The Chaser Report - Why The World's Fastest Billionaire is Facing Jail

Episode Date: October 5, 2023

Charles and Dom gleefully recount the fall of the crypto FTX empire. Also stick to the end for an exclusive announcement on Chaser's Christmas merch! Hosted on Acast. See acast.com/privacy for more information.

The Chaser Report is recorded on Gadigal Land. Striving for mediocrity in a world of excellence, this is The Chaser Report. Hello and welcome to The Chaser Report with Dom and Tom and some great news coming out of the US. Really? I haven't seen any great news coming out of the US. What's happened is Donald Trump gone to jail and I didn't notice? Yeah, well, all these things are happening. But I mean, Congress is collapsing. Trump's on trial in about four different places. But today, it's billionaires are having their comeuppance for once.

I don't believe you. That's not a thing that happens ever. Well, we'll find out how it's happening after this. Do you remember FTX? Yes, of course, the crypto exchange that was a total flaming disaster. Well, yeah, and they sponsored the cricket. They sponsored the Ashes Tour the beginning of the year. All the cricket was the FTX tour.

Was it real? I remember that. And ashes is what it ended up. becoming. And actually, I went to the cricket the same day that FDX went bankrupt. Wow. And like every single ad was FDX. Did someone come out during the tea break and just sort of wipe them all off?

So what happened was they were a very respectable, one of the bigger, they were the second biggest cryptocurrency exchanges in the world. Yeah, so the place you'd go to buy and sell cryptocurrencies, Bitcoin and so on. And as with all, very austere, respectable financial institutions, It was, of course, based in the Bahamas. Yes, absolutely, which is always a guarantee of quality and financial robustness. You know you're basically dealing with, I don't know, Lloyds of London or something. Yeah, especially as the whole operation seemed to have been run out of one big sort of apartment

like apartment mansion, like condo. Frat house, really. Yeah, with 10 of the senior executives of FDX, including the CEO, Sam Bankman-Fried, and his girlfriend, who was the CEO of Alameda Research, which was the hedge fund of FTX. Yeah, and they were jumping in and out of each other's beds and funneling money in and out of each other's businesses' accounts, if I recall. So just to sort of give you a broad perspective on this Sam Baitman Free,

he's now 31 years old, but, you know, back then he was about 30. And he was a very prodigious guy. Oh, everyone's talking about him as a sort of Steve Jobs of crypto, is this new genius coming up and just changing the world, to make things better, and celebrities flocked him, didn't they? Yes, that's right. I mean, yeah, he had the Matt Damon. I know, Matt Damon wasn't doing his ads.

He was somebody else. But he was, one of the things that he got was he was the fastest billionaire in the world. In history. In history. Not over 100 metres. Yeah. So literally, no one has ever become a billionaire faster than this guy went from nothing to billionaire.

And by the time, FTS collapsed, it was worth $32 billion. It was a huge company. And did he lose? the billion faster than he accumulated it in the first place? Was that he said an even better record for losing it all? Yes, because on the day that it was declared bankrupt, it was worth $32 billion, it went from $32 billion to zero in one day.

That's extraordinary. I know, amazing. Anyway, yeah, as you say, they're all living in this frat house, sleeping together, all that sort of stuff. But one of the crucial things that they knew, because they were lawyered up to the wazoo, they were a $32 billion financial services company,

was that it was crucial that any decision that FDX made about its investments and where it placed a cash and, you know, where it borrowed money from would not influence its hedge fund arm. Oh, yes. They call that Chinese walls, don't they? Yes. There is a sort of, you can't, it's crucial, it was just the law, right, that none of the decisions that Alameda research, that the hedge fund arm made,

was dictated by the needs of FDFTA. FTCX. So, you know, FDX needed extra cash, needed sort of, you know, because it was a growing trading. A growing pyramid scheme. Yeah, trying pyramid screen. But all the sort of relationships that they had were fine as long as they're at arm's length. Like if FDX went and said, oh, can I borrow a billion dollars from you, Alameda Research, then as long as Alameda Research went, kick the tyres and went, yeah, that's in our interests to do that. Right. Okay. Then that would be fine. That is the crucial part of the thing. And what Sandbank Fried has maintained since the day he was arrested, which was a couple of days after it went

bankrupt, he has said, look, this thing was lawyered up to the wazoo. We had lawyers everywhere. Everything we did was covered off by lawyers. There is no way my girlfriend did me a favour. Yes, exactly. Because when's that ever happened? Because we, you know, like, Chinese walls happen everywhere. Like, it would be like PWC or some sort of important consultancy, you know, taking

confidential information that they have guaranteed to be secret and then selling it to other clients. Yeah, just passing Australia. It'd be like Charles, the podcasting arm of what we do here at the Chaser, working in cahoots with the giant inflatable avocado selling sector. And based on the sales figure, that's never happened. That's never happened. If anything, we've talked them down, it can hurt the sales.

