This Week in Startups - SBF gets arrested, The Block’s CEO gets a bag from FTX, + Walmart launches a BNPL service | E1636

Episode Date: December 13, 2022

Molly and Jason react to the breaking news that Bahamian authorities have arrested Sam Bankman-Fried. (1:27) Then, from earlier in the day, Molly and Jason chop it up about the news of The Block’s CEO Michael McCaffrey receiving $40M from Alameda Research. (27:41) We then close with a story about Walmart’s new BNPL service. (45:25) (0:00) Molly kicks off the show (1:36) Molly and Jason react to SBF getting arrested (14:51) Vanta - Get $1000 off your SOC 2 at https://vanta.com/twist (15:55) Kevin O’Leary’s FTX deal + Predicting what happens to SBF (26:11) Nutrisense - Use code TWIST and get $30 off at nutrisense.io/twist (27:41) Alameda gave Michael McCaffrey $40M (45:25) Walmart launches a BNPL service FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood Subscribe to our YouTube to watch all full episodes: https://www.youtube.com/channel/UCkkhmBWfS7pILYIk0izkc3A?sub_confirmation=1

Hey, everybody. We're back. It's Tuesday breaking news. We had to stop everything for a quick nighttime record last night because Sam Bankman-Fried has been arrested in the Bahamas. We're going to break that down, some predictions about how long he's going to spend in jail and how soon that's all going to happen. So we're going to talk about that. Also, chew over the now somewhat older news that it turns out Sam Bankman-Fried had given $40 million in loans to the CEO of the block, the media outlet that was covering him. So we're going to talk about that little corruption situation. And then we have Walmart planning to launch a buy now pay later venture, which gets Jason off on a whole big rent. Such a great show. So good. Stick with us.

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It's late in the day. We had pre-taped Tuesday show and here we go, Molly. Out of nowhere, I was literally penning my rage tweet about Sam Bankman-Fried. And I think my rage tweet was, if we could pull it up, Nick, about this guy deserves a hundred years based on our pre-taping of talking about this stuff. I was just so infuriated about it. And now, I think maybe 10 minutes later,

it news broke that Sam Bankman-Fried has been picked up. He's pinched. He's in custody. Perp-walked. Bahamas perpwalk. He got the Bahamas Bahamian Perpwalk, I'm sure, in shorts and sandals. I was thinking that. I was like, is he like in beach clothes when this happened?

Yeah, there you were. going to jail for 100 years. Okay, so that's my, that was, that was not the first tweet. That was my post, but I had a tweet earlier in the day. You'll find it there. Not that one, that's when it announced, but a couple more before there. There's my Walmart rage tweet. That's the rage tweet.

There we go. So this one, you know, I was just thinking about how infuriated, I am at this alleged situation. And in my conversation with you, that this is not a dopey kid. He's Lex Luthor. And we cannot give him a pass. we need to throw the book at him. And so in today's show, we have a section about him paying off.

I'm sorry, in yesterday's show, Monday show. We did talk about, oh, it's in today's. It's in today. So when you hear it, just know that we taped it yesterday. So there's a lot of allegedly in there, but it's still appropriate because it's still allegedly. Yes. And we talked about in that segment, which is coming up later in the show, he paid off

the block. Yeah. But what's happened now here at the end of the day on, Monday at 5.12 p.m. Pacific, 8 p.m. Eastern. So, evidently, he has, in fact, been arrested in the Bahamas at the behest of the U.S. government, based on a sealed indictment filed by the Southern District of New York, which, as you note, in a later tweet, is not to be messed with even a little bit. When SDNY comes for you, it's serious.

didn't even know, I mean, I didn't think that the Bahamas had an extradition treaty. I didn't know the U.S. could be like, go get that guy. Somebody said, I thought Sonny or Vinny was telling us that the Bahamas didn't have an extradition treaty, but maybe that's because one of them was trying to win that bet based on the testimony thing. Anyway, it comes, speaking of which one day before he was supposed to testify before the House Financial Services Committee, It also comes only hours after John Ray the third, FTC's new CEO, released an advanced copy of the testimony that he is going to give tomorrow, I believe, before the House Financial Services Committee,

saying, among other things, the FTX groups collapse appears to stem, it's a banger of a read, it really is, from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people's money or assets. Okay. So that's a concerning tweet. Concerning statement.

Concerning testimony. Testimony. Yes. Testimony. Sorry. Thank you for correct to me. I'm a little concerned with that because that is back to the, oh, gee, will occurs. We didn't have a lot of experience.

I don't care about that. The law does not care about that. And I'll tell you who cares least about that. S-D-N-Y. Southern District of New York. That is Preet Baharas. My favorite podcaster, one of my favorite podcasters,

stay tuned with Pete. Shout out to Preet. That's the office he ran. You know the guy who they just traded for Britney, I mean, out here, the NBA player who just got. Britney Griner, thank you. Yeah. The merchant of death, who they traded,

He's done 15 years. You know who put him away? SDNY. All these big, Giuliani, when he pinched all the mafiosas in the 80s, SDNY. When they shut down poker in the United States,

it was on a black, they called it Black Friday for the poker community. SDNY. When SDNY is coming for you, yeah. You are done. You're done. You're done.

Like, seriously done. They have a reputation for being the fear, the fiercest prosecutors in the nation. When Trump got elected, the first thing he did is he called Preet on the phone and said, I tried to call Preet on the phone. Preet didn't pick up. He wouldn't take the call.

He said, I'm not getting on some loyalty pledge and Trump fired him. And they were the ones who fought, you know, a lot of the Trump tried to use the Justice Department for nefarious purposes. They were the ones who were fighting it. So anyway, that to me means this kid's getting. And in our discussion, I set the line at 22 years and you took the under, you're losing the bet. I'm losing the bet. I'm just going to go ahead and own that now.

Like, I am losing that bet. Luckily, I only ever bet in $2 increments because I'm not very good at betting. I think we bet a barbecue lunch. Is, oh, did we? Good. Let's do that. Let's go to Horn. I was trying to look and see if the SDNY is also the outfit that just convicted the Trump organization.

