The Pomp Podcast - #1192 Brady Dale | Reporter Exposes SBF’s Secrets

Episode Date: April 27, 2023

Brady Dale is a journalist at Axios, and the author of a brand new book "SBF: How The FTX Bankruptcy Unwound Crypto's Very Bad Good Guy." In this conversation, we talk about Sam Bankman-Fried, collapse of FTX, Three Arrows Capital, Terra Luna, and many other things that led up the situation we are in today. I really enjoyed talking to Brady, because he has done the work through interviewing people and doing the research. ======================= Pomp writes a daily letter to over 235,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. We have no advertisers on this podcast, so it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Brady Dale is a journalist at Axios and also the author of a brand new book titled SBF,

How the FTX Bankruptcy Unwound Crypto's Very Bad Good Guy. In this conversation, we talk about Sam Bankman-Fried, the collapse of FTX, Three Arrows Capital, Terra Luna, and many of the things that led up to many of these situations. I really enjoyed talking to Brady because he's done the work. He's gone. He's interviewed people. He's done the research, and he had tons of insights around that story. Even me, who lived through all of these different moments, I learned a lot in reading the book

and in talking to Brady. So here is my conversation with Brady Dale. This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales. Using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify.

Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Alright, guys.

Bang, bang. I'm super excited to talk to Brady. He's got a brand new book out called SBF, How the FTX Bankruptcy Unwound Crypto's Very Bad Good Guy. I've read the whole thing. Here's my proof of work. I got all my little notes and highlights, etc. Brady, I thought a great place to start is why write this book?

Is it just the biggest story in finance, biggest story in crypto? Was it just you had a front row seat? Like what drove you to write this and do it so quickly? Well, I mean, to be perfectly honest, it was Wiley's idea, the publisher. They wanted to do it. They thought it made sense to get a book out quickly on this topic. And they sought me out and asked me to do it. And I've always wanted to do books.

But I think it's a great story. In fact, a part of the backstory of it is I had already been thinking about a book that was related to Sam anyway. I had a book proposal I had written that hadn't gone anywhere for the Sushi Swap specific story, which is sort of I view as Sam's kind of debut as a leader in the crypto world. And so I had already done a ton of work on that. So that whole kind of middle part of the book that covers that was like largely ready. So I'd already been thinking about him as a character. And then when Wiley was like, we think this would be a good story to do.

I was like, obviously it would be a good story to do. So I agreed to do it. All right. So in the book, you turn the first draft into Wiley and December 30th, 2022. And then you basically get a chance to interview Sam. And you've got a quote in the book that I thought was just fascinating. He basically says, in terms of facing the future, I think I'm just going to tell the truth and see what happens.

And I certainly don't agree with the public narrative, but that's not for me to decide at the end of the day. I think like my biggest concern is that the incredibly toxic media environment will mean that there's no way for me to have a fair trial and that no matter what happens, there will be too much political and public pressure to find me guilty and that it won't matter what really happened. You've talked to him, you've done all the work, all this stuff. Does the truth matter in this story or is there already this kind of preconceived, hey, they broke the law and they're all going to get in trouble? like how do you kind of get out of it because outside of law enforcement you probably are one of the people who've done the most work on what exactly has happened here in order to be able to write a book about it yeah i think the truth does matter and you know one thing that's a bummer

about doing a book is you can't hear the tone of his voice towards the end of that conversation but i found him to be defiant when we talked i think it was december 31st uh of last year um and one of the things, and I also quote him in saying this elsewhere in the book, is he says, you know, he didn't really think the government had real evidence against him, but as time has gone on, like particularly this additional charge that came out about the bribery in China, it does seem like they do have a decent amount of evidence. And, you know, I'll be curious. I don't think he's going to take a plea at some point, but I think one of the things that really struck me is he thought he had a case but it does seem as time goes on that there's more and more evidence that

they really did do some pretty bad things so i think the truth does matter but i do think the truth is probably going to be on the side of the courts but i mean you know for law enforcement but we'll see so in the book you highlight this idea of like basically sam appears to have served a purpose that everyone was looking for everyone wanted to find the hero everyone wanted to find the person that was going to kind of save the world. And in it, you say, Sam Bankman Freed offered a story that you wanted to believe. The talkative boy billionaire who would turn the wealth creation engine of cryptocurrency into a robber baron's war chest with which he could fix the world. And you go on to talk about Andrew Carnegie and how, you know, we put all of these

