to see warning signs. How does that land with you, Ryan? How does that land with me? It does not want me to make me want to subscribe to the New York Times. And a comment on the article that was from another article was that this whole article just uses soft passive language to disguise blame at every single turn. And so there's a tweet that I thought was pretty useful from a Trong fan that said, that looks like did the command F on the words fraud, Enron, crime, illiquid, stolen, hidden, criminal, or backdoor to see if any of these words

Starting point is 00:22:51 showed up in the New York Times article, and none of them did. For some reason, they talked about him getting sleep. Now I personally read this article, Ryan, of course. And like, while that point definitely stands. that there's no word fraud or theft in this article. It actually wasn't as puff PC as I kind of thought it was. I don't know if you've read this article or got your take on it, but it was an acceptable account of things that happened in FTX

Starting point is 00:23:20 that could have been more scathing, but was a little bit rounded edges. But I still thought it was an acceptable account of what happened. Anyway, that's my joke. Okay, so you don't think this was as much of a... It's not super puffy. It's just not as deadly as it should have been. It's kind of funny because I do feel like many of the biases out of the New York Times,

Starting point is 00:23:44 Wall Street Journal, these other sources are very crypto unfriendly. Yes. And have been for crypto's entire life cycle. You would have expected, now that they actually have a smoking gun, ah, we found the scammer, the biggest scammer in like maybe modern banking history, they would have gone hardcore after not only crypto, but also the scammer themselves. It kind of begs the question of why we got a different outcome here. This was crazy.

Starting point is 00:24:14 Yeah. So, this is, remember when Sam Bankman Free turned, what do I call him Sam? SBF wrote that apology to his employees and like it got sent out in a bunch of screenshots. So Liz Hoffman of the Wall Street Journal tweets out these screenshots. wasn't the source, but she tweets out the screenshots to make some commentary. And she follows up and says, well, this mostly makes sense to me after Sam gave the account for how FTX ran out of funds. And he's like, yeah, we had a leverage position. The market's turned against us. Our assets became less than our liabilities. And then he does his napkin math accounting, which is embarrassing because he doesn't even know how much FTX has in his books.

Starting point is 00:24:55 And then Liz Hoffman of the Wall Street Journal responds, this mostly makes sense to me. FTX had a lot of collateral, $60 billion, against not that many liabilities, the problem that the collateral was monopoly money and the liabilities were real money. That's real basic bankless stuff. Excuse me. Banking stuff.

Starting point is 00:25:12 That's not what happened, Liz. That's not what happened at all. Number one is you never trust a Hoffman, so I think that's... She needs to change her name. I'm not changing my name. Wow, that's an interesting take. Okay, but you get a lot of bad takes on crypto, I guess.

Starting point is 00:25:29 not every mainstream media journalist publication is going to have, I guess, great takes on this. What is this from Forbes that we're looking at? Forbes, Alameda CEO Caroline Ellison is a math whiz who loves Harry Potter and Risk. Wait, when did this, when was this published? November 18. Oh, my God, dude. Wow, among other things, and scamming customers and using depositors funds and, wow, also a math whiz and loves Harry Potter. Again, if you actually read this full length of the article, you actually do,

Starting point is 00:25:59 you actually do get this image of like, oh, Caroline totally, like, f-ed up, and this is totally her fault. But the headline is that she is a math-wiz who loves Harry Potter and risk is absurd. Wow, that is silly. Okay. The tweet was not taken down. The tweet was not taken down. No. But, okay, so here's my favorite one.

Starting point is 00:26:20 This, which is, which is it, the Washington Post. Before FTX collapsed, founder poured millions into pandemic prevention. Most of these initiatives have come to a sudden halt. Yes. They have. So I'm going to read an excerpt from this. When the coronavirus pandemic hit and the world shut down in the spring of 2020, many mourned the loss of life, jobs, and normalcy.

Starting point is 00:26:41 Sam Bankman freed, then a 28-year-old cryptocurrency entrepreneur and his brother Gabe, a 25-year-old congressional staffer, said the pandemic provided them with something else, an opportunity to make a difference. Harnessing the enormous wealth created by FTX, the cryptocurrency exchange that SBF had founded, they undertook a project to spend potentially billions of dollars on pandemic prevention, a long neglected priority on Capitol Hill, even amidst the coronavirus crisis. What is this reporting, dude? I don't know. I don't know. This is either very lazy reporting or just completely out of touch with what's actually happening. But did this just say that Sam had a brother,

Starting point is 00:27:22 who is a 25-year-old congressional staffer? Yeah, that's actually news to me. I didn't know that. I did not know that. Brother Gabe is a congressional staffer. Yeah, and this family's all over the place, man. Like, all over the place, like, embedded in some of the largest institutions that run the United States is what you mean by all over the place. Yes, that is what I... Okay. And so, Ryan, did you know tomorrow SBF is meant to appear at a New York Times conference?

Starting point is 00:27:48 I did know this. Yeah. So that's happening tomorrow. It's happening virtually, I believe. Is it? Okay. Well, that makes sense. I believe that's the case.

Starting point is 00:27:56 Remember Sam Bankman-Fries tweet to see about CZ? Is that guy even allowed in the United States? Well, I'm pretty sure Sam-Bankman-Fried is not supposed to go to the United States anymore. Did you see the speaker list for this? By the way, this looks like a total pose. I don't know if it's like... Are you seeing any amphetamines on the desk?