But I'm not. I'm not sure if that was SDNY. I know they were investigating him. Yeah. They're investigating him. So among other, yeah, I mean, it's serious. And the thing is that even if Ray's testimony initially is like, yeah, they're grossly inexperienced and sophisticated, but there are existing, right, there are rules that could

have been followed here. And none of them were. And that is where you get to just criminal negligence, allegedly. Allegedly, allegedly. This ain't going to be alleged for long. I'll tell you that. If there's one thing I'm in I have expertise in is this kind of fraud.

Corporate fraud, I've been watching this like a hawk my whole career from Madoff to Theranos all of it. And this one is the big one. This is the big one. He is, this is, this is tens of billions of dollars. This is crimes that are beyond belief, I believe, allegedly, that's my intuition.

And the payoffs and the grift, I'm the only, tragedy here is I feel terrible that Sam Bankman Freed killed himself next Friday. I mean, I hate to get dark. I know it's a nighttime show and we're wearing black. I know it's a nighttime show. It's twist after dark.

No. This kid's getting whacked. No, he's getting, I'm telling you right now. If this kid winds up dead in jail, he didn't kill himself. Because I think that there are going to be some serious ramifications here. I don't know what this kid knows, but it's starting to feel a little bit like time mafia.

But seriously though, like who's going to whack him? Like, Sequoia? Because I'm just saying the people who light speed? Nah. Yeah, lights speed for sure. I don't think it's going to be a venture firm. I think that there might be more at play here than we even know.

He spent so much money on all this stuff and buying off people. I can't. imagine where that money is. We're going to find out where every dollar is. I mean, I think we're going to find out where every dollar is. Let's keep it on that side of the tracks. And I think that the parents, I'm told, are still, or I'm told I was reading in the

Wall Street Journal, are still in the bomb as they're never coming back. I mean, these are law professors at Stanford who are now implicated. Like, the condos are in their names. Yeah, they're never coming back and or they may also be arrested soon. Yeah, they could be implicated. That's actually, yeah. I mean, what if they have to testify against their son on this? This is some hardcore stuff.

And we don't know much, but this took how many days? Because we've been talking about this for at least three weeks. I'm trying to figure out when this thing went boom on the timeline. I think it was the beginning of November. We're sitting here December 12th. Yep. So 40 days ago. It's about a bit.

a month, right? Yeah. Well, it's a month from the day that FTX filed for bankruptcy. Okay. Yes, they did file for bankruptcy November 11th. You're correct. One month from bankruptcy to the perp lock. And then, yeah, this all started with that November 6th tweet from CZ, saying he's going to clear his FTT holdings. That starts to sell off. Two days later, SBF says ZZ is going to buy the company. Finance cancels that the next day November 9th, November 11th, we get the bankruptcy, November 13, billions of dollars vanish

from FTX by a back door. And then we had 13th to now, about 29 days, whatever that is. Yeah. Of silence. Well, I shouldn't say silence. Silence from prosecutors. Right.

But he did not shut up. My lord. How many Twitter spaces? I mean, he implicated himself like 50 times. Why didn't he go on the lamb? He knows he's going to jail for the rest of his life. He should have gone on the lamb. This kid should have had an exit plan.

He should have shaved his head. He should have put a goatee on. He should have gotten on a boat. And he should have gotten to some dictatorship, somewhere. He should have gone to Moscow, Hong Kong, a Middle Eastern country somewhere. But really... They must have thought they could ride this out. I mean, again,

his parents are law professors, right? And there were some reports that he was working with his dad. Kind of his dad was his primary legal advisor. Like, they must have thought that they could sort of do this dofy incompetent defense in public or something. but it is like, it's fascinating.

There was, so November 2nd is when CoinDesk published this piece about Alameda potentially commingling funds with FTX. And then, and this is really, really interesting, I was reading about this guy today

who's ironically named James Block, no joke. And he's a doctor who is like a major crypto skeptic and he is really, really into financial fraud. like just as a side quest. He has a lot of fun investigating financial frauds

and he was like something doesn't add up here. So his newsletter on November 4th was one of the things that appears to have shown the huge hole in the Alameda balance sheet. Yeah. There's an interview with him with Charlie Worsell today and it's literally like the doctor who helped take down Alameda research. His post on November 4th,

Two days after Coin Dex was like, uh-oh, he was like, is Alameda research insolvent? And what he did was actually use the publicly available ledgers. What do you know that occur with trading to note that the flows of money back and forth didn't seem to make any sense? He is Jean-Louis-Gassier, perhaps of this story for people who don't know, Jean-Louis-Gatier whose name I love to say and who I've met, he ran Apple in France for Mr. Steve Jobs

and on October 18th, 2015, he wrote a blog post Thereinous trouble, a first person account where he, and we'll pull it up here for a second, basically went and got tested. Right. And then tested his blood. And I was like, well, that didn't work.

And then he tested, so he walked around Stanford, went to the university, you know, went to Stanford University's offices, got his blood done, then went to Theranos, got his blood done, things didn't match up. He knew it.

This is on October 18, 2015. Yeah. And he said in 2018, in a follow-up post, this could have been avoided. And he's not wrong. Wow. It's just extraordinary

that bloggers, citizen journalists, are actually playing a role in this. And this is not a dig to the mainstream media. This is an end, as Molly is apt to say. Not an or, it's an end. Mainstream media journalists like John Kerry Roo and Boston Globe and Frontline to so many great investigative journalists. But individuals can play a massive role in this simply by looking at the facts, people. You just look at the facts and you say one plus one equals two and does it add up?

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somebody leaked. Yes. So someone tipped off Coin Desk. That's how that initial Coin Desk story about the commingling appeared. Someone leaked financials to Coin Desk that showed this money being commingled. Now, this guy, Dr. James Block, already was super interesting, who was super interested and had already been writing

about how it might be kind of a fraud but he's the one who came up with that amazing graphic that just showed it being like a circle, the FTT investments, like it's a circle and then you pump it to here and then you give it to over this

and they do that. But, and this is where I think this is a bit of a knock on mainstream journalism. You have, in order to see that these flows didn't make sense, you had to be able to, one, understand the workings of the blockchain

enough to go and check the ledgers, which isn't that hard. But journalists aren't necessary. You don't have like beat reporting. People did not take, I do maintain that the mainstream media did not take crypto seriously enough, soon enough to have beat reporters who had the knowledge, the technical expertise to actually just go look at the ledger and be like, wait, I'm pretty sure that this money is just going straight back here. So I will not come for that.

