The Press Box - Katie Baker on the Sam Bankman-Fried FTX Scandal

Episode Date: December 15, 2022

Bryan is joined by The Ringer’s Katie Baker to break down the Sam Bankman-Fried FTX scandal with the help of her dictionary, found here. They begin by diving into Fried's background, discuss what it was like covering a scandal involving celebrities such as Tom Brady and Naomi Osaka, touch on winners and losers, and weigh in on the fallout that included a Bankman-Fried media tour. Host: Bryan Curtis Guest: Katie Baker Associate Producer: Erika Cervantes Learn more about your ad choices. Visit podcastchoices.com/adchoices

The time has come to get ready for the 2022 World Cup. And what better way to prepare than by revisiting the World Cup's most amazing goals? I'm Brian Phillips. I'm making a podcast about the history of the men's World Cup, told through the stories of 22 iconic goals. The show's called 22 Goals. It's out now on the Ringer Podcast Network, and we're having so much fun. Hello, media consumers.

Welcome to Press Box Final Edition. Brian Curtis of the Ringer here, along with producer Erica Servantes. You've probably read at least a little about the Sam Bankman-Fried FTX scandal. Well, we have a rule here at the press box when there's a massive crypto scandal. And when it's funny, we call one person. She is my favorite chronicler of both business and business dudes. my teammate and pal since the Grantland days, the ringer's very own, Katie Baker.

Katie, welcome to the press box. Hi, thanks for having me. So you wrote a story last month for The Ringer called the FTX Crypto Scandal Explaner Dictionary, which I recommend anyone who wants to both learn about this scandal and laugh read immediately. But before we dive into the dirty details, what makes the FTCS scandal so interesting for you?

I think it's just the sheer number of people and entities and terms involved, you know, ranging from a Bahamian pet house suite called the Orchid, which something about that is just so chilling to me. To, you know, we had major league baseball umpires wearing FTX on their uniforms. And we have the, you know, the head of, you know, we have these these people involved who are the children of professors at Stanford and MIT. And there's celebrities, but there's also Washington. And there's nerds, but there's also, you know, cool kids.

And so it was just kind of, you know, when I was writing the dictionary, I remember it was stressful because these very strange new things kept coming out that were entire new, not just new entries, but like entire new, you know, tentacles of the story. So for the financially illiterate among us, which is to say me, What made Bankman-Fried and FTX stand out during their brief heyday? Well, for one thing, he was positioned for a long time as kind of a, not a savior. Well, actually, some people did call him a savior, but he would sometimes swoop in and, you know, invest. And I'm saying this with a million scare quotes at this point.

But when there would be a struggling crypto company or a coin that, you know, was going under, even Robin Hood at one point, which, you know, was a trading app that lots of people use on their phones, he was sort of a swooped in and made a big investment when they were having times of trouble, which then led to people calling him Warren Buffett and that sort of thing. So in some ways he was regarded as this guy who was a little bit, you know, opportunistic, but also because he had done the right things, he was in a position to help these maybe more unsavory companies. And so that was also kind of just one of the things that made the implosion of his own company more shocking and also just more interesting to take a look at. You mentioned sports stars, celebrities who got recruited into this umbrella. Tell me some of your favorites.

Well, you know, you have the usual suspects. It just seems like Tom Brady is always involved in these things. Steph Curry is always open to a new to hawk something new. The one that really stuck with me in sort of a, in a weird way, was Naomi Osaka, because she to me symbolized her kind of sales pitch in the ads that she was in, was very much about women in crypto and making sure, you know, bringing diversity to crypto and, you know, not letting this be something that only a select few can get involved with. And I saw that thread like a fair amount. You just kind of see it.

And to me, it's kind of this, I don't know, to me, it just seems like this very cynical mindset where you're sort of weaponizing this idea of like feminism and equality. And that would just kind of get, you know, I'm not saying she came up with the ad or anything like that. But to use her and to position her in that way. And a lot of the other, you know, women who have sort of. on that women in crypto route. I just feel like it speaks to them really kind of trying to identify groups of people that they can reach and bring into this.

I mean, the overarching ad theme was called like UN. And so just, you know, who do we know that's not in yet? And how can we almost like weaponize that? Did I see like a giant wide scale music video by Randy Zuckerberg at one point that was striking these same notes. We should go back and look if that was like, you know, the top tick of the market was when, what was it that she was lip syncing?