Starting point is 00:28:13 There is a picture of an epitamines on the desk that will come to later. That'll be at the end of the day. Oh, thanks. He really delivered on this agenda. Did you see who else was with him? No. Okay, so I think I tweeted out kind of,

Starting point is 00:28:26 a list of the other people who are attending this conference at the same time. Because it's kind of like, who's who's, here we go. Look this. Okay. Mayor of New York City. All right. Larry Fink. CEO of BlackRock.

Starting point is 00:28:40 Reed Hastings. Oh, Janet Yellen. I'm suing her. Janet Yellen. Mike Pence. Zuck. Zuck. Zelensky.

Starting point is 00:28:50 Wow. And also SBF. And I'm just surprised he hasn't been uninvited, honestly. I don't know. Like, what do you think about this? Like, you're in kind of the content game. SBF has been on the bankless podcast before, before all of this came to light.

Starting point is 00:29:06 I'm not convinced that we wouldn't have him on again. I think he deserves an accounting to the crypto industry to just like somebody to just be like, what did you do? And why did you do this? So I did DM Sam when he was talking to, who would be talking to? Dave Portnoy.

Starting point is 00:29:21 Dave Portnoy was like, I'm going to do an interview with Sam. Bankman-Fried and I sent Sam in Twitter DMs that tweet and I was like if you go on any media like thing that's not a crypto media thing crypto media platform to talk to and about crypto like no one's ever like I mean he was beyond the point of repair at that point but it's basically like you have to come talk to the crypto industry and apologize to us and he of course didn't didn't answer that so yes you're accounting for your actions right so would I would we have SBF on I think so because also we're not the New York Times who is apparently conflicted and not sober about what happened and we would

Starting point is 00:29:57 actually ask the right questions but why i just still don't understand why would new york times watching a post why would they be giving him the softball treatment um is there an answer to that question there is not a concrete answer but there is a bunch of data that points to a very plausible answer uh and the answer is money surprise surprise uh but before before we get to that point there's like a few more tweets that I want to get through. Did you see the Matt Walsh tweet that just went absolutely viral? I did. This is Matt Walsh correcting the Wall Street Journal. By the way, so for people who can't see on the podcast, this is the Wall Street Journal front page of the Wall Street Journal. And the title, the headline on the front page is FTX Collapse, Wiped Out Founders Philanthropic Ames.

Starting point is 00:30:46 Okay. And this is published November 25th. So Black Friday. The day after you're having your Thanksgiving meal. That's the 25th or the 23rd? This says on the top here, November 25th. Okay. I got the glasses, David. I do not have the glass. I got that.

Starting point is 00:31:00 See, this is clear than 2020 to me, all right? These glasses really help. FDX's collapse, wiped out founders, philanthropic aims. And Matt Walsh revises this headline with something else. What does he say? Yeah, so in big, bold Sharpie, he writes, FTCX's fraud wiped out customer money. Again, this is the thing that mainstream media can't figure out.

Starting point is 00:31:25 No, this is ludicrous. It's not that complicated. What happened from? On the 25th, too, of November, like, this is very clear what SBS has been up to. Like, evidence has mounted, like, I can't, I can't, how did this make it off of the press floor? This is after the Vox article where SBF said, yeah, the whole, like, woke, liberal, like, effective altruism donation things.

Starting point is 00:31:47 was just a front. That's after he told us this. Is this, okay, I'm still not convinced that this isn't just lazy, laziness. It could be just be laziness. Do you think it is? It's pretty damn. I mean, if it is laziness, then what is the state of modern day journalism, Ryan? I don't know. Like, what are they doing? So here's the thing. I've, I've always rejected when people have referred to bankless as journalists. I've always rejected that. You are not because I feel like journalists should be at a much higher, held to a much higher standard than bank listeners. All right?

Starting point is 00:32:23 We are investors trying to figure this out on the journey, right? The thesis-driven media company. Yeah, so sometimes we're trying to interpret events as they come in. But like we are not doing in-depth investigative reporting. That's for these guys to do. I thought that's what these institutions were set up to do. The Wall Street Journal, New York Times, Washington Post, aren't they supposed to like get to the meat of the story and uncover the facts? and give us some distillation of this.

Starting point is 00:32:50 This is not the headline that's doing that, David. Yeah. I would say to put it into a single sentence, bankless would write an article that says Ether is Ultrasound Money. And an investigative journalist would write an article that says, Is Ether ultrasound money? Those are two different things.

Starting point is 00:33:08 After we meme it. After we're writing. Okay, so that begs the question. Then we're getting back to, which is like, why is the media like this? Right. What happened? Why are they doing this? What's the reason for this kind of reporting? And you said, you whispered into Mike just now, money. Money. What are we looking at from Elon Musk?

Starting point is 00:33:25 So here's Elon Musk saying, if SBF was as good at running a crypto exchange as he was at bribing media, FTX would still be solvent, which has almost 30,000 likes. Good, good tweet. That is an explanation. It's bribing media. What does that mean? What does it take to bribe media? Well, I'd love to ask SBF this. He did this in a a variety of different capacities. And so there's this intercept journalist journalism thing, which this subtitle for The Intercept is Fearless Adversarial Journalism that holds the powerful accountable. SBF donated $3.25 million to the Intercept.

