The Chaser Report - How Not To Steal Eight Billion Dollars

Episode Date: November 5, 2023

Dom and Charles tell the harrowing tale of an American white guy from a privileged background, facing the consequences of his actions. Hosted on Acast. See acast.com/privacy for more information.

The Chaser Report is recorded on Gatigal Land. Striving for mediocrity in a world of excellence, this is The Chaser Report. Hello and welcome to The Chaser Report with Dom and Charles. Hello, Charles. And Dom, last Friday, huge news in the world of crypto. It's worth something again? No, no, no, no. Sam Bankman-Fried.

Oh, Sam Bankman-Fried. Who was the head of FTX. It was the second biggest crypto firm in the world. pronounced fucked, I think, isn't it? Yeah. We're calling it FTX, but I think, yeah, correct, pronunciation is it. Ficked. Fuchs.

Ficked. Ficts. Yeah. So he'd been on trial for the small crime of stealing $8 billion. I mean, is stealing the word to use or is reinvesting in his customer's best interest, it's a better way to put it? Well, that is how his defence team essentially put it. But he was convicted.

Oh, okay. So we can say he's definitely a thief. Yes. Right. So he's convicted of stealing $8 billion, which is quite a lot of money. It's amazing. Hats off to the guy. That's a lot of money to steal.

And look, I want to go through, first of all, all the things that he did right. Oh, that's good. That's useful for her lessons. Yeah. And then all the things that he probably could have done a little bit better, you know, in terms of stealing. That's good, yeah. But then after that, Dom, I want to pose the question to you, which is, what would you do if you stole $8 billion? Let's get into that after this.

First of all, let's go through the things that he did right. Okay. First one is he sponsored a lot of cricket. Yes, he did. He's so nice of him. It was just like 18 months ago that FDX started getting into real trouble. It must have been about beginning of 2021. No, 2022, it was.

And he was sponsoring the Ashes. Like the FTX was one of the key sponsors in the Ashes. What an... apt metaphor for what was about to happen to his business. And literally, it was during the Sydney test that his company started crumbling around him. I think he fled the Bahamas at that point. Or it was holed up in the Bahamas for a few months. That's unusual because generally one flees to the Bahamas.

Starting in the Bahamas and then committing your crimes is an unusual progression. Yeah, and it wasn't until November the actual cricket, the ICC, came and went, okay, these people are clearly just crooks, we should stop taking their money. And it was during the World Cup, like the T20 World Cup at the end of last year, that they went, OK, well, we've taken all these money, but we're not going to put his logo on the finals. Right. So they took the money, they presumably they kept the money, rather than returning it to the investors. But we wouldn't want cricket to be embarrassed by the association with FTX.

That very ethical, entirely racism-free game, yeah. So that was probably the best thing he did. Yeah, thank you, Sam. The other really good thing that he did, and I think if you were in the process of stealing $8 billion, which I think we can now say for certain is what was going on. Oh, yes, absolutely. What you should do is you should grease the wheels of those in power. Very sensible.

And he had this strange strategy of advertising the fact that he was giving a lot of money to Democrats and often quite progressive Democrats in the US, and then hide the fact that he was giving pretty much an equal amount of money to Republican politicians as well. And it added up to about $100 million in 2021 and 2022 that he gave. Yeah, the midterms was 22. Yeah. And he gave a huge amount of money in the lead up to that.

Well, that would have been embarrassing for Republicans, Charles. Because as you know, I mean, Stop the Steel has been such a big mantra of theirs talking about the election in 2020. And Sam Backman Freed, he was not on board with Stop the Steel. Yeah, he was not his thing. That was not a slogan that he could get on board with. And you'd think. Because a lot of what he was trying to sort of get done in Washington was the regulation of

crypto finance. Now, that may, for somebody who breaks the law, that might be seen as a sort of silly thing to do, but if you're wanting to commit a serious crime, one way to get away with it is to essentially write some laws that make what you've done retrospectively legal and just part of the process. What a good idea. Because I guess, Charles, if you think about it, all the crypto bros assertion, they started operating was, this is, look, it's a brand new form of money. It's not like

old money. This is a new thing. None of the rules apply. It's all free on the internet. You can't regulate us. Whereas I believe the SEC isn't it, the regulator in the US, thought, well, actually, no, you're taking lots of money from US citizens in return for a service involving finance. Yes. Are you potentially a bank? And the people who gave their money to FTCX found out that no. No. FTCS was not a bank. And they didn't have, in particular, they didn't have like those gold bullion deposits, which was designed to, you know, shore up the bank. But that was the question being asked.