people on a pedestal today, but actually they might've been doing some pretty bad shit when they were really kind of coming up and creating wealth. And then at the end of that chapter, you say, well, in fact, the lesson of SBF is this, the last thing anyone needs is a hero. And I thought that was so good in terms of that might just be in life in general, but definitely in a crypto market where it seemed like he was able to capture this narrative. How much of that was intentional versus kind of the media just was looking and they found somebody and then they built this character out of nowhere and Sam didn't have that much to do with well I think it was a collaboration I don't know if Sam set out to do it but he certainly loved it

once it got going you know and he he played into it I I do think Sam loved the attention I do think he loved this story about himself I think Sam wanted to be the guy to save the world and it wasn't just he wanted the world to be saved he wanted himself to be the one who saved it So I think all of those things are true. So I think Sam was complicit in building this story and really liked it that he was getting to take on that role. So that is from a mainstream media narrative, right? And obviously, we saw everyone write articles, magazine covers, conferences, like the whole thing. But then you had this one line in the book that just cracked me up. You said, FTX is only real insurance on customer deposits was a meme. And I think what it really highlights here is this idea of like the mainstream media is what traditional finance is used to. They participate, they manipulate in some ways, they hold back information, they feed it information, they do all that stuff. Crypto has the whole meme culture and Twitter and Telegram and like a whole almost like alternative universe of content and information that gets played out.

And what you really are highlighting here is like customer deposits and insurance are no laughing matter. Like that's actually a very real concept in traditional finance. But when you mix it with crypto, this idea that like maybe customer deposits were being held up by a meme. What do you mean by that? Well, it's just this idea that he that Sam had created this idea that he was smart and safe and you could trust him. But, you know, when you look at when you when you started to dig in more into FTX, one thing, one, you know, a lot of people, A lot of fingers are being pointed at CZ and Binance these days, for example. And look, I have no doubt that they've probably done some things that law enforcement wouldn't

love that they did. But one real striking difference between the two of them, and I know people have critiques of this model, but Binance has been pretty upfront about which wallets are its. It's like, we'll publish all of our wallet addresses. We'll tell you what's there. Have a look. And that inspires a certain amount of trust. And as I understand it, FTX has always been pretty hesitant about doing that, right?

And yet people were like willing to trust them so much because he just had this whole vibe of being a smart guy who was on the level, who was doing everything right. And people bought into that. So it was kind of just a meme. At one point you said he's a geek, but a geek with swagger. And I thought I had not heard anyone say that before. What do you mean by a geek with swagger? Well, I'm pushing back there on this idea that he also, I think, helped construct this idea that he was this dorky, a lot of people call him autistic, you know, awkward guy, which I don't think is at all right. I think, you know, I don't know if you've ever talked to him. I have. He's a fun guy to talk to. He's got social skills. He's charming.

you know this is a guy who who plays up sort of a geek is a person who has a very specific interest that not everyone is into but it doesn't necessarily mean like they're like a nerd they use it as a crutch you know he just has these specific interests and uh so i think he actually was a lot cooler than people want to admit in his story and he used this whole narrative of awkwardness to kind of protect himself but the truth is he was like the super confident person who you know wanted to be in charge of fixing the world. So that's what I mean by the swagger. So at one point you talk about the Miami heat arena deal and you say the heat deal had the scent of hubris. And you point out that about six weeks after that announcement, uh, SBF said,

it's been a pretty good year for us to the point where frankly, we don't need to rely on the full 19 years to have the funds for paying for the arena. And I thought the next paragraph of what you wrote in this book was like alarm system, you know, loud siren. You said the Greeks wrote hold tragedies warning against this kind of talk. SBF would have probably called such cautionary tales irrational and they might be, but they are also Lindy and they look pretty good right now. And so how much of this was just pure arrogance and hubris versus you know, Hey,

we believe in ourselves and you kind of need that to be successful. And then shit kind of went sideways, but it's not necessarily because of arrogant arrogance and hubris. You know, that that moment of the Miami heat thing is an important one for me kind of personally, you know, I don't know that I could prove this to people. They could just be saying I'm sort of telling a story to make myself look smarter later.

But I can remember the day that that quote came out because I had been pretty into the Sam story and even was still at that point. But that was the first time that I was kind of personally I was like, bro, you're you're putting your name on an arena right now. Like this just is not it seems too early. You know, this just seems way too early. And, you know, you've read the book. You know that I have sources in there who say that kind of marked a moment where you started to get kind of celebrity hungry. Um, and I think that's the moment where he got the taste of fame and, you know, it started to go to his head and we sort of see the repercussions of that later.