Yeah. Yeah. Who called it out first? Who called out the SBF FTX scandal on Twitter first or on their blog? I mean, KynDust did the first reporting, but you mean like who out there was like, I'm not sure. I want to know who the real skeptics were. Like, there must have been like a series of skeptics even before that. Right.

This would be great to figure out who didn't believe them, right? Because this is what happens in a scandal. Matalvin did great coverage. Was like, I think you just described a Ponzi scheme to me. Oh, right. Remember? And SBF was like, what was the data? Yeah, that's true.

Let's find out. Oh, that was such a great moment. Yeah. So listen, here we have it. We're going to look back on, this is my prediction. This kid's... Oh, and Kevin O'Leary. I don't even want to talk about Kevin O'Leary.

I mean, I don't know if you saw him on CNBC last week, the Shark Tank dude, defending it and talking about his diligence and everything. He got paid $15 million. dollars. Kevin O'Leary got paid $15 million. That is crazy for a spokesperson. Listen, I get off at spokesperson stuff. I mean, I'm not Kevin O'Leary, but I'm probably actually the same league as Kevin Leary. I'll take it back. I could have kicked me like a Millie. Come on. But I'm saying, I've been offered, you know,

six figures, but I've never been offered seven figures. Yeah. Eight figures? Eight figures? You're, you're getting into Tiger Woods, Serena Williams, Draymond, you know, you don't get $15 million as an investor, a CNBC commentator,

a podcaster to stump for a crypto exchange. That's a red flag territory. I mean, that's the part where when you say we're going to find out more things. I'm just forgetting about the other thing that you said, but like, he's splashed a lot of money around.

Splashy cash. to a lot of people. I don't see a lot of, I don't see a lot of soul searching on the part of all the people who said he would never be investigated because he only donated to Democrats. I'm just saying,

didn't see a lot of, didn't see a lot of like, oh, look, he did get investigated. What do you know? Man, are these... Oh, look, he donated to Republicans too. He just was sneaky about it. I mean, he just, he was giving people

bags left and right. Yes, he was. I think to cover up the crime. And so, yeah, here we are. And now he's in J-A-I-L in the Bahamas right now. Okay, let's do some predictions here. It's going to take three years, but in three years, he's going to be in jail.

Yeah. And he's going to be in jail for more than 20 years. Or he's sentenced will be over 20 years. And then we'll see who the co-conspirators are. I don't think Kevin O'Leary is going to be a co-conspirators. spirit spiriter. But I think Kevin O'Leary is going to have to give back $15 million to the people who's, if that money was stolen, that's going to be an ouchy for Kevin O'Leary. Because he claims of the $15 million, he put like $10 million of it into crypto or something. But this life

sentence is going to turn into a lot of outchies for people who took money from him. You got to give it back. Semaphore, I think they probably took $5, $10 million from him in that $25 million round. I'm taking a guess. ProPublica. All this money. Yeah. All of this money is stolen, it seems. And those people are going to have to give it back.

Clawback time. Like bankruptcy court literally might come calling for them. And I think there's a fair question that Nick is asking, which is if he gets, and if SBF gets a made off level sentence. Yep. Is this the biggest black eye for VC ever? Bigger than Theranos. It's bigger than Theranos.

Because really. Because there are no sociality VCs weren't even in. Yes, major VCs weren't in. This is going to change forever. This is going to change forever. Due diligence and governance. This is the straw that broke the camel's back. You have the Facebook, you know, super voting shares.

You have Google super voting shares. Okay. Well, you know what? Those companies made everybody rich. They're real businesses, et cetera. And then we got a collection now of instances, whether it's We work, which didn't do things illegally, just did stupid things

and was mismanaged. Governance. And it was all governance problems. You know, Uber had some governance problems. And here we go now. This is the ultimate governance problem. And so, yes. So this is like made up money,

extreme financialization. No board, no CFO. He wasn't giving financials at all. He was like blowing people off on financials and giving him post-it notes and was operating out of the Bahamas. And you have some of the biggest names in VC in here. Like this list is British. Everybody.

N. A soft bank inside. Multi-coin is not a big name of VC. Tribe. Trama bottom. Sequoia, Bradfeld, Maltimiter. Now, Altimeter was a small check. And in a lot of these cases, you know, as Sequoia has already done, the Mio Copa.

And they already said, like, listen, it's in a fund that did a ton of, has a huge return. However, you got to do diligence, right? And you got to have governance. And so this idea that. You know, we have to move fast. We have to fund these companies. Now everybody's going to pump the brakes. This is the peak of the bubble.

And we have our own made off. Theranos was like, a couple hundred million dollars. Yes, people's health were at risk. I don't think there was ever anybody who died from it. It certainly wasn't good for the... It was never even a criminal case. It was never a criminal case. This was, you know, like, or it became a criminal fraud case

because the investors pushed for fraud charges based on their investment. but not based on like people's health or somebody, you know, getting wrongly told they did or did not have cancer. And we were, we work wasn't a big deal. So anyway, what we're sitting on right now.

Yeah. Yeah, is going to be a made off level event in our industry. It's going to take two, three years to sort out. We'll be sitting here in 20, this will be resolved in 2025. That's when he'll start his sentence

sometime, second half of 2025, I would take two or three years for this to work out unless he pleads guilty and gets a, you know, he pleads. And I think playing out the deal, that might be his best move here. We'll see what his lawyers. This kid seems to be a real, I mean, unless he's some mastermind in terms of post stealing all this money, the checkbox for dopey is what he did once this thing went into bankruptcy. He did kind of act dopey after that.

But before that, he was a mastermind. So I think he's, well, I think he was acting dopey. I'm 100% with the people who say that he was acting dopey on purpose as an attempt to sort of sway sentiment around the idea that he was just a sweet ding-dong. And it's too complicated to understand and it got out of his control. And that's why. And I suspect that dopey days are over. Like he's going to stop talking now. He's just got to settle.

He's got to settle. I think he should just take the 25 years. He's whatever he is. If he's 30 years all right now, he gets out when he's 60, take the 30 years, go for good behavior. All right, that's all we got, folks. We wanted to get out to you early. We want to the rest of the show.