Oh, like we're going to make it after all. Yeah. Yeah. When Randy gets involved, run, you know. So the Tom Brady involvement of this were those Tom Brady tweets where he had laser eyes. His Twitter avatar for a while was laser eyes. I don't know if he had already removed them when FTX-FL. he had kind of quietly removed the laser eyes.

The other thing we saw after the whole scandal unfolded was lots of political formers sitting with SBF, if we may call him that, at various conferences. There was Bill Clinton, I remember. Tony Blair, I think, was at least in one of these conferences. Were these in the Bahamas, too? there was there was at least one major conference in the bahamas where i think that's the one that that where he sat on stage with jazelle and like you said bill clinton tony blair really hitting all the you know the the old uh politicians there um i think michael lewis was in attendance at that at that at that f tx conference and yeah there's you know he also there's a lot of talk about the political contributions that he made, which on the surface, I think, were probably to, you know,

democratic causes. But, you know, there was an interview in which he said he was also donating to GOP causes. You know, for him, the value out of donating was him trying to, you know, well, there are multiple reasons, but one of them was he was always very vocal about issues of crypto regulation and how to do that effectively. And so I'm sure. that was a part of it. And then also his kind of broader worldview of effective altruism, which is the sort of combination of like dorm room late night, you know, pondering the mysteries of the universe with, you know,

wanting to have the most cold hard cash to be able to use in the ways that you think are going to be best for not just yourself, but for humanity and post-humanity. and post-humanity. So it really can go to some interesting places. So, you know, once you start with Bill Clinton, it always has a way of somehow devolving into post-humanity and simulations and all that.

You write in your piece, effective altruism is kind of a hall pass for greed. I can be greedy. I can make as much money as humanly possible, but it's okay because I'm going to give it away and I'm going to give it to worthy causes down the line. Yeah, I mean, that is one. kind of way to look at it, and he certainly did look at it that way in the sense of people would ask

him, do you think that, you know, are you trying to almost be as risky as possible in the hopes that you do hit that home run? Because the more risk you take on, you know, what the pendulum does swing in the, in the good way, you, you know, have this kind of unmatchable ability to donate and to build things and to conceive things. So, you know, but you can kind of use that as, like you said, it can kind of just defend making any decision if you're going to frame it that way. And I feel like when it comes to a lot of this stuff, when you read it, and then when you think about the fact that, you know, you read about SBF and how he grew up the son of these two Stanford law professors and or Stanford professors

and they had other professors over for dinner all the time and they had these scholarly salons and I just imagine them talking about like the trolley problem and him being a six year old at the table just laughing it up and it all leads to this. You know what I mean?

Whenever there's a scandal like this we like to go back and find the media people who got romanced by the figure in the middle of the scandal in this case SBF What was the tenor of some of that coverage during his heyday? There was different coverage. It's interesting.

I was kind of kind of think through like a Bill Simmons-esque winners and losers type thing when it came to the media. I like it. One unlikely winner, and then I'll get the losers, is the actor Ben McKenzie, who many listeners may know as Ryan from the OC. before all this, he was a sort of pretty loud anti-crypto voice to the point where he is working on a book with the journalist Jacob Silverman about this. And Ben McKenzie testified to Congress just the other day about this. So he's really been vindicated in a lot of what he fought early on. So he's definitely a winner in my book. Some of the loser, well, a neutral, I would say, was.

you know, right when the FTX thing happened, our guiding star Matt Levine, the financial writ writer for Bloomberg, who's kind of the best in the biz. You know, he had written a column in which he said, I like Sam Bankingfried. I like him as a person. I want to believe him to him.

So people were kind of founding him for that. But the simple response was to look at the piece and look at the section that, in which he was writing this, which was called the Ponzi thing. And he was basically concluding that a lot of this stuff really did sort of fit the description of the Ponzi scheme. And, you know, so his assessment of that was a little more nuanced. And, you know, he's just been incredible on this all along.