Proper Chinese walls exist because we've got integrity, right? And that term, by the way, it's probably racist. Chinese walls, look, whatever, but that's, That's what they say in business. Structural separation to make sure that there can't be collusion, just like in PWC. I think it's only racist if you don't believe in them. Well, I was confused because...

Because Chinese walls is supposed to mean a robust and clearly, you know, unbreakable wall. They're referring to the Great Wall of China, but domestically speaking, the walls tend to be a rice paper. Thin and flimsy. And you just fold them out of the way. Yeah, that's right. I think there might be an element of sarcasm.

could just be. So the whole point is that the government finds itself in a little bit of a tricky situation because it's got to be able to prove. Not just that, you know, yeah, sure they were sleeping together, but, you know, these sort of Chinese walls happen all the time. And if it's lowered up the wazoo, then maybe actually there is an argument to say, well, you know, Alameda research just went, okay, this is a growing FTX business. This is a, you know, one of the largest currency exchanges in the world. Why don't we lend them some money? That sounds like a really good investment, wouldn't you? Especially if they've been funneling money into your Alameda research in the first place. Yeah, exactly.

So the prosecution's in a little bit of a difficult situation, or so you would think, right? So the trial started a couple of days ago, and the government laid out their case on day one, which was that basically, by the time it collapsed, Sam Bankman-Fried and his girlfriend, a few other people, had stolen about $10 billion. Did they steal it, though, or did they make a pitch to Alameda research to say, look, independently, it might be in your interests to just give me a couple of bill. Yes. You know I'm good for it.

I'll pay you back. Be your best friend. It's a bit like in dumb and dumber when they discover that briefcase of cash. Oh, yeah. And then they go, look, we're not going to steal it because it's like a million dollars in this briefcase. What we'll do is we'll take the cash and we'll just write IOUs every time. Exactly. You know, because we're going to pay it back.

Yeah. Yeah, yeah. So that's the government's case. But the defense also outlined there. defense in their opening statement and they said look sam didn't defraud anyone this is a hindsight case this is this is something where okay everyone's wise in hindsight but actually until it collapsed nothing bad was happening it's just it's just the fact that it collapsed that makes you think that it you know like if it kept on going on and on and on no one would ever be the wiser that there was

this is the whole thing about pyramid schemes that they're only exposed when when you use the money is received from new customers and to basically give to yourself, you don't get caught until they want it back. Because they think they've got a crypto balance with you, whereas in fact, you've just taken their money. I think you should contact the defence and outline that to them, because that sounds like a perfect closing statement. I just remember, Charles, what the Chase's subscription business is like.

Oh, shut up. Which was that as long as in every, as long as in any given month we've got enough new subscribers to pay the printing bills, then there was a chance that the people who'd bought, I don't know, 10 issues, subscriptions from us, we actually get those subscriptions. Well, that did work. It did. It was a growth model. No one ever wanted a edition of the newspaper didn't get one, unfortunately. I remember this very respectable businesswoman who was helping us at the time. I won't mention her name. But she saw how we were doing that. And she was just so appalled by, she said, you've got to do accrual accounting. You've got to, because I had no concept that there was

something called the cruel account. You're like, well, here's new money. Let's use the new money to pay for that. It was just cash accounting, which is, you know, money comes in, money goes out. That's, anyway, the point is. We're very good at the money goes out, but let's find out exactly how this thing's going to land in a moment. The Chaser Report, more news, less often.

So they're the two sides of the case. One side is $10 billion has been taken from FTCX. Yeah. The other one is, no, no, no, no, because. it only became apparent once the music stopped. It's not a fraud until someone asked for their money back. I've got that tattooed on my chest. The point is that given that it was lowered up to the wazoo,

the government might not actually be able to prove that there was some intention to just automatically defraud by shifting money from FDX to Alameda, right? Yeah. What they need is they need some sort of piece of paper, some sort of smoking gun. Smoking gun. Yes.

That shows that there was human intent. that made this thing. But let's see there was a document where someone went, hey, I'm a bit short, you just give me $10 billion as a favour. As a favour. Promise I'll pay you back. And that would prove that it wasn't being in our mate's interest.

It's actually in the interest of FTC. But there is no piece of paper like that, because as Sam keeps on saying, everything was lawyered within an inch of its life, right? Like all the paperwork is like, oh yes, this is all arm's length decisions, right? Except there is a small, piece of code very deep within the FTX exchange system.

Right. So the actual software that they used to buy and sell crypto, yeah. That talks to the Alameda research computer that is completely separate. How did that get there? Right. It's a tiny piece of code. It's just like literally a few hundred numbers long, like when you turn into binary. And what it did was it basically meant that every time FTCS needed a bit more money,

Alameda would know that and adjust its portfolio so that it gave a bit more money to FTX. Oh, so they didn't ask, so there's no records of asking, but there's a sort of auto leveler. There's an auto leveler where Alameda researchers' entire portfolio is dictated by the needs of FDX, the exact thing that the government is trying to prove. Gosh, if only there was someone in the government who was able to actually look at the source code and discover things like that. a second, I think there might have been. Yeah, so, well, actually, no, the government's actually a bit luckier than that, which is this guy who was testifying on Thursday, Australian time,

Adam Yadidia, right? So essentially the moment FTX started going bankrupt, Adam submitted his resignation and immediately went to federal prosecutors, right? Right. And it's always, it's important, if you're ever in this situation, where your company has massively gone under at short notice, I just, you've got to be the first in the door, the prosecution. First in the door.