We'll do the rest of the show. This is enough. Mishugana and craziness for one evening. I hope they throw the book at him. This kid's garbage. The people around him are garbage. And the industry should have done a better job. The end.

well, now we got something to talk about for three more years. Boy, man, this is going to be a lot of stuff coming out. It'll be a good show. It's going to be a good show. Our show and the TV show they make out of this. TV show, going to be great. Shout out to Who's My Guy from Moneyball? I love that actor.

Lewis, Michael Lewis. Yes. He's the writer. But who's the guy who played the analyst with Brad Pitt? Jonah Hill. Johnny Hill is getting an Oscar. So I want to congrats. They're going to use that de-aging technology on him.

Doesn't matter. That kid can do it. I want to congratulate Jonah Hill on his Oscar. And I think the Oscar is going to happen in 2026. And the conviction and this kid's in jail in 2025. Enjoy the rest of the show. Hey, when COVID hit, you all know, is struggling with my weight. One of the things I tried was a continuous glucose monitor,

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Visit nutrasense.io slash twist and use the promo code twist to save $30 and get one month of free dietitian support. N-U-T-R-I-S-E dot I-O slash twist. All right. I have been on this semaphore Politico, SBF, Splashy Cashy. He's been given everybody, you know, millions of dollars. But in this fraud, we just got the biggest bagholder in media. This is a pretty big bombshell. Axios reported on, I believe, Friday, maybe over the weekend, that between spring of 2021 and spring of 2022,

Alameda, which of course is the sister company of FTX, Sam Bankman-Fried's two companies there, the Twin Stars, gave over $40 million of secret loans to LSC's tied to the Block. And specifically, the Block, of course, is a publication, a news publication that covers the crypto industry. Get it, The Block. I think it's the number one, right?

I think it's like Coindex and M. Pretty much. Yeah. And one and two, maybe. Gave $40 million of secret loans tied to the block CEO, Michael McCaffrey, who has since stepped down after this reporting came to late. They bought this guy, condo in the Bahamas. Hold on. I don't even know.

I can't keep up with this level of fraud. This would be like if Bernie Madoff gave a Wall Street jury. journal writer, a condo in the Bahamas and $40 million in loans to give them great coverage. They're not giving $40 million a loans because they're in the loan business and the CEO of some crypto blog is a great customer who's going to pay back the loan at a high interest rate. This is payola. This is the only explanation. You don't give $40 million to somebody running a publication that covers you covertly

for any other reason that I can determine. Yeah. And I have a high level of expertise in these things. Unless, I'm talking about fraud. I mean, I've been covering these frauds. This is payola. Now, if semaphore wants to pretend it's an investment and this is a rich dude and that's been happening for all times and Bezos bought the Washington Post and people invest,

okay, you want to play that game? I gotcha. We can debate it. Mm-hmm. Molly, that's not this, right? Mm-mm. This is stone, cold, pale, and a lot of it. I remember many years ago now, I think a decade or so, there was like a New York Times reporter,

and it was uncovered that he had taken like $35,000 and somebody had helped his kid get in private school or something. And it was like the biggest scandal ever, ever. It was like, we have to like tear it all down, shrub the whole thing, like $35 grand. Right. Now, who took it? Help getting into a private school or something, a New York Times reporter. I'm probably getting these details wrong, but I remember that you're a little bit of, yeah, people do grifty stuff, but you're talking about adding another three zeros. Right.

$40 million. To the left of the decimal place. And that's like you might get sort of like a skew, right, or like a story placed or whatever one assumes. There wasn't even like an obvious outcome of it other than just sort of influence. This is $40 million in a freaking condo to the CEO. up a company that specifically covers this entire industry. Like, you have to go, and it was complete evidently news to the journalists who worked there who were like, wait, do we now have to question everything we ever wrote?

Like the level of hustle here, the absolute methodical purchasing of politicians and members of the media is frankly like way more made off. Like, it belies everything that SBF is out here saying about what a just sweet ding-dong he was who, like, did too much accidental at a role and wasn't paying attention. This is Lex Luthor. This is Lex Luthor. He is not a dummy. This is the Lex Luthor of corporate criminals. He makes Madoff and Theranos look like, you know, minor, like the penguin and the riddler. This is Lex Luthor.

This is running the Luthor. Legion of Doom. He's got a huge brain. This kid is Ivy League educated with Stanford parents. He saw how the game was played. And then he took a huge chip stack and he said, you know what I'm going to do? What's the most influential person covering me? Well, I'm going to give him $12 million in April of 2021, according to this report, to buy out the block. I guess there were some other investors. Then, wow. So he gave the $12 million. SBAF gives him 12 millie. He's like, here I bought you.

That's a bag. I bought you your publication for you. Listen, there you go. That's more money than my house cost. And I'm rich. There's a lot of money. It's a lot of money. I'm looking at that going like, that's more money than, oh, that's a lot of money for me.

And that's just the first slug. That's the first lug. Second loan, not six months, maybe eight months later, January, 20, 22, according to these It's 15 millie. Provided capital for the block by an LLC named Lonely Road. He hit it all, by the way. He hit it all under LLCs. Yeah, of course.

LLCs, Bahamas, multiple payments. Because when you know you're in Griffed territory. This is some crazy isish. And then a third loan sometime in the spring of 2022. And by the way, the spring comes but three or four months after the winter when those last loan happened, 16 million, which in part went to buy an apartment in the Bahamas, buy an LLC name Red C. Now, I'm wondering, because I've heard these reports, I don't know if you've heard them, that scam bank run fraud owned a bunch of properties or buildings in Bahamas, allegedly,

allegedly. Allegedly. Allegedly. Well, apparently, God, man, if I have to say allegedly again, I'm going to literally smack my head into my desk 10 times. I know. Allegedly. I'm wondering if he bought, if this is a round trip where he bought the apartment from Sam Bankman fraud. Oh, maybe? Because he was already shopping for condos in the bomb as he bought those ones for the parents. Yeah, I think this guy was condo. I mean, this guy knew how to spend money.

I give Bankman fraud some. Well, also, that's how you get the Bahamian government on your side. Oh, God, you're right. Taxes. You do a ton of real estate purchases and then all of a sudden you've got like, it's all taxes and it's all like golden visa type stuff. Like that's how you get a golden visa if you go to Portugal or Spain or whatever.