Starting point is 00:34:05 There is this like a nonprofit? The Intercept nonprofit? No, it's a, oh, maybe it's a nonprofit. I actually don't know. It's definitely a media, an investigative media institution, whether it's a nonprofit or not, I don't know. I don't know. Oh, it's a nonprofit news organization

Starting point is 00:34:19 founded by Glenn Greenwald. Cool. Yep, okay, so there's that. The next in the list, Semaphore, a new journalism project created by Ben Smith, formerly the media columnist at the New York Times, and before that, the editor-in-chief of BuzzFeed.

Starting point is 00:34:36 SBF gave a grant to Semaphore. A grant. Yeah, remember, and then, Ryan, remember trustless media? We covered this a very, briefly on a weekly roll-up a long time ago. It was a, it raised money to start a media company in crypto called Trustless Media, which I took offense to because my Twitter name is Trustless State. But we talked about them anyways because it was a good raise.

Starting point is 00:35:01 High production. And they were actually the first. The bankless killer. Yeah, the bankless killer. Yeah, that was like kind of the wink-wink. They were also the first organization that did the first big piece on Doe Kwan after the terror collapse. That was their episode zero.

Starting point is 00:35:14 They somehow got Doquan to do an interview after, God, look at that photo, man. What the hell? After Tara collapsed, they got the first scoop with Doquan. You remember this? Yes, I totally do. Well, guess who led the round of Trustless Media? You're going to tell me what I already know, but why don't you tell everyone else?

Starting point is 00:35:35 It was Sam Bankman-Freet. Sam Bankman-Free. FDX CEO leads Trustless Media Seed Round to help build community-owned Web3 shows. Can you go back to the old website? Does that look community owned to you? Well, this is what bankless could look like if we actually had some fantastic production value days. If we actually raised money. Yeah, raised money.

Starting point is 00:35:56 I, you know, look, he's going for something here, right? Like, I guess I get it. But is this effectively what it means to buy media? Is you kind of write checks, grants through sponsorship? And when you can't get any forays into crypto, you kind of found and create your own crypto native Web3 media companies. Is this effectively what it means? I guess so.

Starting point is 00:36:24 Yeah. I mean, I would imagine there's a bunch of sponsors out there who are like, we'll totally sponsor your media org and run commercials, but you have to do this, this, and this. Can you talk about that? So I feel like we have an idea of what this looks like because we are actually running a media company. And so, like, we have sponsors that pay for our show. I guess I will talk about that for a minute. Our policy and our approach to sponsorship has always been like, you have to be willing to fire your sponsors at any time. You can't let them own you. That's policy

Starting point is 00:37:03 number one. And so we've always had... You are never beholden to sponsors. Never be beholden to sponsors, right? Don't be ever put yourself in a place where you require a check from a set of sponsors in order to exist and push your message for it, right? Rather be in a place where you can select and pick your sponsors as you go and drop those that don't align with your values and retain those that that do. So that's something that I feel like we've worked hard at banklessly do. And in order to do that, you have to like keep small, stay scrappy, maintain profitable over, be profitable over time and kind of establish a reputation because I think you can very easily be put in a place where you're owned by sponsors. You can also be put in a place where you're owned

Starting point is 00:37:50 by your investors as well. And so I think this is a challenge if you are funded by like a billionaire or Jeff Bezos or somebody in the crypto, like this example of trustless media was funded by SBF. Really hard to write a piece on SBF or a, a piece on SBF or a, comment and talk about SBF if you're actually funded by the guy, Alameda, right? So that's another thing that we've avoided doing. And I guess, you know, our policy towards sponsors has always been just like fire any of them if we have to, right? And so we have let sponsors go in the past. Don't sell to the highest bidder.

Starting point is 00:38:35 never never receive sponsorship for like um content so paid content is an absolute no no like always has been for bankless can you define paid content because when we were taught when we had our bit boy show people are like bankless receives money for their sponsors what the hell's what the hell is the difference between what we were talking with bit boy what is saying that right what is paid content yeah paid content means like it looks like it's organic content right so let's say we wrote an article on bankless and it looked like it was organic content, but it was really funded by some sponsor, FTX or something like this. And so it was, it was actually a puff piece, right? Or, or a podcast, a show, let's say. The reason we're having so-and-so on a show is because

Starting point is 00:39:23 they have paid to be on the show, something like that. And so- Disclosed or undisclosed. Disclosed or undisclosed. If it is disclosed, like that's one business model, as long you're extremely explicit about it. I agree, but even then it can become kind of a slippery slope, right? Of like, you're disclosing it. But like, so we have never done paid content pieces. We always segment our sponsors as like, hey, this is a sponsor. Like, it's very clear when bankless runs an ad.

Starting point is 00:39:51 Like, these are advertisers. Anyway, it's not perfect, right? But it is a way to put some firewalls in our media entity so that we can't be purchased. by a Sandbank bin freed or an FTX. Right. And I think that becomes hard over time if, you know, maybe you're an established institution, your revenues down, your subscribers are down,

Starting point is 00:40:17 all of these things. There's mounting pressure. And so there can be external pressures that cause you to take sponsor funds that you wouldn't ordinarily take. Right. We've always tried to be very diligent on that and like make sure that that we're firewalled off from that

Starting point is 00:40:32 and we don't have that kind of risk. And I think other crypto media entities do that fairly well. So I guess that is how you buy media, though, right? You could pay for content, pay for a puff piece. You could donate to the right people. You can spend on sponsorship money with kind of the wink-wink, nudge, oh, you're going to cover us favorably if we spend on you, that sort of thing. Oh, I have plenty to talk about there.