You know, then you have people like, you know, Kevin O'Leary from Shark Tank who've just kind of been doubling down. You have Bill Ackman, the hedge fund guy who, when Sam Beckman-Fried, went. on his first interview with Andrew Ross Sorkin. I think Bill was actually in the audience. He's tweeting, I believe everything he's saying. So even after the fall, that's the one that to me just stands out. Even after all this, he's still in.

You know, he's still, he still wants to believe. Those are some that stood out to me. Yeah, I feel I saw at least one Jim Kramer tweet, screenshot it. Maybe it was the J.P. Morgan one. The other one that, you know, I don't know if it, I don't know really where it was distributed other than online, but the big BC firm Sequoia, which was a big investor in and investee of Sam Beckman-Bread,

they commissioned this like 14,000 word New Yorker style glowing, you know, first person included article about Sam that was on their website, very proudly, tons of photos. That one in the headline has the word savior in it. It's now been scrub from the web, but it can be found in the way back machine. But I mean,

that was kind of the gold standard for like things that in hindsight when you read them, just every word feels like a red flag. That's not just New Yorker. 14,000 words is like William Sean, New Yorker in the 70s where we're doing a three-part series. Is that like,

typical for Sequoia Capital to be in the long-form business? Yeah, I'm now wondering, you know, where I went wrong. I wonder what they pay for word over there. They're going to save long form. Somebody has to. I will say reading the piece, I really, it was illuminating to me because I could imagine myself having written it if I followed a lot of my just not worst impulse but if I like, if I just didn't have someone there to like rain me in or to question things

or if I wasn't doing enough of a good job, you know, questioning things. Like I could see how it was created, which was, you know, I was telling someone that reading it, I had to almost read it in chunks because it was like staring at the sun. Like I, it was, it was too real while at the same time being just filled with all kinds of details. I was, you know, about him playing video games while interviewing with BAC firms and just, but seeing that is like the coolest thing ever. So I get that same feeling. And whenever the Elizabeth Holmes documentaries came out, and of course, they bring on all the journalists who wrote the cover story about the genius of Elizabeth Holmes on. And we're going to review this line by line.

And I get the same squeamish feeling because I'm like, oh, my gosh, I can see the anecdotes they're pouncing on. I can see them falling for the romance of the subject. And I can see them also just getting stuck, right? Like not being able to figure out what's going on because they've got limited time and a limited look inside the machine. So what they wind up is with this kind of admiring profile that then will be held up and flogged after the fact like, oh no, look what you did. Yeah, exactly. I mean, it definitely had a big, you know, story, not just about the person it was being written about, but just about the process of

writing these things. And then you have the added layer of it being commissioned, presumably, by Sequoia. And you could almost feel them trying to make it seem like, well, no, but I'm also, I also get it. You know, I'm not just doing this. Anyway, there was a lot to it reading that piece. I mean, I recommend it as like a document for sure. For people who like to stare at. under the sun. We should also note that Bankman Freed, mostly through his philanthropic foundation, made a lot of investments in media. This is from Puck. He hired a team of advisors who'd been making investments in non-profit and for-profit newsrooms over the last year, including in Vox, the Intercept, ProPublica, the Law and Justice Journalism Project, an international

affairs podcast, and most prominently semaphore. So that's really fascinating. I also love the words. You also get in every single article about this, the quote loosely regulated world of crypto. You cannot write about the scandal without using the adjective loosely regular. You're reminding me of one of my favorite things. And I don't even know if this would be backed up by research, but I don't care,

which is I swear that there is a time in like the mid-aughts when hedge funds were being written about a lot. And every time the New York Times said, the word hedge fund. It was followed by comma, loosely regulated pools of capital. That phrase, every time, I swear. It was like in the, it was like

a hedge fund. Shoemaker and I also love to track when celebrities go into the embattled or disgraced zone because we don't have any convictions right or guilty pleas yet. So you have to find an adjective to describe it. I saw our old

pal Jay Caspian Kang and the New York are the disgraced founder of the Crypto currency exchange FDX. And I've seen a lot of embattled as well. You know, I've deployed an embattled in my time. I must say, but yeah, he was, he went into the zone. I'm trying to think what his word would have been like, you know, if you look two days earlier, you know, the, you could always go with the eccentric, the idiosyncratic, or, you know, the, um, the ascendant, from ascendant to embattled, and, you know, the, um, from ascendant to embatted, is the good stuff.