It's a real estate investment. So he does all this. He's in a non-extradition company. The authorities are never coming for him. He's like, I bought a ton of real estate. Don't you worry. I'm keeping that Margarita Villain business. And I have bought myself a torrent of friendly coverage at the block

because I own that guy outright. Man, this kid. There is no universe in which this was like a dirp a dirp, stumbling. I'm sorry. I'm really sorry, but I just,

you know, I could have done better and I apologize. I was just, I, I, oh, yeah,

where did the money go? Where did the money go? That was amazing. When did I start? When did I start with their loads? Yeah, no, I did the best I could and I could have done better.

And for that, I apologize. And I'm like, this guy is Kaiser Soze. You ever see Kaiser Soze? You know what I'm, the reference usual suspects? Yeah, of course.

Yeah. This is Kaiser Sosa. This is Kaiser Sosei stuff. Like, I'm sorry, but it just is. And everything that we find out, every additional bit of information and shout out to Sarah Fisher at Axios for uncovering this one. Shout out to Xios.

I love Axios. This is the kind of stuff that's just like, it piles up in the evidence locker. It's like, you don't buy this kind of influence. You don't spend this kind of money. So, again, methodically, if you're not just trying to get the best treatment ever. The house listed under his parents' name was worth $16.4 million.

I mean, you know that Sunny Balwani and Elizabeth Holmes only went down here because their investors came for them. Like, if I were one of these investors who's already, they're already on the Mayaculpate tour, I'd be like, okay, you know what? I'm coming for you. I'm coming for you, SBF. Extraordinary. We spent our LPs money buying journalists. What? Anyways, bananas.

Bonanas. Banana pants. And so they've put now a disclaimer. The block has put a disclaimer on every article. Just shut the website down. Right. Delete the articles. It sucks for the people who work here who probably did think that they were really just working at a new site.

But just shut it down. There's a disclaimer on all the FTX articles from the past that's a beginning in 2021, Michael McCaffrey, the former CEO and majority owner of the block, took a series of loans from former FTX and Alameda founder, Sam Bankman-Fried. McCaffrey resigned from the company in December 2020, after failing to disclose those transactions. No, wait a second. Does Michael McSam artist,

Michael McSam-Mick-Lam-Wole-Block? Like, he's no longer CEO, and he was the former majority-owner and majority-owner of the block. Majority owner. So they're not saying former majority owner. he still owns it. I think you might still own it. So shut it down.

Turn the website off. The cheap revenue officer Bobby Moran will take over a CEO and will look to restructure the block to buy out McCaffrey's stake. Here's what McCaffey does. Goes to the management team. You can buy all of my shares in the company for one Bitcoin. Ship the Bitcoin. Give me the Bitcoin on a wallet.

Give me a thumb drive with the Bitcoin. Because by the way, Michael McCaffrey, you're going to jail. Either you turn and you go fed witness and you give all the emails, the transcripts, and you help put this guy in jail or else you're going. Because if this seems so dirty to me, I want to know where that money is and what dirty stuff went down. Because I wonder if they pay taxes on this. Who knows what, when people do this level of primes, there's like 50 other ones because they're sloppy criminals. And there's no way.

Yeah. I mean, this loan question is. I want to make sure I say a legend. It's super sketchy. Like, I want to see the paperwork on the loans. Like, you don't want a journalist, $40 million. Have you ever met a journalist? We're never going to pay back $40 million ever.

That's not a thing. All he's got to do is get like, you know, I don't know, you know, 80 book deals. You know, and just right. We'll just pay it all back in FTT. Molly, just please. Anytime we're talking about the story can just every 30, random 30 second timer, just drop a button that says allegedly. You're the one who just said that guy was going to jail,

allegedly. Allegedly. No, I have a good send for this. I told you, Sonny Balwani and Elizabeth Holmes were going to jail. And I predicted six to like 15 years. Where did it wind up? 12. 11 and 13.

10, whatever, 11. And I said she'll serve six or seven. So I'm sticking with my original prediction. She does six, seven years, hard time. I'm sorry, easy time. She's going to have a, I mean, Balwani and Sam Bankman fraud are going to have a wonderful time in jail together. They're going to be playing. chess, they're going to be doing startup ideas, they're going to get out, and they're going to go

look up Shrelly, and then who's the guy who did a fraud festival? Oh yeah, the fire festival, Billy. Billy Fraud, sir. Billy McFarland. Here you go. Legion of Dokes. Lex Luthor, Sam Bank McFried. Yeah. You got Mr. Ice, Schrelly. You got, no, Screlly's the riddler. He's the Ridler, yes. He's the riddler for sure. Yeah. And Elizabeth Holmes is poison ivy. Mm-hmm. Sunny Balwani's a penguin. Sunny Balwani is the penguin.

Just disgusting gross human being. The Legion of Dopes. Amazing. I'm so glad these guys. I hope they get max time in prison. Allegedly. Honestly, I'm going to say something here about these white-collar criminals. If you're a white-collar criminal, you should have no

white-collar prison. The idea that somebody who sells some weed goes and does hard time or somebody who commits a murder and does hard time. And all these white collar criminals are like, you know what? The worst thing that happens, they get three years, they get to walk around. You know, I go for a jog. You know, it's boring, but I lose a little weight. I read a bunch of books.

It's like these guys are going to the White Lotus. F these guys and gals. There's only one gal, but they need to do hard time. Let them break. Like, sir, I'm not joking. Why do white-collar criminals get white-collar prisons? Where did that concept come from? Because why do people who commit one series of crimes get...