Starting point is 00:41:02 and actually Balaji has plenty to talk about there because this Belaghi, I think, did a pretty good autopsy of the whole, like, confusion as to like, is the media, mainstream media paid off? Is it not what the hell is going on? So he put a thread together, which I want to read.

Starting point is 00:41:18 And then he also gets into some technical, some legal terms, which he says, like, if you lost money in FTX, you should be familiar with these, which I will go through. Ryan, you want to share Belagia's thread while I go through this?

Starting point is 00:41:31 Oh, yeah, I was just looking Here, let me share my screen. This is Belashi now. Yeah, okay. So Blasci says the net result of FTCS is that billions of dollars were stolen from crypto investors to give Democrat-aligned politicians, nonprofits, and journalists. This is why there may be no prosecution. So this brings us to kind of the punchline of the whole episode. Why isn't SBF in jail? Well, because he spent hundreds of millions of dollars on political organizations, PACs, nonprofits, and journalists.

Starting point is 00:41:58 Can I just pause? This is a stronger articulation of what you just said. part of the answer of why isn't SBF in jail is just because it's too soon. Like, we have to prove this case, just be arrested, like we have to have some probable cause before arresting all of these things. But Balashi's making the case that he may never go to jail. Right. In fact, there might never be prosecution here. So let's segment that out.

Starting point is 00:42:22 It's not that SBF isn't in jail now. It's that he might never face accountability for his actions. Right. So, yeah, go on. What does Belaji say? Yeah, so Blasji, of course, asked the question. So why is SBF so protected? In answers, he was basically Soros Jr., just with stolen customer money, and evidently bought

Starting point is 00:42:41 off entire media, non-profit, political, and regulatory establishments. The author of this article that Blasji is linking is, he says, a born rich journalist, so he knows Sam Bankman Fried's milieu, his, like, you know, comrades, if you will. The author of what? The article that he is citing in this tweet, right? here. Okay. And so the article says, the optics would look awful if SBF is giving away money to WizKid political projects just as millions of FTX customers lose their deposits. And then Belaghi says, the overall picture you get is of rat scurrying around now that SBS money has been cut off

Starting point is 00:43:21 and very much not wanting to defraud crypto investors to claw back those stolen funds. We'll get into what a clawback is in a second. And so Belaji continues and says, the stage is set for an absolutely insane zero-sum match. On one side, one million crypto investors robbed of 10 millions of dollars by SBF. On the other side, a network of dark money Democrats who will fight to keep as much of those stolen funds as possible. So this tension is one of the big answers to the question as to why SBF isn't arrested yet. And this is the juxtaposition, if you believe Bellagie, if you believe this angle of things, is that we have a bunch of people who would like their money back because it was stolen from them by SBF and crew.

Starting point is 00:44:03 And then there's a bunch of political organizations who now have a bunch of money and would like to stay in power and not give that money back because, you know, we need money to stay in power. And so Bellagia continues and says, the bankruptcy case may play out on social media. Crypto investors to get FTX funds back may hire lawyers like Irving Picard who clawed back 75 cents on a dollar for Madoff's victims, Bernie Madoff victims.

Starting point is 00:44:29 And so who would they claw the money back from? Of course, it's the groups that SBF funded. And so just continue a few more tweets here. The fundamental question is, when did SBF start stealing from customers and how much did he steal? And Ryan, like, throughout the reporting, there's pretty strong indications

Starting point is 00:44:46 that the fraud of FCX actually started all the way back in 2021. Because if you remember, Alameda Research posted a net loss of $3 billion dollars on their tax returns on 2021. Full year for crypto. Right.

Starting point is 00:45:02 And SBF started shooting from the hip with political donations before 2022, back in 2021. And so SBF was sending while his big hedge fund, Alamedo, was taking the fat L, he was still spending a ton of money on political donations, on nonprofits, on media entities. And so this fraud might go as far back as money being spent in. 2021. So that's crazy. And so Blasje says, this can only be answered by forensic accounting. So hopefully that is, you know, some forensic analysis that's going on right now. And so on his one more tweet,

Starting point is 00:45:40 yeah, one more tweet. He goes, the list of all the donations. Before this, David, it says the headline amount given to Democrat politicians is 37 million, but understates it. FDX Foundation alone was 190 million. Oh my God. That is getting to Soros-level donations here. Right, yeah. And so the next tweet, $69 million in political donations, mostly to Democrats, but also to some Republicans, $109 million to a foundation, that's the FTX,

Starting point is 00:46:09 $128 million to a political action committee. You know that political action committee? You know which one that is, Ryan? I'm sure it was protecting DFI freedoms. It was, it was, what was it? Shit, where it's my notes? It's, I can't remember the title. It's like, fright for freedom.

Starting point is 00:46:24 It's something, it's, two F's... Fight for Freed? It's his mom's super pack. Oh, cool. Yeah, so he sent 120... Throw a little nepotism in there. Exactly.

Starting point is 00:46:35 He sent $128 million to his mom's political action committee. Well, he's buying his parents' houses in the Bahamas. They're in on this too, right? Yeah. Uh-huh. Uh-huh. Wow. Right.