Yeah, some precocious. My favorite is always colorful, too, because yesterday's colorful as today's. Uh-oh, we should have known. Which, speaking of which, there were a lot of signs of grandeur or oddness that maybe were part of SBF's mystique and now look like warning signs

when viewed after the fact. What are some of your favorites of those? One aspect, you know, and you asked why what's funny about this early on. This was just one of those weird ones, which is, you know, he has talked about is always playing video games like League of Legends.

And that when he got a big Sequoia investment, they were on a Zoom call. And the whole time he was, he was playing. And there's, you know, and they're in Slack talking about how cool this guy is because he's in the midst of playing video games

while on this investor call. And then at least, to this kind of serious investigation by the Financial Times, I think it was, about that that found his profile on League of Legends. And he was only, and I'm going to butcher this, I'm sure, but I think he was only a bronze tier or something like that. And they were like, you know, for the amount he plays, he really should be better. Like, that's an embarrassing level to be in. So, you know, the video game play and then, you know, that's a red flag. Why isn't he better if he's playing video games so often?

You know, the sleeping on bean bag, the, there's a picture of him at his desk that got, you know, dissected to death. And it included like a giant bulk container of table salt that people were speculating about and, you know, medications that caused a lot of interest. And, you know, so just a lot of that stuff. There's just a lot going on there. What was it? Did you have a favorite? Well, the beanbag thing just did not look comfortable. at all. It looks like when I walk in a room and find my kids kind of just flopped on things.

Yeah, it was like two, it was like a two beanbag set up. Which is not a particularly great way to sleep, at least for me. He resigns and declares bankruptcy on November 11th. What are some of the events that conspire to help FDX bite the dust? Well, you know, he has this kind of rival in the crypto world. CZ is what he sort of goes by. So there is a lot of back and forth with CZ. And I know that's kind of some of the stuff that Michael Lewis has alluded to in his work that he sees that relationship as being interesting. And I do too in the sense of this guy CZ seems like the one guy that can actually needle Sam. because and get under his skin like I feel like when he responds to him he actually gets kind of you know

um like forthright and and kind of you know but also petty so that that was a good one I mean to me the you know from that time period of when that was all happening the the two things that really stood out were these Excel spreadsheets you know that that were leaking of the company's assets and and then Sam was making up one to try to reconcile where the money went. And it just would say things like hidden poorly internally labeled Fiat account, like negative $8 billion, just on like a Google sheet, you know? And then an old presentation from the company to investors promising, quote, high returns with no risk, which is like the, talk about red flags. That's just like sometimes you

know, you take these financial ethics classes or something and you know for for certifications and you think like this is just so obvious or elementary you know, no one says high returns with no risk and but there it is right there. So, you know, they just, it turned out that there wasn't money

behind, you know, they were as the, as the bankruptcy lawyer has said, it was just sort of good old fashioned embezzlement It's just people finally going to get their funds out when there were rumors that things were going well. CZ was kind of pushing some of that. And, you know, there was nothing to, there was nothing left that had been written out in loans and purchased weird coins and definitely not custodied in each customer's account. That's for sure. After resigning, some people would lawyer up and hide from the world.

SBF did not do that. He went on a media tour. That's the only thing we can call it. At one point I saw somebody tweeting, we need to retire the word exclusive because he had given so many, quote unquote, exclusive interviews to the likes of George Stephanopoulos,

Andrew Ross Sorkin of Deal Book, Voxes, Kelsey Piper. I think there was an Axios one mixed in there. What did you make of this very, very chatty and strange media tour? It's funny because I remember in the first couple of days after they declared bankruptcy, he was still listed on this New York Times deal book summit symposium with all these different speakers. And people were sharing the screenshot and saying, like,

I can't believe they're still having him and all this. And I was just thinking like, well, it's obviously not happening. They just haven't taken it down off the web. I just thought it was kind of stupid that people were even screenshoting that. And then little did I know. That was kind of the opening salvo in, like you said, a world tour that at one point I was signed into some weird crypto Twitter space where he was being interviewed by someone named Coffeezilla.