So what I thought was interesting is like, you call out these moments that you personally experienced or you, you saw, you know, along the way. And I think you're like pretty honest. You're like, Hey, look at it for a long time. Like I bought into the story and, you know, had a certain view. And then over time I got more and more data and like my view changed. And obviously there was kind of this big, you know, moment, uh, towards the end. But you said that in the start of 2022, SBF told you, my reading now, given what I know now, which is still not everything, is that basically there's some number of black swans that would be necessary to blow out Alameda.

And like that number was slowly decreased over the course of the year. And so what I read that is like 21 was this amazing year for investors across all asset classes, crypto specifically, right? We hit all-time high in Bitcoin and many other asset prices. Hedge funds were literally just like printing money. they were returning and distributing and all this stuff and so when you take the miami heat arena the celebrity hungry stuff and then you add in the performance like it's easy to see how you start to believe that like you actually are really really good at playing this game 2022 happens and when there's a drawdown you know the famous warren buffett quote of like when the water goes out

you see you know who's naked and yeah there were definitely the moments of lunaterra etc that kind of put increased pressure but is it actually something where like 21 created the exposure that took them down in 22 in your opinion or do you think that there was like specific things they made decisions they made in 2022 that actually was the undoing well the thing you have to understand about sam i don't i don't know that i have a great answer to that question i mean it's just speculation but i do think one of the things i came to understand about sam was he had this viewpoint that FTX needed to get huge as fast as humanly possible so it could have a moat around it that no one could beat. And I think they had a culture where they had gotten very big in 21

and they were like, well, we need to make a few more really big bets so that no one can ever overtake us. I think they were hungry to like overtake Binance or something like that to be the biggest and so I think where it might have been smart to be like wow this is really blown up this really looks like the top we should start cashing out and planning for a winter they were like no we can get a few more wins in here like I'm pretty sure you know I think I'm pretty sure they were I don't know for sure but I'm pretty sure they played Terra I'm pretty sure they played the um that crazy DeFi thing that um I mentioned the book the name is eluding me right now but that happened in January that was kind of the first blow up of 2022 that people don't talk

about as much the really weird that it was the own fork on on avalanche i think they were in there so i think they were going for a few final big swings to cement themselves at the top and and here and this is one of the parts of the story that i am most confused about with sam because you know you and i have both been around for a minute right so we both have some appreciation for like things go up and then they really go down and you have to do things differently in those times i mean i'm not an investor but i still you know i get you see what happens you know i I see what happens. Right. What's confusing about Sam is he was there for 2018 too. You know, he started in 2017. So this is what I'm confused about with him. It's just like, I feel like those of us who went through 2017 and 2018 kind of know how to read the tea leaves. just like okay it's time to cash out now it's time to start going careful for whatever crazy reason

they didn't you know he i don't know he thought this time is different or what but um yeah i think that was it they wanted they wanted to overtake binance and um and staying second place through crypto winner wasn't an option and sam has said this you know i quote him in the 80 000 hours podcast for example saying this he was always willing to bet the farm he was always willing to take that double or nothing bet to go even bigger or lose everything um which i think was fine until he launched ftx and it was no longer just his money he was playing with it was no longer just house money playing with he started playing with everyone else's money too how much of it you mentioned in the book suzu talks about kind of the super cycle and the

institutional participation means it's different this time there's not going to be this big draw down do you think that sam just kind of bought into similar thinking whether it was that specific theory or something like that. And that's why he played it differently. Or do you think that it was just miss, you know, market timing, there's plenty of people who are professional investors who just miss it, right? They think it's going higher or going longer or whatever. And it ends up actually crashing before they can get out. I don't know, I think, I do think, and everybody sort of told me all my various sources told me some, some I reported on some I didn't, you know, some were people who didn't want to, you know, be included in the book, but still kind of talked to me a

little bit. A lot of people tell me that when you interacted with the Alameda crew and the FTX crew, there definitely was this whole vibe of we're the smartest kids in the room kind of thing. And I wonder if kind of they bought their own nonsense that like we can always win and we can always come out on top. And that's really what it kind of looks like, you know, like doubling down in mid 2022 and like buying every company in sight, it certainly made it look like they could always find a way to get out. So talking about being overly honest, uh, you have a section in the book where, uh, you basically rehash what Doquan said on my podcast, which I took a lot of shit for. People were very pissed that he came on the podcast that I was even willing to talk to

him, et cetera. And my thought process at the time was like, this is the biggest buyer of Bitcoin in the world at the moment. How are we not going to talk to him about what he's doing with Bitcoin? right right and so what you say in the book is um you know he talks about the purchase of bitcoin he was frank about the risk tara needed bitcoin as an extra defense he explained and then later on you say this was the death spiral that everyone knew was the chief risk in a design like tara's and doquan explained it to pomp without any spin he just said it and so what i always think about is like if you go and you interview a big hedge fund manager in the traditional financial world they ain't saying shit they got their talking points they're sticking to it right you can ask