Starting point is 00:46:45 Okay. Okay. But one piece for this, David. Mm-hmm. What I wasn't aware of in going through Balaghi Suite is the clawback potential here. Yeah. Mind the gap was the PAC that was started by San Benckfried's money, which received $120 million. What does Mind the Gaps do?

Starting point is 00:47:07 Mind the Gap. Let me quickly Google. Protect people from like metro subways. Don't step out too far. Left wing super PAC dedicated to helping Democratic political candidates win elections. Okay. So it's also a political donation here. Yes.

Starting point is 00:47:23 Okay. The clawback piece is the part that's not. new to me. I didn't realize that that could be, this money could be clawed back, which maybe lend some credence, because I've always known, like, why is mainstream media now, once this guy's ship has sunk, why, rather than distancing themselves and condemning him and pretending like they are part of the group that's always hated SBF or always thought he was suspect, I would, I would anticipate that's the default reaction mainstream media, but Blasie saying it's maybe it's because they don't want their money to be clawed back. Exactly. Yeah. So if you actually scroll down a few more

Starting point is 00:47:54 tweets, Loggi titles this tweet, the crypto clawback. Anyone with money on FTCS may want to learn the following terms. Clawback, look back, fraudulent conveyance, unjust enrichment, avoidable preference. Now, right, I went ahead and did some Googling. So I've got some of these terms to find here.

Starting point is 00:48:10 So if anyone listening has lost money in FTCS and is curious as to what these means, here we go. Are you a lawyer now, David? I'm so, such a lawyer, armchair lawyer. Bankless is not legal advice. It's time to remind you. I'm just reading definitions here. clawback. The term clawback refers to any money or benefits that have been given out but are required to be returned due to special circumstances or events such as the monies having been received as a result of a financial crime. Wow, that seems relevant.

Starting point is 00:48:39 Fraudulent conveyance, the transfer of property for the express purpose of putting it beyond the reach of creditors, making creditors have to bring a lawsuit to the courts in order to void the transfer. So making it hard to get your clawback? Yes, exactly. Unjustly enrichment. When party A confers a benefit to party B without party B providing proper restitution, a.k.a. an unequal exchange of value. For example, the recipients of political donations from FTX who did not provide an equal and opposite return of value for those donations, therefore implying that the actual

Starting point is 00:49:14 compensation was political protection. Wait, wait, wait, wait. Isn't that all political donations? Isn't that what lobbyists do legally? Well, okay. It depends on definitions. All right. And then voidable preference.

Starting point is 00:49:26 When there is a transfer of assets to a creditor shortly before a debtor files for bankruptcy protection, recipient of these assets must return them to the bankruptcy estate. Basically, if you kind of withdrew from FTCS and were able to get your funds out or something like this, that would be voidable preference. Yep. So all of these things seem kind of bad if you got money from FTCX. Yeah. So if anyone is listening who got money from FTCS, you have to give it back. Probably, right?

Starting point is 00:49:58 They have to prove this in court. I guess you're trying to disprove it in court. Yeah, but if you're trying to disprove it that you have to give it back, who are you? Because that is credit. Like, that's customers money. You kind of suck, right? Yeah, you kind of suck. Yeah.

Starting point is 00:50:16 Well, somebody's got to take the L. Mm-hmm. Somebody does have to take the L. So maybe it should be depositors, then. That's what some of these donation recipients are probably going to argue in court. Yeah. Yeah. Okay, so I want to speed run through the rest of this show rhyme.

Starting point is 00:50:31 Okay, so $5 million donated to Joe Biden for the 2021 presidential campaign. Yes. 2020 midterm election cycle, $40 million donated to mostly Democratic politicians, making him the second largest financial backer after George Soros. Go on. He's also paid for a speaking opportunity to sit on stage with none other than Bill Clinton. Oh, Bill. But FTX U.S.

Starting point is 00:51:01 Hey, this is Tony Blair, too. Oh, Tony Blair, look at that, yeah. FtX U.S. also donated three quarters of a million dollars to Congressional Leadership Fund and $150,000 to the American Patriots Pact. These are Republican entities. right? According to a Bloomberg report, FTX donated $1 million to the Senate leadership fund, a super PAC associated with Senate Minority Leader Mitch McConnell, and it just goes on and on and on. I do want to shout out to Beto O'Rooke, who returned $1 million that was donated by SPF.

Starting point is 00:51:35 The money on October 11th, SBF sent Beto O'Rooke $1 million, but that $1 million was returned, not after FTX imploded, but before, because the contribution was unsolicited and the campaign's upcoming report would show that this $1 million donation was returned on November 4th. So I just want to do a tip of the hat to Beto O'RUK for returning...

Starting point is 00:52:02 O'Rourke, thank you, for returning $1 million because it didn't pass the sniff test. Well done. Wait, you could do that. If you're a politician, you can return money that you receive that looks shape. Yes, you can give money back. That seems counterproductive.

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Starting point is 00:55:06 I know you wanted to talk about this. And I've seen a lot of, you know, armchair, psychological profiles. I'm talking about like amphetamines playing a role, talking about the psyche of a sandbag retreat. I think, look, I guess the goal here in like, people are like, why do you even care about the psychology of this person? For me, it's just about, it's also about kind of looking for the early warning signs, seeing sort of the patterns.