So buying both political parties, I suppose, is one way to try and make sure that you don't have to be regulated. So they are the things that he did right. The things that he did wrong, and, you know, there's probably quite a long list that he can point to. But the first one I feel is that he almost immediately distanced himself from the other people, like he's co-conspirators. So it wasn't just him doing the stealing.

There were three other people involved. There was his on and off girlfriend. Slash the woman who ran the arm's length was Alamator Research. Alameda Research, which was the hedge fund arm of FTX. And what we've discussed on previous podcasts is the way the whole theft worked was they set up at arm's length, even though they were in bed together. They were arm's length in bed. You can be at arm's length.

We're at arm's length now, Charles. We're sitting quite close to each other. But I mean, my, your shoulders about an arm's distance. So, if I was to, you know, run the hedge fund arm of the chaser, and you were to run the chaser arm, then we'd be completely... At arm's length. Yeah, at arm's length, we'll be doing the job. And so the point being that the way it worked was they were completely separate entities

and Alameda just on its own independently made the decision to keep funneling money into FTCS and essentially lend money to FDX, which it then was able to... Embezzle. Embezzle, yes, exactly right. Almost immediately, Sam Bangman-Fried started leaking to journalists, things like internal chat logs, and I think even his girlfriend's diary he gave to a wide journalist. And that meant that, like, literally, I think it was the day

that she discovered that he'd leaked the diary to the wide journalist, that she went straight to the prosecutor's office in New York and went, you know what, I'm willing to do a deal. So the thing is, if you ever want to steal eight, billion dollars. Don't betray the people who know how you did it. I mean, I see what Sam Backman-Fried was thinking, Charles, because when you love someone, you want to be with them all the time. You don't want to be apart from them. Yes. And so when you're going down for potentially hundreds of years of jail time, you want to make sure they're implicated so that you'll be doing

time together. Maybe not in the same prison or certainly not the same cell, but at least spiritually you'll know that the two of you are both caged birds. You're in it together. You're in it together They're just not literally. But how does that apply to the other two people he threw under the bus, which... Well, didn't they have orgies and do partner swapping? Oh, no, yeah, you're right. They were, what, a thruple or a fupple? Yes, no, you're right.

That is true. Yes. What's a four-person thruple? I'm going to call it a fupple. A forgy. A forgy? Okay. That sounds like an outdated phone technology.

Anyway, yeah. Anyway, so that were the mistakes, right? This is really good to know in terms of our own business. And then the final mistake that he made, which I think was probably possibly the worst mistake. stake of all. There seems to be some level of arrogance attached to this Sam Bankman-Fried guy. I mean, what are the odds that a guy that set up a crypto exchange? A bit of a douche. Bit of a pro. Yeah. And I don't think it helped that Michael Lewis, who wrote Lies Poker. Oh, and Moneyball. Great investigative journal. Yeah. Extraordinary.

Yeah. Followed him around, even before it started collapsing, and was writing essentially a hagiography about him. The book itself is called Infinite Man, Infinite. Oh, really? Infinite wisdom. I'm quite surprised. Michael Lewis is, you know, quite a savvy journalist. Oh, no, he only released it a few weeks ago. I loved Moneyball. I started reading it and it was unreadable because it's this hagiographic sort of look at, you know, the much misunderstood guy who stole $8 billion.

That's so bizarre. Yes, he's been totally, and he actually, in his press circuit, he sort of admitted, oh, yeah, I sort of got a bit caught up in... Reality distortion field. Yeah, that's right. But you know what this means, Charles? He must have had crypto with FTX. Yes.