them anything what colors the sky they'll tell you about how we have you know uh risk mitigated investment strategy for long-term hold blah blah whatever yeah crypto is not like that i mean right to see doquan literally almost call a shot on hey if it works this is what's going to happen if it doesn't work it'll be for this reason and everything will blow up is shocking in hindsight which i think you're kind of calling out here in the book explain a little bit more as you see that now with the hindsight bias like how you read into that this episode is brought to you by Accenture when your advertising operations fall out of sync everything else follows Spotify and Accenture are working together to reinvent the rhythm of ad sales using automation analytics and smarter

workflows to simplify campaign delivery and access better data across the business the result less time spent on operations more time connecting brands with the moments and fandoms that matter most? Learn more at Accenture.com slash Spotify. Well, I mean, I think, I think the way I understand that is, you know, I know Doe kind of well. I mean, we've never met in person, but we've talked a bunch of times. I think I got a handle on his vibe. And I read it at the time as a flex you know like him saying like I will just admit what the biggest risk is and I think I can mitigate that risk and get around it because I'm so smart and clever and I also think he really thought that he had done a very smart thing by buying all this bitcoin as a bulwark I think he

thought it was an I mean it turned out it was like a it was a bunch of tissue paper you know we learned it did nothing as that as the spiral happened. But I think he thought that that was a really smart move. And that would also, you know, get people behind him. So my read of that in retrospect is it was a flex, it was an expression of confidence, you know, it was like, should be honest to show that you think you can still get through it. And then in retrospect, you're just like, well, I guess it was hubris then. So what's so interesting is during that blow up of Terra Luna, Three Heroes Capital obviously came under immense stress. And you said at the time, Three Heroes Capital's fall looked like Samson defeated. But once FTX crumbled in

November, 3AC looked like a different metaphor, the canary in the coal mine. And so it seems like now actually maybe that one event is really what kicked off all the contagion. And yes, some of the things that happened later in 2022 obviously had an effect, but really most of the trouble that started for many of these companies, funds, et cetera, was really Terraluna going down, not the things that happened later in the year. Those were just kind of the final punch that knocked out some of the firms. Is that an accurate read? Well, I think that's an accurate read. I mean, I also think another way to look at all of it is if you're in crypto for a minute, you should know that until this stuff becomes mainstream, we're going to have a series of wild rides up

and you should probably get out before the big rides up end and then go conservative and a bunch of people didn't. I mean, you know, Bitcoin, I mean, we all know that Bitcoin is what marks the height of this market. By the time Terra fell apart,

it had been six months since Bitcoin's all-time high. Like you're insane to still be playing hard six months after the Bitcoin's all-time high in a crypto market, you know? So I think, yes, I think Terra is a crucial part of it, But I think another crucial part of it is just we know that this thing has cycles.

The cycle was clearly over. Why are people still swinging for the fences? So that's interesting because in another part of the book, you talk about Pierre Rochard's tweet. And Pierre has been around for a long time in the Bitcoin world. And he tweeted out the following. He said, easiest prediction I'll ever make. What a hot start to a tweet. Easiest prediction I'll ever make.

Fiat-brained bozos try fractional reserve banking with Bitcoin and get wrecked. SBF fancies himself to be a savvy JP Morgan, bails out the bozos. He puts in parentheses, you are here. Then he says, which only encourages more bad risk-taking. SBF needs a bailout, but you can't print Bitcoin. In hindsight, Pierre looks like Nostradamus, right? Yep, yep.

Were the Bitcoiners right? Was everything else bullshit and Sam, et cetera, was just playing a game that was unwinnable? or was it a case of bad risk-taking and actually there is uh you know some degree of truth to the things they were trying to invest in or value created there uh and it's more so bad risk-taking than it is just like bitcoin is the thing and everything else is nonsense as if you know what i think pierre would argue yeah i don't quite agree with pierre on that you know um i think there's good things it might you know if you look at my coverage i cover all kinds of things in the

crypto world, I think a lot of it is interesting. You know, I mean, on the flip side, one thing I'd point out is, for example, a lot of crypto lenders blew up, but none of the DeFi lenders did. You know, they all had some big liquidations, but it was all orderly. You know, there was just like, yep, a bunch of money came out. You know, nobody, there was no defaults, you know, went fine. You know, so I think there's some plenty of good things out there in the crypto world on the ongoing slow build of this new industry, but we both know it's all prone to irrational exuberance and people getting too excited. And even Bitcoin is prone to that, right? I mean, Bitcoin goes up above where it should really be and it falls back down, you know, kind of always each time higher