Yeah, it's horrible. A horrible, torturous existence. And I don't think those people should get the torturous existence. Let me be clear. I think everybody who's in prison should be treated with dignity and it should be a real rehabilitation. But this idea that white-collar criminals get a walk and a pass, it's not cool no well it's that is why so much about our financial system is broken so much about

our economy is broken because there are no there's no accountability for financial crime and fraud there's very bit you know there's hardly ever account it is a shock that elizabeth holmes and sunny balwani went to prison it's a you know no bankers went to jail like that you get you get trump when no bankers go to jail after they literally break the global economy by sheer dint of greed and madness because they can't. All right. Well, listen. The point is, you're listening to the show This Week in startups,

there are people who are grifters and criminals in the world. So for young people listening, you don't want to be in that bucket. The game is already rigged in capitalism to be in favor of risk takers and hard workers. The game, and when I say the game is rigged, I don't mean it's like cheating rigged. it is designed, our beautiful capitalistic society here in America is designed to give huge rewards to hardworking, innovative people. We have the most beautiful open architecture and operating system for capitalism already. You need not cheat. You need only to work hard, recruit great people, build great products, and delight customers.

a great product with a great team and delight customers, everything works itself out. Rinse and repeat, you fail two or three times, you win once, you have a great career. There's no reason to cheat. There's no reason to pay off journalists and politicians and do this level of grift. It's stupid. If you can get into MIT and your parents or Stanford professors, you can figure out how to run a proper business. If you're at Theranos and you were born in Silicon Valley, Elizabeth Holmes, and Sunny Balwani was a millionaire who had a successful company, they didn't need to cheat.

They chose to cheat, Molly. They chose. They made a deliberate decision to be greedy criminals. That's it. And here's the thing that I will say about Holmes and Balwani. At least they started out. Like, at least she genuinely wanted, oh, come on. I don't believe for a second that this person was like, I'm going to, if you're going to cheat.

Actually, I agree with you. If you're going to cheat, do it the SBF way. Just make up some money and then start getting a bunch of investment and move it. some money around, right? Like, this person genuinely set out to try to revolutionize health care, to make it so people didn't have to, but not criminal, right? But like all founders are somewhat delusional, but not criminal. And ultimately, with a good goal in mind, like a goal to save lives and help people and make testing easier and more accessible. She drank her own Kool-Aid. She drank her own Kool-Aid and they got, it all got away from them. And frankly, it is almost unheard of

that their own investors are the ones who sued them. Had that not happened, I think there would have been far less accountability, if any. And then you have Sam Beckman-Fried who was just like, oh, I understand how to completely manipulate the workings of the financial system. And journalism and media and politics. Right. And media and politics. I mean, as it like an object lesson and celebrity.

And how to basically just hack and celebrity. I mean, who didn't he compromise? It should be. Has he gotten to judges? I don't know. We'll probably get to the mob. I don't know. We'll find out.

I feel like that. I feel like the mob would be like, which constituency. We operate in cash. He didn't. Right. Compromised. Has he gotten to any, uh, religious people? Like who's left on the list who he didn't pay off?

Religious people. The mob. Mm-hmm. And, uh, law enforcement. Yeah. And we don't know. The judicial systems. We'll find out.

Right. We'll find out. But like, I'm sure there's some judge who got a bet. Kid ran a freaking playbook. Unbelievable. Lex Luthor of Crypto. Speaking of financial shenanigans.

Let's go. The story that I have been all over because I'm like, I have some butterflies about this as a trend for the American consumer. Buy Now Pay Later, which we have talked about before. We will keep talking about and is only getting bigger because now Walmart is getting in the BNPS. game. Hold up a sec. Wait a second. Walmart. I just want to point out, I went to a Walmart.

What? You? Once. I went to a Walmart once. The same number of times you went to Costco. I told a friend of mine about that the other day though. That's actually true too. I literally was like, dude, dude, dude, Jason has been to a Costco one time ever. I want to go. Actually, for me, I want to go to a Costco kind of like as a recreational kind of thing, like a discovery process. Date night. Yeah, actually, For me, that would be like a full date night. Because like it's so fun and there's so much cool stuff and it's all a great value. And then you can get takeout pizza and like a bottle of wine and like a salad.

They have pizza there? Oh, they have a food court? You don't know about Costco pizza? I know. I mean, I know about IKEA hot dogs and I know about the rotisserie chicken. Who does rotissory chicken? Costco has the $5 chicken and they have $1.50 hot dogs also. And the Costco hot dog is delicious.

But the pizza is where it's at. You get a couple slices. I can't. A pre-made Caesar salad. and a bottle of wine and you sit in the car and look at the view. It's a great,

it's a really fun date night. Look at this. My, my producers here, Rachel and Brian, are just very much into the Costco. Brian was there yesterday, buck 50 dog.

Yeah, not bad. I could, like religion. I think you would like it. I can F with a hot dog. I think Costco's how like rich people stay rich because it's a good value.

Pause. Sorry, I pause myself. If you, however, let's get to this. But here, my point about going to,

I had a point about Walmart. Because it's inexpensive. I've had three. I filled three shopping carts. Yeah. And it was like $127. And I was like, wait a second. When I go to Whole Foods, it's $127 for two bags.

What's going on here? And I realized things are cheap in the world. There's like a cheap version of all the expensive stuff I buy. Yeah. There's like a cheap version. version of yogurt. There's a cheap version of milk. There's a cheap version of ice cream. I didn't know that. I'm buying like pints of super premium ice cream for $11. I didn't know there was a $3 version of that. I buy like this spoked yogurt for $18 for a pint that's made by some artisanal people who hate me in Oakland, your neighbors.

And they laugh at me when I buy this stuff. One time. He's been there one time. I mean, to me, Whole Foods is like my Walmart because I order from good eggs. So when I want to save money, I go to Whole Foods instead of good eggs. I did make Whole Foods a lot cheaper, though. They did. Unbelievable. That is better.

Yeah. So Walmart already relatively inexpensive is nevertheless offering a buy now, pay later option. They partnered with a FinTech venture and they are according to the information going to launch it in 2023. and that would put Walmart, done, done, done in direct competition with the other Buy Now Pay Later services that we've talked about so much like Affirm and Klarna. Currently, Walmart actually offers Buy Now Pay Later using a firm, but it's apparently going to dump them and move on to its own BNPL.

And what's interesting about this is, is one, like Walmart is already pretty inexpensive, but two, or B, increasing people's access to what is basically rebranded layaway at the moment of what is potentially going to be a protracted economic downturn just feels like a recipe for even more American debt. Like we're in the trillions of dollars of American debt right now. Fully, what is it, like 40% of people say they've missed at least one payment, 42%, have made a purchase through one, buy now,

pay later, and over a third report having missed at least one payment. These numbers are going to get crazy. This is extraordinary. You called this for the past year. I thought, hey, buy now, pay later.