Starting point is 00:55:33 so the crypto industry doesn't get duped again because this keeps happening. And I feel like it's even now, it's still happening people in crypto. Like there are other megalomaniac scammers that the crypto industry is still propping up, like even now. And so, yeah, what are your thoughts on kind of the psychology of this situation? What was SBF thinking? What's his profile? Yeah. So I remember that Crypto Grifters video that I made on that short video.

Starting point is 00:56:03 and I talked about like the common denominators behind all of the grifters of crypto. Like what, what draws them all together? And there are some elements of Sam Begman-Fried story that is very, very much the same as all of them. But there's also some unique ones, right? So like, let's see, did I put that tweet in there? No, I don't think I did. So like, Doquan, massively bombastic individual, clearly was like really stroking his ego while,

Starting point is 00:56:33 like the Luna price was going up through the roof. And he also had this like massive army of lunatics, self-described lunatics, that just like enabled the hell out of him. As in like he couldn't do anything wrong because any tweet that he would tweet would immediately get like 10,000 likes and a bunch of people just like piling on on whatever like thing that Doquan would produce. Right? Like this is the story of Daniel Sesta.

Starting point is 00:56:55 This is like the story of three hours capital. There's like these people in crypto that their ego is too, Like, it's too, like, when it gets big and inflated, they love it and they want more. And we saw this same sort of behavior with SBF, even though, like, it kind of threw us all for a loop because, like, here's this modest guy in, like, a sweaty t-shirt and new balances and cargo shorts. And he's plastering his image about effective altruism all over the world. And it was like, it was different from Thero's Capital. It was different from Doquan. It was different from Daniel Sessa.

Starting point is 00:57:29 But it was still, like, SBF, the character. SBF the ego was large. And some people definitely called SBF out, but it wasn't as obvious as Doquan, for example, right? Do you know, by the way, where I first saw this massive contrast between SBF and some of the others, is like when we had that conversation

Starting point is 00:57:50 after all of this unfolded with Jesse Powell and Cracken, another exchange founder, but incredibly understated. Yes. Like, he is not like traitor, God, savior of crypto persona. He's almost like kind of in the background. And there's such a contrast there between Jesse Powell and an SBF.

Starting point is 00:58:12 But yeah, go on. So there's an article I found that I actually did not see circulate on crypto Twitter while I was making this agenda. Ryan, did you know that FTX employed a therapist on staff for 32 hours a week just for coaching services to FTX employees? I didn't. I had heard this. Could this therapist prescribe medication as well? I believe they could, or if this is someone else. So if you're a therapist, you can prescribe very limited medication. It's a psychiatrist that can prescribe medication. And this person is not a psychiatrist. This person is not a psychiatrist. They were just a therapist.

Starting point is 00:58:49 Okay. And so there's this quote from the article that I'll read. And if you think you're screen sharing, Ryan, you're not. I can't open it. I don't have the news. New York Times. Oh, that's right. Okay. So, sad. And so in this article, so the therapist was, first off, very surprised as to the events

Starting point is 00:59:08 that took place. Really? When people said that, like, oh, yeah, SBF is like this sociopath who has zero empathy for anyone. That was a surprise to him. And so, like, while it would be, like, super easy to be, like, SBF is this, like, insane character, and, like, we all saw it coming, and, like, he was just, it was blah, blah, blah, Well, it's actually not, it's much more nuanced.

Starting point is 00:59:30 The therapist was, he had a, when asking about the culture at FTX, Dr. Lennar is his name. Let's see, what's the full name? I can't remember. Dr. Lennar says, it was a very tame place. The higher-ups, this was also asking about, like, the perhaps, like, orgies that were going on, if you heard those rumors. Dr. Lender said, it was a very tame place F-TX was.

Starting point is 00:59:53 The higher-ups, they mostly played chess and board games. There was no partying. they were under-sexed, if anything, that's a direct quote. You know, those people really felt like it was a family, said the doctor. I think that's why this is so devastating for all of us for this to be over, citing about kind of the culture at FTX that was like very much a family thing. But also, if you cross-reference that with a few other things, FTCS employees lived in a, it lived in a palatial.

Starting point is 01:00:20 What is that word? Platial. Palatial group house. Yep, yeah. A platial group house. Several of them. used to be in romantic relationships with one another. And of course, this is where SBF had rumored to be dating Caroline Ellison, the CEO.

Starting point is 01:00:37 Right. Okay, so group housing, they all dated each other. And then also, of course, there is just the rampant use of amphetamines, which has come out post-FTX collapse, that the leadership totally encouraged employees to take any sort of amphetamine. They had intimate knowledge of, well, this amphetamine does this to you, you want to do this, this amphetamine does that to you if you want to do that. Okay, so we have, we have, we have SBF and in Caroline, and they're living together. There's like group dating

Starting point is 01:01:07 going on. They are spending all of their time together. It's starting to sound kind of like a cult. So this is when group think takes over. And this is when like the same, what I was talking to with like the frog army that was enabling Doe Kwan. Well, this group of people just enabled themselves. And they were on like, you saw Sam Bankman-Fried when we had him on with Eric Voorhees. And then there There was like 17 other interviews where the guy is literally vibrating. And so if you're taking too much amphetamines, you cannot actually come to terms with what reality is. And so this is probably part of one of the big reasons why FTCS got as crazy as it was.

Starting point is 01:01:43 It's drug use, dude. Like, it's insane. And so there was this picture, I think it was like autism capital on Twitter, which I know is an interesting Twitter handle name, that found this one drug. called S-ROM or something. M-S-M-S-M-S-M. M-S-M.