than the last level of irrational exuberance. So obviously there's a real build of wealth happening there, a real build of value happening. So I think it's a mix of both, but I'm still very impressed by Pierre's call. You know, I missed that at the time. I found that in my research later but i was just like this guy definitely deserves credit for this call this is amazing you know it was absolutely insane talk about what happened after ftx blew up what which kind of your read so ftx uh freezes withdrawals and there's a period of i think it was like nine ten days people on the internet are going wild there are folks flying there both investors in ftx people who were not happy with FTX.

There's all sorts of speculation and debate. There was a hack that happened and some of the funds got drained. Like talk a little bit as you did work in terms of, okay, the blow up happens. What were those nine or 10 days like? Well, the weirdest thing about a lot of those days is something happened that had never happened before.

Sam went silent, you know? And that's one of the things which Nathaniel Whittemore really talks about on his podcast afterwards, once it's all said and done. FTX has gone and FTX has gone into bankruptcy is just that like everybody was like what the hell for the first time ever our our CEO who won't shut up is not saying anything and that was a real source of concern to lots of people and you know I've got sources in there who are inside the

company and who are just like you know look if Alameda goes under that's no big deal they're just one market maker you know in the company where we are we're resilient against that we got multiple market makers, it should be no problem. And then more and more, it becomes clear that like, no, there is a very big problem. And then it looks like there's a giant hole in the balance sheet. So yeah, I mean, I think almost immediately became clear that something was wrong, because Sam always had something to say about everything. And all of a sudden, he wasn't talking. And then eventually, you know, they declared they tried to sell a Binance, which was out of control. And then and then when Binance didn't want to buy, they declared bankruptcy. It's

wild. Do you think CZ slighted hand and knew he wasn't going to buy it, but kind of cut off all of their options? Or do you think that that was, you know, kind of in the moment, everyone's trying to figure it out? My colleague, Dan Primack at Axios, did some reporting on this a little bit at the time. And, you know, who knows, it's all just opinions and things like that. But his sources at the time told him that what CZ believed he was doing was inflicting a little pain on a rival who'd been kind of a jerk. And it turned out that there was way more there than even he suspected. So I think CZ was trying to slap Sam on the wrist. I don't really think he thought he could sink the company with a tweet. It just turned out that there were much bigger issues going on there

than anyone realized. And that's what happened. So, um, I don't really, I think, I think CZ wanted to hurt them. He was just like, if I sold a bunch of FTT right now, that would not be good for them. And I never do this. So everyone will notice it. And then it just turned out that there was a much bigger weakness there than anyone suspected. So you talk about towards the end of the book, uh, SBFs, uh, maybe public communication strategy. And you say in late November and early December, SBF would not leave the public eye. He was in magazines. He was in the new york times he was doing interviews on youtube he was on twitter spaces and then you list a ton of people who interviewed him you talk about the fact that he goes to various conferences

including uh there's a recording of a phone call with tiffany fong there's the new york times deal book summit good morning america new york magazine the scoop podcast uh axios interviews etc is that like a strategy is that just like i'm gonna wing it what's going on there because i don't see very many people when they're in this type of you know hot water and scrutiny being like let me jump on twitter spaces and just like anyone can ask me any questions let me go on you know uh coffeezilla and let him just ask me whatever he wants like that's a very unique strategy it is a unique strategy um you know there are those out there who think he had like samurai level pr people who were telling him to do this to like you know flood the published consciousness and believe that

there was some chance that he was going to get away with all he did because of that. I don't think that's true. You know, I think that was Sam being Sam. My least charitable read of it is he believed he was about to lose the public eye for good and he was going to have his last few tastes of fame, you know, because he enjoyed that attention. My most charitable read of it is he thought he could you know kind of like Do Kwon telling you this is how my this is how my project falls apart he thought by maximizing honesty he could convince the world that uh he was innocent um so but I really if you had if you made me make a bet I would say it was the former I think he was addicted to the attention and couldn't get himself to stop and didn't have people around who knew how