Whatever. It's not really going anywhere. The, you know, the people who are like these direct-to-consumer people, they know what they're doing. Not a big deal. They've got some high margin,

you know, direct-to-consumer product. and they can float it. They got big cash reserves. If you buy your Peloton for easy payments or you buy your, I don't know, your Casper mattress, whatever it is, who cares? If it's poor payments of 50 bucks, a young person buys that, somebody who's on a tight budget, they want to treat themselves. I didn't have a problem with it.

Yeah. But you called it. Low income individuals with no savings are being offered a layaway plan for consumable. groceries. Alarm bells should be ringing people. You should be able to buy milk and socks and underwear for your kids without it being on a goddamn layaway plan. Boop.

Yeah. The economy is about to crash. Yeah. Wee, I know people who won't even buy groceries with credit card. Yes. You know how fast you're shopping, American consumer. I know people who won't even use credit cards for groceries because of that entire concept that like the milk is gone before you even get the bill.

But this is that time's like a million. You know how long milk lasts when you got three daughters? Like five minutes. Exactly. You know how much milk I'm buying right now? Yeah. You're like how many eggs I go through? Buy now, buy now, buy now, pay now, pay now, pay now, pay now.

I buy 18, 24. I bought three dozen eggs the other week. those eggs were gone in a week. Damn, those are little dairy. You're like running a frat house over there. No, six-year-old girls eat a lot of food. 13-year-old girls eat a lot of food, man. I make them omelets.

That's that's it. That's almost a dozen eggs. And they want seconds. So I'm at a dozen eggs in one breakfast sometimes. Yeah, I just, I find this stress. Family of five. This stresses me out. Mostly people are using by now pay later right now for electronics.

But of course, you just start using it at Walmart. You're going to like, it's. going to be household necessities. It can be audio. It could be toys. It just, and you don't have to have a credit check. Don't do it. It's just a, no, I just don't like it. I don't like it. Don't do it. This is, Molly, remember the housing crisis? Exactly. This is that. 60% of people owned a home and they're like, you know, it would be great if we could get to 70%. How do you do it? Oh, you know what? We'll do a no research loan, variable interest rate. You just have to pay the interest. Your home's going to double in price every seven years. So just pay interest on.

for seven years, you're good. Yeah. And what happened? It turns out people from the 61st to 70th percentile should rent. They shouldn't be homeowners yet. It's a beautiful dream that they could be. Yeah. But they don't have a stable enough income.

That's why people wouldn't generate loans for them because they didn't have proof of a stable income. So they said, we're going to do a no proof loan. The proof was there for a reason. Right. How dare they give low income people, middle income people who we know are stretched? We know their savings are running out. We know there's a recession.

I mean, it's weird because it's a white-collar recession, so maybe this will be okay. Maybe they'll just get extra jobs, but I don't like this. Yeah, I don't like it. I mean, just the like cheerful extension of debt, I mean, the fact that credit card companies make money on people not paying their bills every month, like you and I are their nightmare customers because we pay our bills every month. And so we're not paying that 22% interest, 16% interest, crazy amounts. like these buy now pay later companies ultimately are going to make money when people default because then they can charge them interest it is like unquestionably a predatory business model unquestionably and the idea of it just being extended to people at a time when they are already

extended is is not i just don't i don't like it i don't know if it's the kind of thing where the government should intervene and say like maybe there's a max that you can put on buy now pay later I don't really know, but like, was there ever a layaway crackdown? We don't need that. In the words of my friend CP, the franchise from Knicks fan TV, when a Knicks player does something stupid, specifically Julius Randall, we say, we don't need that. That's what Knicks fans say.

When he dribble, dribble, dribbles for 20 seconds, does some crazy spin move into three defenders and the ball gets turned over, we all collectively say what CP the franchise has taught us, we don't need that. You know what? Society, we don't need that. Buy now, pay later for your goddamn groceries is the craziest, stupid, most irresponsible decision by Walmart I've ever seen. Yeah, I don't like that.

To the executives at Walmart, look yourselves in the mirror and say, we don't need that. No matter how desperate you are for revenue Walmart executives. Do not put low-income people onto a payment plan for milk and fucking eggs. Yeah, it's like payday loans. Damn, we're doing stupid things. I know. This is stupid, people. Wake up.

You don't need a layway plan for milk and eggs. I mean, Jesus. What kind of financial instruments are we making? I know the worst. I am, this is exhausting. It's exhausting. It is exhausting. And consumers will take advantage of it and they will get themselves.

in trouble and other companies will be like, this is a great idea. I can totally make, I mean, it's like, you don't even know where to start with the perverse incentives. I literally don't even know where to begin. Everybody hears to blame. These are savvy finance individuals. The people from the buy now pay later companies, the retailers. If you do this for a laptop, I get it.

If you do it for, you know, I don't know, a car, you know, I understand it. Like something should be financed. Milk and eggs are not in that group. Toys for your kids and socks and underwear or not in that. They're consumables. Yeah. Jesus. Jesus.

I am absolutely furious about executives doing stupid shit like this. Because you know how it's going to end. Like we all know how it's going to end. It always ends the same thing. I didn't, you know, it's not like it didn't take a magic ball to be like, huh, wait, so you're giving people access to more money than they can afford. Where has that ever gone wrong before? Let me think of all the times. It always ends.

same. Amazon, by the way, building the same thing. They have an internal buy now pay later service called Amazon monthly payments where users typically pay 20% upfront of the full order price along with any additional fees and then can pay it off in monthly installments. You know, by the way, in Europe and Scandinavian countries, there is no

financing. Like, people buy their houses and cars with money. Like cash. If you were buying a home in Greece, Italy, a lot of European countries, the expectation is 30, 40, 50% down. Okay, different countries have different ideas about debt.

Debt equals death. I did a tweet from the other day about venture debt. Yeah. And this thing resonated. So for the producing team, if you can go find that tweet, I did it on, I think,

Sunday morning maybe. I did two or three tweets in a row about venture debt. There was a ton of venture debt given to startups. That's fine if it's a state-stage startup, and you have a CFO. Totally fine.