And that was one of several of those. And, you know, like you said, and like Andrew Ross Sorkin asked him, like what would a you know everyone's first thing is that you can't talk when you when you hire a lawyer and so um you know there I remember there are times I think during the the Sorkin interview where he got like kicked off his connection and people were joking about a lawyer you know someone coming in from Sullivan and Cromwell and pulling the plug and um I don't know you know it's interesting because the first time I watched it um it felt really extraordinary and then as they've gone on, you really start to see what he just does and doesn't answer. And there's a lot of doesn't in there. There's a lot of very contrite, almost aggressively contrite. You know, I screwed up.

Everyone hates me. I know it. I wish I did everything differently. But there's nothing like behind that. You know what I mean? Yeah. Did you get a sense that he wants to apologize his way out of it, make amends in some weird public way or just I'm enjoying the attention and this is the last blast of attention I might get of this kind for a while. Yeah, because I've seen someone say, you know, this is just a game to him. And I don't, it's hard for me to figure out like if that's the case or if he truly just, you know, it's funny. One of the, I remember when he did the interview with Kelsey from, from Box, which was, which was kind of my favorite, you know, the only, which was the most interesting and different of all the interviews. And for those that don't know it, it was all on Twitter

DM. And it was with a girl that, you know, he knew, you know, they knew each other in the world, but I don't get the sense there. He said they were friends. I don't, she has said, you know, they weren't particularly tight or anything like that. And it was a DM exchange in which he became who's very kind of nihilistic saying a lot of this stuff is just for show and but it was really interesting to kind of see that side of him so that one stuck out to me a lot and the others I don't know what there was one I watched where they asked him straight up you know are you trying to create like a unfit you know unfit defense here by doing all these interviews, you know, to show that you were in the right state of mind.

And he kind of was like, no, I just, you know, I just, I'll do whatever I can to help. And I want to, you know, I want to help. I want to do right by the customer and get them the money back is what he kind of keeps returning to. But again, I don't really think that means much. That would be an amazing defense. Nobody in their right state of mind would have done this many press interviews. therefore. Yeah, even people that are trying to promote something don't do these many interviews. You mentioned Michael Lewis's name. We got one of those news stories that every journalist read at the same time,

and every journalist, I think, experienced some pang of envy or just, I don't quite, can't quite describe the emotion, but we learned that Michael Lewis had basically been embedded with SBF for a long period of time, Michael Lewis, of course, author of, Moneyball, the big short, Lires Poker and many other books. What did you make of the news that Lewis had an end on the biggest story on the planet? Three words. Still got it. You might take issue with being an old guy, but I appreciate the catchphrase.

I didn't say any more than the three. No, but, you know, I had sort of like, there had been rumbling prior where it was like, you know, it was in one of the, it was some bullet point and some media. a newsletter that was like months ago like Michael Lewis is working on some kind of book about crypto and he says like I think I found like the ultimate character um and it would just kind of came and went and I think maybe at the time people were maybe guessing who it was but it was just a little minor thing and then when people when this all happened and that news came out and then the publisher ultimately issued a press release about it um yeah just the I mean I'm

so excited to read it and even more excited now that I see kind of how open Sam can be, even when he's not being open. But I mean, just imagine the conversations that they have probably had. Like I said, I'm interested in the angle of the sort of rivalry between these guys. There's just always a lot of potential there. And it can also, I just think, broaden the story from being just about FTCX to being about, you know, what is this, what is this thing and who are these people that have become, like, the leaders of it. Yeah, so, you know, he's done it again or he will do it again. The one thing I took issue to was I started to see this kind of genre of tweet that was like, you know, when Isaac Chautner comes calling and when Michael Lewis wants to interview you,

like, you're about to, you know, you're about to go down. And I don't think that's necessarily like what Michael Lewis's stuff has been about. It hasn't been about, like, you know, exposing these things and taking people down. It's been about sort of selling these people and not like lifting them up. That sounds too trite. But you know what I mean? I just thought that

that genre of tweet misunderstood his work and I wanted to say that. Absolutely. I mean, that's Billy Bean, right? And it also made me interested because that little squib from the book compared SBF to Luke Skywalker. And I don't know will ever know the answer to this, but like, I wanted to know what would the Michael Lewis book

have looked like if it came out six months ago, as opposed to coming out after these events. The timing's super lucky that it wasn't, yeah, like later on in the stages of being done or whatever. It's kind of the perfect, you know, now he has the rise and the fall. Yeah, it reminds me of those books that were written about the Astros, you know, when a cheating scandal came out, the new, the brilliant way to build a baseball, team and they're like, uh-oh. SBF was arrested in the Bahamas this week, and one notable thing about his arraignment was that he was wearing a suit.