to tell him no yet and so he just took all the attention he could get because he thought he might never get it again. So you also talk about some of the investors. You say FTX list of investors span powerful and well-known investment firms. I'm sorry, this is New York Times writing this. FTX's list of investors spans powerful and well-known investment firms, NEA, IVP, Iconic, Third Point, Tiger Global, Altimer, Lux Capital, Mayfield, Insight, Sequoia, SoftBank, Lightspeed, right? I mean, just go through the line. There's a ton, BlackRock, Temesic, et cetera. What do they all think now? Do you have any sense in terms of, is this just a case of fraud and fraud happens in every market? And if somebody says they're doing one thing, if their auditors are

tricked, their regulators are tricked, then we shouldn't expect investors to be able to uncover this? Or is there a little bit of kind of egg on people's faces and maybe it's a different story? Well, Pomp, I got to turn this question back to you on some level, because you're an actual investor. And I'm curious about this. As someone who's not an investor, who's never been in any of the rooms of any of these things, I don't really know. My read is the way these things work in a hot market, when startups start to be in the driver's seat, they get to start sort of lowering standards, lowering standards. And the hotter a startup is, the more demands they can make of investors. I mean, is that 100% true? I guess. I mean, do you know? Do you see your

peers doing this? Are you like, how the hell did you sign this term sheet at this point? Does that happen? I think that there is a laundry list of situations that we saw over the last two or three years that exact situation played out. I will say that sometimes it's a negative in terms of when there's no board of directors, there's no diligence, those types of things. That's obviously not good. This is an example of what can happen in those scenarios. There's also a lot of different examples where people took money off the table or whatever and like the businesses worked right and so like in some weird way um i think that investors especially when they start out i was like this uh early um in kind of my investing career is like i want to invest in companies and

i want to be really helpful right and it's like yeah that's great okay cool that makes you feel good because you're helpful and maybe you're actually helping or maybe you're not you learn right but what you find over time is like the best companies don't need your help right maybe they need advice every once in a while, or they need a specific introduction or whatever. It's not like they don't ever talk to the investors, but it's like when something's working, it's going to be very hard for outside investors, especially the smaller investors in the rounds to have any material impact on the business. Right. And so in some way, it's like this, like a self-selection thing where you want to invest in the companies that don't need your help. And so naturally what

that means then is like, you kind of are asking them permission to invest in the company. And so a lot of these firms, if there's a bunch of competition to your point, then you can lower the standard because there's so much demand. I actually don't know if it matters whether you're an individual angel investor or you're a very large firm. Like in some way, you may just come to the conclusion like, hey, we don't want to break any glass. We're not going to get invited to invest in the company. Right. And so you get this kind of kind of weird thing. What I also think, though, is if somebody says, send me your audited financials and they're sent and for some reason they end up not being true it's kind of hard you know or is the expectation that every

single investor is going to go and check the auditor's work to make sure that the financials that were audited and approved you know are actually factual um maybe right i don't want to say never but i think that the point of having the auditor is that the auditor is supposed to be the one that is able to sign off on it so if they get tricked it's kind of hard for other people to do it and and you can extrapolate this from the private markets the public markets i think that's the other thing right is audited financials there are rules if you submit financials that are inaccurate right but at the end of the day even public hedge fund investors evaluating public companies how many of them have the ability let alone have the desire but the ability to actually

go and underwrite some of this stuff outside of what the auditor is saying or what a regulator is saying and so you know it's kind of like in a bad situation like oh people should do more diligence. 100% agree that that is definitely something that has to play out in these bull markets. But somebody on Twitter was yelling at me one time and they were like, how did you not know? I was like, well, what questions would I ask? And I wasn't an investor, but we had worked with their US-based entity. And he was like, you should have asked if they were taking all of the crypto assets, siphoning it into Alameda, and then making leverage risky bets with customer funds. I said, OK, if I had asked them that and they said no, then what? Right. Right. And like in some way, that's kind of what people saw in the terms of service and some of these businesses. Some businesses say, hey, we're doing X with the funds. Other businesses say we're doing Y with the funds. That's why it's written there.

what's in what is unique or interesting about this case is it appears at least what's been reported that what the doc said they were doing something different and so again you know who uncovers that in some way you know this is a case of the free market uncovered it right the market dynamics were able to identify and expose this faster than any of the kind of fail safes or safety nets that we put in place in terms of regulation auditing etc and like whether that's good or bad I'm not really sure. But like, that just seems to be what happened, right? Yeah, yeah. You know, yeah, I think I think that's right. And I don't I don't really know what the clear solution is. You know, people are doing this proof of reserves thing right now.