Desimely trying to pump and dump. The crucial mistake is Sam Bankman-Fried decided to testify in his own trial. Now, the one thing that you do, if you're still $8 billion, that all lawyers will tell you is whatever you do, don't testify. Because it gives prosecutors the chance. So the prosecutors have to prove that you've done something. And if you don't say anything at all, then your lawyers are free. I'm not a lawyer, Don, but you've studied law.

I started law. I'm certainly not a lawyer. You know that this is true, right? Well, certainly in America. Your lawyers, it gives them farmer options to go, well, maybe he just stubbed his toe and accidentally pressed that button. Oh, $8 billion. Yeah, but don't forget as well, there's the Fifth Amendment in America, which means that there's

a protection against self-incrimination. So presumably, I don't want to make assumptions, but in the case of Sam Backman-Fried, I imagine opening his mouth would be self-incriminating. By the way, Michael Lewis's book I just checked, it's called Going Infinite. I presumably he didn't realize he was referring to the sentence at the time. that he named it. Yeah. So he spent the last few weeks testifying. I assumed, of course, that the jury would spend a week or two trying to figure out who was guilty, who was not. They took four and a half hours. I mean, I'm surprised it took that long. I reckon it was

five minutes and they went, let's just have some drinks. Yeah, that's right. But we're going to have to go back to our jobs and, you know, partners soon. We've got all this free food. Let's just make it look like we spent a long time on this. Because Charles, in the age of crypto, I mean, transactions happen in an instant, don't they? No, not in the age of Crypto. Not an FTAs. It takes really long for the blockchain to work. That's part of the problem. So 110 years he's facing in jail, they reckon. I do like that these days, sentences seem not to have any regard for human lifespan. Like, he's like, yeah, or should it be a thousand? He's a white-collar criminal, so he'll still get out in five. Let's be clear. Oh, the other real thing

that he did right, which I forgot to mention, is that both his parents are legal experts, financial legal experts. Oh, that's right. He's the kid of two sort of geniuses, isn't he? And his mom is an expert, a professor in legal ethics. Wow. Yes. Wow. And is this dad like a professor of irony? And I have read this chilling account that puts a very convincing argument that his parents are in fact fairly narcissistic alpha-style go-getters and that actually they professed that they're doing everything for Sam and everything. But actually, at the end of the day, they sort of have sunk him themselves. Well, I mean, he's a sunk cost at this point, isn't he?

They helped him do all this stealing. They got huge amounts of gifts. They got tens of millions of dollars worth of gifts out of him while he was in charge. And, Charles, I've always said, if you're a professor of legal ethics and millions of dollars drop into your lap from your son from some new business that they're running, don't ask questions. Take it on trust. I assume this is ethical.

Don't even say that. Just spend the money and enjoy it. And just assume that your lectures around the breakfast table have sunk in at some point. I want to get into what we would do with the 8 billion chiles in a few moments as we continue. The tale of Sam Bankman Fried, who has been a huge success in life as long as you take account of all the stealing. Yeah, I think that's right. I think we always place all these moral judgments around what he's a good life. Whereas, you know, what we should actually be doing is...

Let's find out after this. a report. Less news more often. I think the thing is, Charles, it's good to be remembered. And if you just started a crypto exchange that was briefly popular and then, because here's the thing that's funny about all this and there's many ironies, but part of the irony I presume is that in between Bankman Freed, funneling all this money out and having the consequences, crypto crashed massively, right? Yeah. So ironically, okay, he stole all this money from his investors, but if he just left it in crypto, they would have lost most of their money anyway, Bitcoin has bounced back a bit lately.

Yeah. But in some senses, if you were able to pay them back, they'd probably say thank you. It's a favour, taking our money out of crypto. Yeah, because what I never understand about any of these cases is why, if you'd set up a sort of business that had taken in, I think it was about $30 billion worth of investors' funds and you had them under management. And presumably, there were completely legal ways to just make a good clip out of that. Yeah. Even 1% you're doing fine. Tell everyone, oh, we're taking 1%, then it's all above board and legal.