Starting point is 01:02:01 How do you spell that? M-S-A-M. Yeah, S-A-M. Yeah, it's a combination of M and Sam is kind of the name. It's because the creator of this named it after his children. Wow. Well, the fact that it's Sam is in there is pretty interesting. So the listed, what do you call it, side effects of this thing is like risk-taking

Starting point is 01:02:24 and gambling behavior. And like basically everything that you like like you would put into like a fraudulent company that is like a big, a gigantic. Well, it probably exacerbated all of this. I think what's interesting about what you just said, though, is there is kind of this character caricature afterwards of clear sociopath, clear psychopath. It's interesting. If this, if you could believe what this therapist is saying, and he's not in himself being kind of, yeah, I guess, delusional about it. Just therapist didn't think so. Yeah.

Starting point is 01:02:56 Therapists is very interesting, right? Like, so either he was very good at fooling a large number of people, or maybe the portrait of him being sort of pure sociopath, psychopath, psychopath is not accurate. I'm not sure. I know which which would be more interesting for Hollywood to cover is definitely the like drug, drug orgy kind of line of thought. So maybe that's what we'll see coming out of there. Yeah. You wanted me to share this tweet?

Starting point is 01:03:26 Yeah, so here's the Autism Capital tweet that identified the M-Sim, like, a rapper on Sam's desk. A drug normally used to treat depression or Parkinson's off-label for its alertness and focus benefits. So I can actually tap into some of my psychology background. So Parkinson's and depression is like a lack of dopamine. And so dopamine is highly associated with, like, attention and focus and also reward-seeking behavior. Parkinson's just happens to be a lack of dopamine. So if you increase your dopamine, like your Parkinson's systems go away. And so this is why when some of the things that are likely to happen, side effects, thank you is the word I'm going for,

Starting point is 01:04:09 side effects is like impulse control because if you have this system that is tinkering with your reward pathways, you can't control your impulses. And so literally on the side, on the side, like the warnings of this drug are the side effects of unconsored. controlled spending of money, binge eating, remember how SPF gained a ton of weight in the last year, and other intense urges, right? And so all of these things are like adjacent to so many of the conversations that have been going on. And so like this is a story of like a kid without any like oversight, no parents in the room, enabled a bunch of his friends, didn't really think to have any sort of like controls over the funds of FTX, put a bunch of like-minded friends

Starting point is 01:04:55 in the same room, they all live together, they all started using amphetamines to be high performers, and eventually it just got too much. It was just like one gigantic crescendo, and eventually it blew up. What's interesting about all of this is that's probably the legal defense I would use if I'm Oh, I do not think that as a legal defense. I don't know, man. It was the drugs. They made me crazy. It's a side effect. Look at all of this. I don't know. I mean, which brings us to, I guess, kind of the final thought for this episode. And the question we started with is SBF going to jail? Why is he not already in jail? So what do you think about this? All the fact patterns considered. So we've got somebody who's clearly illegal activity, certainly unethical activity,

Starting point is 01:05:44 ripping off millions of people, billions of dollars, you know, give a huge black eye to the industry. It caused, I don't know how many crypto banks to enter Chapter 11, blockfied just earlier this week, entered Chapter 11 going bankrupt from this, destroyed lives. I wouldn't be surprised if there was personal injury in some destroyed lives as a result of this. It caused a lot of harm and pain to a lot of people, not in jail, maybe getting softball treatment from some in mainstream media as a result of what? What are the motivations here? Political donations, something else, like wanting to prevent clawbacks, that's Blasji's theory anyway. And then we've got like kind of a psychological, I guess, profile starting to emerge here.

Starting point is 01:06:28 How do you think this ends? Does SBF actually go to jail? I mean, I don't. I'm not an expert in this particular matter. I'm like the odds of whether he ends in jail or not. I think the thought that I do have is I know you and I are both big fans of Ray Dalio's book about the changing world orders. And what did what did Ray Dalio do to write this book?

Starting point is 01:06:47 he went back in time to look at when empires rise and fall and why do they rise and fall. And there was a part, I think even in his earlier book, which talked about the fall of the Roman Empire. And he said that people were aware of the decline of the Roman Empire before it collapsed. Like people saw the writing on the walls. And one of the big writings on the walls were like people just started to become blatantly corrupt. And they stopped caring about public opinion. Instead of doing things behind closed doors, they just did it. out in the open.

Starting point is 01:07:19 And that was like, one of the last symptoms of like a falling empire is like, just total corruption. Total, total blatant corruption and no one cares. And that's like the last thing that happens before everything breaks down. And like, every time I see like Nancy Pelosi making public trades about laws that she's about to enact,

Starting point is 01:07:36 that's what I think of. And now when I see SBF sending out hundreds of millions of dollars to political organizations and the political organizations are like, well, we don't want to give it back because we want to stay in power, which is basically just like giving a thumbs up to fraud saying hey thanks for the fraud because you gave us a hundred million dollars i'm thinking the same thing man just the end stage late late stage empire debt cycle late stage empire problem we've got corruption in the system yeah so i i think you'd say that if sbf is not held to account not prosecuted for this right i mean

Starting point is 01:08:12 on the flip side of this all right um uh elizabeth holmes there and us founder just went to jail for 11 years. Did she donate any money to political organizations? I don't know. I guess it's probably too early to call at some level. But if this turns out to be a case where we get no prosecution, and we have people like Alex Perzsef, who let me just remind everyone listening right now,

Starting point is 01:08:36 is a developer of open source privacy tools in crypto for Ethereum, developed a smart contract called Tornado Cash, is now in jail, has been in jail for three months, is going to be in jail for at least another three months, was brought to jail without charges, actually confiscated his material possessions. They went and they repoed his car, David, took his personal property. What's his crime? Open source privacy tools for the world.