Obviously, that is not perfect, you know. But what else are you going to do? You know, there are to me there are other red flags, like, I could get this wrong. So you know, we can issue a correction or whatever my quote here is wrong. But I do think that this is this is what it said. In that crazy kind of profile that Sequoia put out about SPF, right, which I mentioned a couple times in the story, and everyone talked about when it came out. It was just this, remember that glowing profile they put up on his site? They hired this ex-journalist to, you know, write of him. There was a line in that where I was just like, how can this possibly make sense? It's in the part of where he's doing the staff meeting, and it might have been a smaller number than this,

but I think what it was he said, he was like, look, guys, we're going to have to rein in our spending a little bit, if there's expenditures over a hundred, I swear to God, the number was a hundred million dollars, put it in there. If it's over a hundred million dollars, you're going to have to get pre-approval from some managers. Otherwise, you know, good to go. And I was like, even if they raised $4 billion, right. Which I think, you know, was the amount they raised, right. A hundred million dollars is still a significant portion of $4 billion. Like how is, how is that the number that you have to have approvals about? And how did Sequoia print that story and not go wait 100 you know like even if it was even if i'm exaggerating by 10 even if it

was 10 million i think it was 100 million you know we could check but um that still seemed like i know whatever the number was as i read it i was like that's a crazy number how are the investors not like more concerned about that you know so there were other red flags i feel like but um yeah it also is um one of these situations where it's so easy in hindsight to put them all together right but to your point like even the people who are experts along the way are okay maybe there's one thing that's a little weird this a little weird whatever but like it's very hard to kind of find this stuff and i've got a friend who i recently was having a lunch with and i said to him you know what other ones are hiding in plain sight and we started talking about you know what

are the things that uh could potentially be whether they're fraudulent uh they're not what they say they are uh maybe they're not going to be as successful as people think they are for whatever reason you know we're going through kind of a bunch of brainstorming of these things and he said to me no actually i start my list not with what are the riskiest things or the things that people are are uh uh suspecting i start my list with the things that everyone thinks is the safest i start my list with the thing of that everyone trusts and i thought it was just a really like like yes like that is a great way to to kind of compile a list right is actually like what are the things that no one questions that actually may have have an issue if you kind of think about it

and so i i tend to think um you know when when there's trust even if you have decentralization even if you have kind of all the the merits of uh what the industry provides like there is still a level of trust right and and i think that that is something that doesn't get talked a lot about is whether you trust a company whether you trust a decentralized uh you know platform whether you're literally just trusting the fact that the information you're looking at is accurate right i always ask people you know hey how many uh how many bitcoin uh are in circulation and they'll say a number and i say okay cool did you read that on a website or did you actually go run a note and check and a lot of people will just look at the website even though they have the

ability to go check right and like guess what like it takes a little bit longer it requires you to do a little bit more work like there's all these things as to why people won't do it but even when you can 100 000 percent check to make sure that the number you're looking at is accurate most people still just go look at the website and so you introduce trust and you know kind of this reliance on a third party um which again bitcoin promises not to have to you know rely on but i think people will still do it even if it's available to go run the node and figure it out for yourself this episode is brought to you by accenture when your advertising operations fall out of sync everything else follows. Spotify and Accenture are working together to reinvent the rhythm of

ad sales using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result, less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. Yeah, well, so I want to circle back to this, how you could know in advance, but on that, on that score um you know one of the things i always feel like a bit of a jerk about every time there's a big blow up in crypto and i do think this is does make me kind of a jerk but also i do think it's sort of right is like you'll see a lot of these mainstream media stories that they'll talk about people who lost everything you know when the blow up happens and there'll be

these cases of people like i had my entire life savings in like whatever coin or whatever thing and it like lost all this and i've lost all of it and that really sucks and i feel bad for that person but i'm also just like if you were in this space at all and you were listening to any of the responsible long-term people in here i guarantee you they were all saying don't go all in on anything you know like they all say that again and again and again like you i'm sure you know i know you're the biggest bitcoin pan on the planet you wouldn't tell anybody to put a hundred percent of their of their capital into bitcoin i don't think am i right like i'll take it even a step further. When a lot of this stuff blew up, there were people who were yelling and screaming at me

on the internet. They were so mad. The US-based FTX thing, BlockFi, et cetera. I was sitting there and I was like, through 2017, 2018, I was one of the biggest anti-ICO people in the whole world. I literally was just saying, I think this is all bullshit. I think that the SEC is going to step in, whatever. It took a while, but here they are. The second thing is, I was the person who uh popularize the idea of get off zero like literally go from zero to like a dollar go from a zero to you know a hundred dollars whatever and then the third thing was people used to get mad at me in the bull market when i would say on national television or anything you know i don't know maybe most people are putting one to five percent of their portfolio into this and people be like how