Why you would bother going to the lengths of then stealing some more on top of that? Well, isn't the thing, isn't the thing, it's basically, you get to the point where you think it's an infinite cookie jar, and you just assume there'll always be more money, so doesn't know how much you spend, because you're so brilliant that you just kept getting more. And that is certainly true. In the dying days of FDX, where it was clear it was about to collapse, He was begging his investors to give him 24 more hours. He was talking to the feds and saying, look, I've just got to line up some more money from

the Saudis to plug that gap and it'll all be fine. And there is a sort of truth to that in terms of modern financial management, which is that if you can keep the scheme going by finding a greater full and pay back your original people, then the authorities really don't look too hard at what you're doing. I mean, Jared Kushner, right, did that deal. deal with Qatar and managed to sort of keep, it's like a hamster in a wheel. You kind of keep the wheel spinning a bit longer. And in fact, if I remember correctly, SBF was going to do a deal with Binance, which is the biggest crypto exchange. They were going to bail him out. And then

they took a quick look at the financials, we're like, holy shit, we're not going near that. Well, one of the problems is that SBF had paid Binance in these tokens that Alameda research had created. Right. And so... I think they would have been wise to that. And that was part of the trick on the balance sheet was like, if we value these coins, which are completely illiquid because we own all the coins, we value them at $8 billion. And therefore, we're not broke because we've got these $8 billion worth of shiny beads that we invest in. And I've been saying for years, Charles, that the chaser is a very, worth hundreds of

millions of dollars because of all the chaser coin that we made. Yes, yes. Which each one of them is worth actually $1 trillion now. I've just revalued them during the course of this podcast. But this is how it works. This is the bizarre thing about the crypto world is it's just make-believe. Yes. All this stuff.

It's a make-believe Ponzi scheme. It's definitely a Ponzi scheme. Yes. And as we covered last week, AI is about to collapse the whole thing anyway. Bernie Madoff is going to seem like this tiny little two-bit operator in comparison to the crypto scheme. Because the thing about Bernie Madoff's of this world is he wasn't intending. Like, yes, okay, we now say he was stealing and he was. But he just thought there'd always be more money.

This is a thing. So I'm looking forward to, I mean, we talk a lot about the Turing test for whether a computer has artificial intelligence, whether it's sentient, can it pass for a human. I'm looking forward to, we can call it the SBF test, perhaps, when an artificial intelligence is able to, of its own accord, create a Ponzi scheme and defraud humans. Yes. Then we'll know that a landmark has been reached. Yes. AI technology, without even any humans being greedy, just because it realizes, it just wants, I don't know, more chaser coins or whatever it might be. It's been programmed to try and maximise.

Which makes me think, Charles, how have we not gotten our own AI going? Why haven't we gotten on the bleeding edge of this thing? Because it's a great way to... Oh, the AI. It was the AI that transferred all that money from our investors and we didn't even realise. I think part of it is that at its core, AI is fundamentally boring. Because it only...

You can't actually invent anything new. It can just reconfigure stuff that's been already put into it. Oh, okay. So what it would do, yeah, because this is what I've been kind of studying lately. I mean, AI serves up the most likely next word, as we said before. So what it would do is just brew up all the Ponzi schemes of the past. Yes, exactly. Maddof, SBF, everything else.

You know, the Chase's subscription scheme in the early 2000s, all those elements. It wouldn't actually come up with something original, but it would come up with an Uber version. But it would become up with a... Actually, Uber is probably a Ponzi scheme too. A well optimized version. It would be very optimized. So what would you do if you stole $8 billion? Bitcoin, obviously.

Put it all in big coin. That's a very good question. Because there's quite a lot of money to have had the power over. Yeah. It's crazy. How would you even spend that? Amazing fall from great. Well, it's sort of bizarre what he did spend it on.

It was things like they were renting a hotel room as their office slash orgy palace. And that presumably costs, what, $25,000 a week or something? Yeah. I mean, to be fair, you could probably buy a house in Sydney for $8 billion. Hey, just the one. No, but the other thing I was thinking was, at the going right, doesn't that get you one periscope of a nuclear submarine at billion dollars? Yeah, yeah, yeah.

Just the one periscope. But in reality, that's what, like 20% of your nucleus submarine, like that. Compared to what we're blowing on that scheme, it's nothing. It's nothing. It's nothing. Compared to scomo and elbow. But what would you, would you, maybe renewables or something, you put it into renewables?