We talked about this on a VC Sunday school. We did a VC Sunday school, yeah. People started giving venture debt to series A companies. The series A companies, this is the BN, buy now, pay later version for startups. Yeah. Banks started giving $2 to $5 million in venture debt to unprofitable, early-state startups, like they were goddamn Patagoni invests with logos on them over the past decade. every time I saw this, I begged my founders, do not do this.

And they said, no, we're not going to pull down the money or no, it's like an option. Why would you be against this? You're a downer, J-Cal. You don't get it, J-Cal, blah, blah, blah, blah. Debt is a freaking ticking time bomb. Don't live with debt. It makes everything harder. And unless you have a CET, debt is a very expensive financial instrument.

10, 15, 20% interest rate, and venture debt comes up in but two or three years. And then it requires a venture capitalist to buy that debt basically to get you out of the hole. It's like a loan shark. Now, if you were just doing what's called factoring, you know, you have a million dollar contract for the year and you want to get six months in advance to build the software, I get it, no big deal. But people started using this to cover their basic burn rate.

And, you know, this is a, you know, this is a. mistake. And we are now in a position where people are living on too much debt. This is like giving producer Nick, buy now, pay later on his espresso martinis on the weekend. He's going to pay for those espresso martinis on Monday and Tuesday I can tell you with the hangover. He does not need. He'll be sorry. Consumer debt in America. Those espresso martinis that my brother Josh makes, That'll get you in trouble. I mean, we'll have one this week when we're skiing. Take carey.

Like Uncle Louis said, tecoresi. U.S. consumer debt is $16 trillion. Jesus. I'm sorry about cursing this much. There's going to be a record for beliefs. It's going to be a tough one. And then non-housing debt has doubled every year since 2003 and is now just over.

four trillion dollars. And most of that, you can see like a ton of that is credit card debt. Actually, scroll down a little more. Let's see where it all is. Oh, I'm sorry, it's all student loan debt. And then auto loans and then credit cards and then others. Yeah, bonkers. This is going to be bonkers.

It's going to be bonkers. We're just all indentured servitude. We're just all like going to become indentured servants in America just paying our monthly big. Like you just pay the. the monthly nut, the whole thing, and it just includes all of your stuff. It's like where we have at long last become an actual rental society. We rent our entire lives.

Startups don't do this. Please don't do this. Do not. Please don't take debt. It is a trap. Literally, this is what happens we take venture debt. Everybody gets on the bus. And then literally somebody goes, oh, look, I found a backpack.

There's a bomb on the bus. Oh, there's a bomb on the bus? Oh, great. Stop. Let's stop the bus. Stop the bus. And let's somebody take the bomb off the bus. Like, no.

The bus has no breaks. You have to drive the bus before the bomb blows up. It's the movie speed. Yeah. Go watch the movie speed and ask yourself, do you want to be Sandra Bullock? Is she the one on the bus? Yeah. I haven't seen this film in 30 years.

I saw it in the movie theaters. I don't know when this came out. I remember it being a very tense movie. Then you got to look up the Simpsons episode where Homer is trying to remember the name of the movie. And he's like, it's like, it's like the bus. Like it can't go down, slow down. It has to go a certain speed the whole time. Like he just says it over and over and he's like, but I can't remember the name of the movie.

Look at baby Keanu. Aw. It's got Keanu and Sandra Bullock. Yeah, dude, it's a great movie. Well, and who's that guy? I know that guy. Bill Paxton. No, that's not Bill Paxton.

That's the other guy. That's the guy from the news TV show, the newsroom. Oh, yeah, yeah, yeah. Totally. That's the newsroom guy. I love that guy. It's a great cast. Please tell me he didn't die.

Dennis Hopper. What? Yeah. My God, I feel like I got to talk to Lee to Lon Harris about this. I know. We got to watch this movie. Let's watch it before Thursday. That would be great.

We can do it. No, you know what I'm doing? I'm watching some of the A.O. Scott movies. Let's pick one of the A.O. Scott movies or two. Okay. Like the sci-fi one and the other one, TAR. Whatever's on pay-per-view or to my friends in the movie business, of which I have many, they got these screeners, send me a screener.

Neptune Frost. That's the one I'm going to watch. I choose Neptune Frost. Okay, okay. Can you just make sure we let him know on our group chat that we're going to do it? Ladies' choice. Again, I'm going to be misogynist on the program. Ladies' Choice, I hold the door for Molly, my wife, everybody.

I'm sorry, I'm old school. Sandra Bullock, Keanu Reeves, Dennis Hopper, Jeff Daniels. That's my guy. Alan Rock! From Billions and Ferris Bueller's Day Off. Alan Ruck, my guy. I love that guy. I feel like Alan Ruck.

That might be a new bromance. me. I know everybody's thinking like, oh, you should be pals with Keanu. Um, I feel like Alan Ruck and I could have like a good guy bromance. Keanu's out, Alan. Reach out, Alan. Let's produce like an indie film together. Connor. From Succession. Okay, here, just this is a message to all my super fans. I feel like Alan Ruck and I could roll together. I like his like vibe. Like, we could be homies. I think we'd let, I think we'd tear up the town. Like the two of us like, we're kind of like both character actors in this simulation. The two of us, like, we're kind of like both character actors in this simulation. The two of

going out would be like completely mid celebrities. It'd be like a midnight out. We're both mid on the celebrity scale. That might have been the case pre-succession, but he's kind of a bigger deal now. Nah, he's still mid. Although so are you because of all in. But we're both mid. We're both mid.

There's nobody here is Keanu. Now you're like upper mid now. You guys can be upper mid. I keep myself at mid because I prefer being mid. Mid to low. Life is much better at mid. I like being a D-list internet celebrity. That's my,

You're just brilliant. Like, just enough. You're a brilliant media commentator. Well, I tell my child, and I will stick by this until I die, I would rather be renowned than famous. Of course. And you are. Look at all the awards. Podcasting Hall of Fame.

Podcasting Hall of Fame. All right. Which basically is a closet somewhere in like somebody's house. Pretty much. It's like a podcasting All of Fame. It's like somebody's guest house in like Los Phyllis. I'm pretty sure that I'm pretty sure the one I can. got already close. They closed it down. They shut it down. I might have been the last.

It might have been the last class. Love it. All right, everybody. This been this week at startups. Thanks for tuning in.