First in the door. Cut the deal. Yeah. And he, and he... Sorry, sick, I've just got to go and call, um, uh, sick about the chaser. So, um, so... Good luck, Charles! Oh dear.

Anyway, let me explain this because... All right, I'm back. I've got a meeting with him later. Okay, Adam Yadidia, obviously was feeling a little guilty. And, and what he said, uh, on Thursday, our time in the trial was that he, I made, I make, may have unwittingly written code that contributed to a crime. That's why him. Oh, no.

And he, because he's appearing as a witness under an immunity order to some reason. Lucky man. But he went, oh, wait a minute. That code that I wrote that informs FDX thing, the one that Sam, I remember telling me don't mention this to anyone, might actually be a bit of Dodge Fest. That's also, if you do work for a company. and you're gradually realizing it's a criminal endeavor. When they say don't mention this thing that you did to anybody,

possibly a red flag. That's right. So that's where it's at. It's only day two of what is likely to be a six-week trial. Wow. So I'm sure there's going to be a lot more juicy details about billionaires getting their comeuppance here. But the point is that this guy who was worth billions of dollars

and presumably still is worth $10 billion, seeing as that money is still missing. He's looking like he's going to spend the rest of his life in jail. He's 31. Well, except that he's probably written some sort of piece of code that spreads the sentence amongst everyone else who have worked for FTCS or indeed invested in FTCS. Maybe they've made the jail out of Chinese walls.

He's probably hoping they have at this point. So the bottom line is don't buy crypto. And in particular, it's been, hasn't it been so satisfying just seeing NFTs absolutely go down the toilet? it in recent years because they looked like they really should and there was a brief period when I was like you got to buy a no you're missing out on the next big thing thank fuck the good thing about nfts just to have a little bit of an afterthought with that is that they've actually started unwinding some of those trades and realized that they were literally just

part of a massive money laundering scheme yeah and that the whole thing was very intentionally designed to blow up god why didn't we get in on it you know what though charles if i can buy an NFT of the bit of code that equalized the two bank accounts, I would definitely buy that because that's going to be worth a lot one of these days. I guess I'd say that if anyone wants to buy an NFT of an avocado inflatable

pool toy, all you need to do is just contact Charles here at the Chaser. And I think you could be honest, something really big. These things are going to take off. You know, we've actually sold out of those bull toys. I know you mock me. Yeah, that mocking you is the way we sold them. It's right. It's quite strategic.

And in actual fact, somebody contacted me and said, does this really truly reflect your values selling cheap shit from China? And I thought about it and I went, actually, no, it doesn't. So this Christmas, we're not selling much at all. Hang on, Charles. If I recall what you were doing before, isn't it true that you were selling very expensive shit? You marked it up quite a lot.

Okay, so we're not doing disposable novelty items this Christmas. Well... Oh, the chaser annual. That's pretty disposable. Yeah, we're doing the chaser annual. We've got the bad pair. we've got um i mean i do have a few things from china but they're they're sort of more high quality stuff i bought these wonderful lapel pin i got up made a whole lot of lapel pins which are tiny i'll show

i i can go and do you do you want me to go and get you one a lapel pin okay just hold on one second i'll be back in a second oh you knew there'd be a marketing pitch at the end he's literally going off now to get lapel pins they're really cool he says how cool can a lapel pin possibly be okay Charles is returning with a lapel pin. They're tiny. Yeah. And you really got to... Oh, you've got to go in nice.

So, you know how people kind of ostentatiously wear the Order of Australia badge? Yes, exactly. Like your sister, who's a member of the Order of Australia, as we know. So your version of this is a small... It's about centimetre and a half white, I'd say. Yep. And it says, oh, fuck Murdoch. Yep, fuck Murdoch.

So you've got to get in nice and close. Yeah, my aim is to get Kevin Rudd and... and Malcolm Turnbull wearing them and then it'll just go viral. That's not a bad idea. Maybe get Lachlam Murdoch. James Murdoch? Actually, James Murdoch.

You should actually send him one. Send him one right in a letter. Anyway, so we're going to sell those. See, they're cool. They're really cool. And also, we've got dog band-endis this year. He's always hoping that one of these things is going to make enough money to pay his bills.

All right, our gear is from Road with part of the Iconclothes network. Thank you for listening this far. If you have, please jump on Apple Podcasting. give us a five-star review and then make fun of us. We love both those elements, please, not just the one. See ya.