I mean, if you wanted to invest it, yeah, I guess so. But what would you do, like, what would you do with it? What would you honestly do, like, I'm not asking as a joke. I'm asking is it, what would you actually do if you had $8 billion? Right here right now. I mean, I think I would find... Can I borrow some money? I think I'd find things that I really liked to invest in at a potential loss.

Like, first thing I'd do, in actuality, if I had $8 billion, I would recreate our comedy club. I would bring it back. Oh, wow. I would, day one, I would go, you know what, that was great. It was great. And it didn't even lose money at one point. Like, it was actually doing okay for a while there. Giant Dwarf, I'd bring back Giant Dwarf for sure

As a comedy theatre I'd buy Triple M. Oh, would you? Yeah, well, apparently it's not very much at the moment. Yeah, exactly, and just, you know, get rid of the... You'd just do a show, wouldn't you? Yeah, like, it was just like 9pm till 11pm Wednesdays and Thursdays.

You're like, Charles's Nightly Rambal. That'd be quite nice. That's a great idea. What else would you buy? I would either buy a Tesla or Tesla. I'm not sure which are the two. I'd buy a sport team. I think I'd love to buy a soccer team or something.

Yeah, okay, which one? Oh, you could buy any of them. You could buy Manchester United, couldn't you? You probably could actually for that. Yeah, but that wouldn't be a good investment. No. Arsenal's my team. I'd maybe try to buy them, but I could buy Sydney FC and make them good.

Would it be good actually owning the team that you go for? No, because you're not a spectator. All the fans that hate you. Then, yeah, you want to just be a bit separate from your team. You'd buy the rest of the teams and make them shit. Yeah, that would be. You know what you do? You know what would be the coolest thing to do

to basically buy art and like the whole of art. Like anyone making art, you would buy the art. Yes. And the amazing thing is it would probably actually pay for itself. Yes. Like over time, if every emerging artist, literally... You know what you're talking about?

It's basically a Ponzi scheme. Oh, yes. And you know the federal government has a thing called Art Bank that does this, right? It's actually one of the best things they've ever done. Oh, yeah. The federal government buys artwork from emerging artists, like new artists, who desperately need the money.

And so it's wonderful and it's good for their see that. They can say they're in the Art Bank collection. Federal Government buys them and then sits on them. There's a giant warehouse in kind of Redfern that has all this stuff, or Alexandria, I think, that has all this stuff. We should do an Art Bank heist. We should. It's a really cool warehouse.

So it's a really cool kind of office. But then they rent it out to big corporations. So if you're a giant corporation and you want to have like really great art in your office, you rent it from Art Bank. But then we keep owning it and it keeps getting worth more and more money. And eventually the really good ones end up in the National Gallery or wherever. And it accumulates lots of money. So it's actually, I think it's probably the best bit of public policy Australia has actually

ever had. So I'd do a private version of that. So there you go. Sam Baitman-Fried. Look, it's never a happy story when a crook goes to jail. Really? Oh, well, maybe it is actually, yeah. In this case, it is.

Well, I just, look, I do feel sorry for him a little bit, though, because if you look at the world, right, as a white guy from a privileged background in America, yes, what are the odds you'll have any consequences? I mean, you can. For your actions. You can literally overthrow American democracy, and nothing will happen. Nothing. In fact, you'll be neck in neck with Joe Biden in the polls, is what you'll be.

Consequences are, like people like you and me, Charles, we're allergic to consequences. They never happen. Yes. Do they? No, they don't. I mean, if you murder someone, maybe, maybe there's a chance. But just a bit of light fraud. Hire a good lawyer.

Just a bit of $8 billion fraud. Yes. Which goes to show we were never ambitious enough with the chase of Charles. Yes, we should have murdered more people. No, no, no. Oh, no, you mean, oh, you mean embezzled, right? So we didn't. Who knows?

A lot of stunts went down back in the day. Anyway, so I think, Charles, the aim to us is that our Ponzi scheme with the descriptions was too small. And look, if you are listening to this and you've got $8 billion, um, buy the chaser. Buy the chaser, yeah. And we'll keep running into the ground for you and just buy our shares. Our gear is from Road with part of the Icona class network. See, yeah.