This is different. There was a whole piece that I enjoyed in the New York Times by Vanessa Friedman about how his downfall may also signal the downfall of a particular way of dressing among Silicon Valley Masters of the Universe. What do you make of SBF style and its future or non-future? It's funny. I had the same thing. I had that in my notes. Bahamas arrest. First time I've seen him wearing a suit, question mark. It was a good suit too. It was like navy. I thought it looked good. Yeah, you know, between between him, we have, you know, I think that kind of idea of the founder being so above the realm of you petty, you know, suit, you know, suit wears and

that being like an attractive thing, you kind of keep thinking that that'll go out at some point. But it's been pretty persistent, you know, over the years. People still fall for that. Whether they still will, like probably. It's a powerful impulse to see someone not dressed for the occasion and to feel that, you know, maybe they're just, maybe they're on to something. That's part of the image making in these profiles, right? This is Friedman's line. Not just any t-shirt and cargo shorts, but what could seem like the baggiest most stretched

out, most slept in, most consciously unflattering t-shirts and shorts. It's a uniform that telegraphs to the watching world, somebody who doesn't have the time to worry about what they're wearing because they are thinking such big world-changing thoughts. it's so true it's like Zuckerberg wears the t-shirts too but you get the sense that they're they probably each cost like five thousand dollars like you know they're probably sewn with a special silk and but it just looks like a heather gray t-shirt but spf was not that way it was like wearing your you know 90s kid wearing a hard rock cafe t-shirt that they got a vacation that is you know square shaped perfectly square.

And it really was like a different, you know, the sock, he always had new balances on. He was consistent with his shoe, shoes in my opinion, kind of weird-length socks, you know. Just, I mean, the fact that he was on his home turf at the FTX conference in the Bahamas, on stage with Giselle, like, I mean, he really, he didn't stray from, from his look at all. So I guess you can commend that, but it really is striking. Do you think we can bring back the Hard Rock Cafe T-shirt? I was just thinking about like the, the mat or whatever they, the dog one, the mad dog or whatever, the Co-Ed Naked. I would happily bring back to Co-Head Naked. But yeah, I always think of like he really looks like, he really looks like he really looks like he should be wearing umbrose, but instead he accessorizes with Cappy.

I'm not bringing that back. That's where I draw the line. Katie Baker read everything she writes at the ringer, including the FTX Crypto Scandal Explaner Dictionary, which was an awesome piece. Katie, thanks so much for coming on the press box. Thank you. It is time for the second weekly edition of David Shoemaker guesses

the Strain Pun headline. Yeah. Monday's headline Atop a story about the resurgent Detroit Lions, was Goff claps. It's in Jared Goff. Today's headline comes from Marcos Aragon. It's from KPNX News 12 down there in the great city of Phoenix, Arizona.

Cinema country, as I call it, David. The subhead is kind of a scary one. At least it activates my old childhood nightmares. Rattlesnake found in ball dispenser at Top Golf. I read a little bit of those to you. What? It all started when Arizona YouTuber and professional snake rangler

Rattlesnake Solutions posted a video this past November of a recent call to business received near Scottsdale. In the video, Marissa, a member of the snake relocation team says she's on the way to Top Golf in Scottsdale for a rattlesnake removal. Once he arrives, a couple of employees point her to the ball dispenser

where the snake is hiding. So we're looking for golf and a rattlesnake, just a snake, maybe. What was News 12 Strain pun headline? Slither, rattled,

so it's not rattle. Yeah, no rattle. Swing a hole in one. Swing, oh, swing, I like. Swing and a hiss. Swing and a hiss. Yeah.

That's good. You're back on the streak again. One. One in a row. It's only going, only going upward, well, I guess it can go back to him. He is David Chewaker. I'm Brian Curtis. Production Magic by Erica Servantes back Monday.

With more lukewarm takes about the media, plus our annual year in media pod. See you then, David. See you later, Brian.