Starting point is 01:09:05 They repoed his car, and SBF has 19 properties in the Bahamas. Let's see where it all falls out. I'm a little hesitant right now because we don't know what's going to happen yet. The legal system does take time. Let's put that out there. But if in six months time, a year's time, two years' time, we have someone who is so wealthy, is so well connected, has given to the right politicians,

Starting point is 01:09:36 and let's call it what it is, bribe the right people, such that this individual faces no consequences for their, for their actions, this is late-stage empire. This is blatant corruption. And I think we've already seen a number of those cases, right, goes back to kind of Epstein, didn't kill himself, type stuff. Like, it's another tremor, I guess. Here's the thing, though, David. The extra insidious part about this is the industry he did this in is crypto, right? And now so we get to the end of this and it feels how in the world are we supposed to say you and I a technology that we believe in protocols not people code not kings right how are we supposed to now defend crypto and say oh actually

Starting point is 01:10:27 crypto is the way out of this if you're taking a surface level you're telling me crypto is the way out of this right no crypto is the way crypto enabled this yeah crypto is the way SBF stole all of that money And you're telling me crypto's the way out? You're telling me protocols can solve this. You're going to say, look, it's nuanced. This was another banker that was like entering crypto and he had custody of your keys. Like if you don't give up your private keys, you know, then you become the bank. You don't have to trust this other individual.

Starting point is 01:10:55 And so, yeah, actually crypto's the way out. That falls on death, deaf ears right now, which is why I'm so infuriated in this particular case. Because, man, how many years of, like, how many years have we been doing this podcast, bankless? to people how to take their private keys, go bankless, decentralized finance of the way out. We don't have to trust third parties like San Begrat, and now here we are in crypto in the same. So I don't even feel like we're in a position to say,

Starting point is 01:11:22 oh, in all those problems that you just describe, or some of those problems, a subset of those problems with late-stage empire, late-stage capitalism, all these things, and crypto is the way out. You have the corruption problems you have. Well, we need to create code that is not corruptible. It's uncorptible. like decentralization, what is it?

Starting point is 01:11:40 It's corruption resistance technology. That's what it is, the bottom line. It's really hard to make the case for crypto at this point. Yeah. So what do we do with that? People just like conflate these things. But I will take another leaf out of the pocket of on the Brink podcast where Matt was Matt Walsh was talking about this exact point where people would report,

Starting point is 01:12:00 New York Times, mainstream media would report on the collapse of FtX. And they would be like, their reaction would be like, oh, it's so confusing. there's like these crypto things and like there's these tokens and like I'm just really confused about it. And Matt responded like, it's not that confusing. He stole $10 billion. Like it wasn't crypto. It was what caused the collapse of FTCs? A lack of regulation, a lack of oversight.

Starting point is 01:12:28 And the fact that, again, the SEC pushed all this stuff offshore because the Gary Gensler's of the world are like effing up their jobs. And so like, yes. It's, it's say, oh, DFI fixes this is like such an old thing to say. But at the end of the day, it's just like, that is the truth. I'm a fundamental believer that the truth always comes out because hiding the truth is always harder than fabricating the truth. Owing their own private keys would have fixed this. Yeah.

Starting point is 01:12:58 You can't steal your money if he doesn't have your crypto, right? So this is a harsh way to learn it. But that's why maybe he's not in jail. We'll have to see where this goes. from here. Anything else you want to say, David? I had fun putting this agenda together. Thanks for doing this, man. Yeah. I mean, is this what?

Starting point is 01:13:16 I'd love to hear from the chat. We usually reserve this show slot for guests, but lately we felt that actually it's just better to just talk about the updated news over the last seven days. So I'd love to hear from the chat what kind of content. Because at some point, we're not going to want to talk about

Starting point is 01:13:32 FTCS. At some point we're going to want to go back to regular scheduled programming of bankless stuff. I would love to hear from the chat. what you guys want us to talk about. I think we're getting close to that, David. I feel like this may take a little bit longer to heal, but I can't wait to go back to talking about, like, projects that are building in the space again

Starting point is 01:13:52 and get back to this kind of drama. Yeah, dude, I can't wait to, honestly, 2023 starts. I can't wait in crypto anyway to leave 2022 behind us. And like, let's start rebuilding this thing right. Yeah. All right, guys, we appreciate. You appreciate you tuning in. As always, I got to say, none of this has been financial advice,

Starting point is 01:14:12 nor legal advice, nor journalist advice. I don't know. And I'm also not a psychologist. Yeah, David's also not a psychologist. No medical advice here either. As you know, we say this at the end of every show. ETH is risky. Cryptos risky. So is Bitcoin. So is DFI. So are centralized exchanges. For sure, you could lose what you put in. But we're headed west. This is the frontier. It's not for everyone. But thanks for joining us on the bank mystery.

Bankless - Why Isn't Sam Bankman-Fried in Jail?

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