could you not tell them to put more like you know the dollar is going to zero whatever when we get to the bear market it's like it's your fault everyone lost savings and i just sit there and just be like, the two things can't be true, right? Like they can't both be true. And I think I share your sentiment of like, I feel bad for anyone who is harmed in any market when things go down. I mean, we now are seeing obviously, you know, people who took out adjustable rate mortgages and the Fed hikes interest rates, and now all of a sudden their mortgage payment triples. But again, at some point we have to have this idea of like self-reliance and self-responsibility as well right and so it doesn't uh completely excuse everyone's behavior right because obviously people

have a responsibility when they have a platform all this type of stuff but i do think there's this very weird uh dynamic where uh because of the way that attention works the most egregious extreme stories are the ones that get pushed the hardest and so to your point the like person who took a hundred thousand dollars that they had to their name and put it all into an obscure crypto coin. There's a lot to unpack there. And it's not just like, Hey, the coin went down. And so the people who made the coin are bad. Right. Right. Right. So I want to circle back to this idea of could we have foreseen it, you know, for folks, I, you know, hopefully your listeners pick up the book and have a look. One of the things about how the book works is it goes all the way to the back

to the beginning of Sam in crypto up to when, you know, uh, the end of last year. And one of the things I do think as I revisited that story, and again, I wasn't smart enough to see this in the time at the time but there is a way and and and you know you know is having read the book one of the themes of the book kind of is just sort of I have all the sort of like spiritual language like you read one of the things in there about the Greek tragedies and things and I sort of I sort of come back to like you know the gods don't like it when you do this like that kind of thing a variety of times and a part of the reason why I did I like that kind of language but I also did it because when you look back over the year there's some other ways in which it was almost

like the universe was making warnings so two examples that I have in the book in there are cream finance and mango and mango markets both of which were instances where um where well cream finance was a case where the community pushed back against sam making gigantic bets against ftt using the platform they were just like we're going to put some brakes on this you know that was a community realizing that you shouldn't go all in an ftt so on some level i i saw that as kind of a warning to the world about about uh the story and then mango markets was like almost exactly the same thing as what happened a month and a half later with FTX. You know, Mango Markets was this decentralized exchange on Solana that allowed people to

make bets against its native currency, which was Mango, which was obviously a tiny, tiny currency that was thinly traded. And, you know, this guy, Abraham Eisenberg, you know, pulled this hustle where he made the price of Mango go up really high, borrowed all of the capital that was on their credit thing and just walked away from it, let his loan go bad. And it was just like, and of course, Sam went onto Twitter afterwards and talked about how like they had poor safety measures on Mango and FTX had much better safety measures. But I'm looking at that story and I'm just like, wow, this is a story about an exchange that let you take out excess collateral against its native token. You know, can we think of another exchange that did the same thing?

Oh, right. FTX did, you know, so it's like the universe does on some level provide warnings of these things. You've just got to be paying attention to when it gives the warnings. And so those stories are in the book, and that's why they're in there. I think that that makes a ton of sense. The book is called SBF, How the FTX Bankruptcy Unwound Crypto's Very Bad Good Guy, which is a fucking amazing title. Where can we send people to find the book? Well, definitely go to your local bookshop and ask them to order it. Tell them you'd be excited for them to have lots of copies there.

Obviously, it's up on Amazon already. You can order it from there. Also, bookshop.org if you want to order it from a local bookshop that way. But yeah, I mean, the best thing folks could do is go to their local bookshop and be like, hey, I can't wait for this book to come in. You should have tons and tons of copies. That would be fantastic. I think that is a great thing.

I've had a lot of authors come on here. No one has ever said that. So you know what you're doing, which I appreciate. Brady, where can we send people to find you on Twitter? And if they want to follow up after this, ask questions, whatever, where should they do that? Yeah, I'm at Brady Dale on Twitter. Also would love for folks to search Axios Cryptocurrency and subscribe to our newsletter. We put a newsletter out every single day.

Me and my colleague, Crystal Kim, I think it's pretty good. I think folks will like that. So yeah, the Twitter and my Axios newsletter would both be great. Amazing. Brady, I always enjoy talking to you. The book was fantastic. I don't think that I've ever read a book about something that I live through and was like, oh yeah, there's a bunch in here that I didn't know even as it was going on.

So I appreciate all the hard work that goes into writing this. i hope that people go pick it up sbf how the ftx bankruptcy unwound crypto's very bad good guy for those that are watching on youtube yes i have the spiral bound uh version uh which just means that uh i got to look at it before you but you should go buy it because it's awesome uh brady thank you you so much we will uh we'll definitely do this again in the future thanks mont