It always struck me as odd that this guy came out of nowhere to become one of the wealthiest people in crypto in a few years.
I don’t know if his adherence to effective altruism had anything to do with this outcome, but taken to an extreme I could see someone rationalizing fraud to redistribute wealth in a way that maximizes benefit to others. Basically Robin Hood.
Not trying to defend SBF or FTX but honestly wasn't that impressed with this critic either.
His criticism seems to break down to:
1) Look at him, he's ugly
2) He doesn't have the proper lineage of insider mentors to be allowed to be a billionaire
3) We don't have the full story on the original arbitrage mixed in with some political pandering
4) The compliance officer was sketchy
4 seems to be the only valid point. 3 is worth further research but not really anything in itself. The other 2 reflect more poorly on this guy than SBF. Overall, I don't think this guy really had anything, I think he just didn't like the smell and ended up getting lucky on the timing.
But he 100% did not call out any meaningful elements of what ended up happening in any detail.
Those were not his primary complaints. Yes, he took some shots at his appearance, but let’s be honest. The financial and VC world has a stick up it’s butt, but this nobody (Sam Bankman-Fried) shows up to interviews and meetings in a three day old t-shirt and shorts and can’t keep his leg still and talks like he’s been up for 24 hours straight on Red Bull. It’s strange. Why does that work for him, who has nothing to explain it away, and no one else? Where did he come from? Where did he get all his money? Why were major VC funds fawning over him?
The short seller also mentions that this is only “3%” of what he has and is working with an investigative journalist to blow this up. And that was weeks ago, and they were probably working on it before that.
It’s not about credentials. It’s that you have 20 year olds out of nowhere suddenly managing tens of billions of dollars. Like the guy says, it doesn’t make any sense.
In interviews, FTX never gave reasons of why they moved to the Bahamas from Hong Kong. He really doesn’t ever explain anything.
As an entrepreneur in finance for 10 years, I think the guy's perspective is actually pretty understandable. When you've been in finance for a while and have learned how many footguns and ways to go to jail there are to get major regulatory projects licensed and functional, you start to think of projects like "launch a bond offering and get it rated" or "launch an exchange" as so incredibly complex as to be impossible. There's a certain cynicism that comes up in the industry where people think something just can't be done because they know it's so complex to do right.
Now I actually think that although this take is realistic, it is actually overly cynical and actually underestimates the possibility of disruption in finance. In actuality, not knowing the complexity allows a young entrepreneur to develop a simplistic plan and pitch it with conviction to VCs who also don't know any better. The mistake experienced people are making is that their experience tells them it is only reasonable to do a thing "correctly" or "scalably" when in fact the incorrect, illegal, unscalable way wins you valuable proof points. And with enough proof points and follow-on VC rounds the simplistic plan can mature enough to actually become functional.
In the specific case of SBF and FTX, I do think the critic's seemingly superficial cynicism was actually both well-founded and ultimately correct. Launching an exchange functionally, legally and scalably was in fact too much for the inexperienced leadership of the business. They tried really hard to make a business model that worked and scaled fast. But in doing so, they ended up with effectively designing a circular reference (trading their own token) which made a lot of money for a while, but ended up crashing their business. I think they were well-intentioned, but it is true that more experienced leadership would not have tried the self-referential growth strategies FTX/Alameda engaged in. And in retrospect the critic's spidey sense was right; the pace of growth of FTX was bizarrely unsustainable and likely pointed to an underlying system that didn't make sense.
Marc Identified several indicia of fraud:
1) He acknowledged SBF and the CTO, Gary Wang, are worth billions, however the money materialized out of nowhere.
This is highly irregular and a potential indicator of a scam on the backs of retail investors.
2) He noted the chief regulatory officer of FTX, Dan Friedberg, was the general counsel for a poker site that defrauded its players.
A big red flag for anyone thinking of interacting with FTX in any way.
3) SBF has a record of deploying capital poorly (making losing investments and falling for scams) and he provided no good rationale for making these bad bets
A clear sign he isn't a good businessman and it creates even more skepticism that FTX could be viable.
4) He sees through their obvious attempts to paint a rosy picture of SBF and FTX with their very vague but positive marketing, but no ability to explain concretely what is positive about FTX, what their business model is (why the founders are getting so rich!)
These things are "smelly". They are like "code smells". On their own, they don't necessarily indicate anything, but taken together they could be an indication of much deeper problems with the codebase.
Marc was saying that the microscope needed to be put on FTX, SBF, and Gary Wang ASAP, because things stunk to high heaven. He was saying questions needed to be answered and the fact they were seemingly purposely being evaded was a big red flag to him.
I agree, this video is a nothing-burger. There are much better people who have been detailed in both their criticisms of SBF and the types of things he has been just exposed of doing for years. Crypto Critics' Corner and Molly White are the first two off the top of my head.
Molly White's most recent article on the collapse was posted on HN just yesterday.
Ok, what about the observation that FTX’s regulatory relations person was guilty of orchestrating and covering up a notorious online poker cheating scandal? There are recordings of him doing this btw. And that he further lied about this history and left it out of his LinkedIn. That alone is enough of a red flag to make you run in the other direction.
3 is SBF's equivalent of Madoff's split-strike conversion. A strategy that can make a little bit of money that a fraudster uses to claim to be making a lot of money. And just like Madoff nobody questioned it until it all came crashing down.
Easy heuristic: every billionaire in crypto except Satoshi is a fraudster. Maybe it's overfitted maybe not but historically you'd be correct 100% of the time.
Go to 34 minutes in. Amazing how many red flags there were. This guy has a good track record of exposing fraud, going back to the Lernout & Hauspie days, which the old timers around here will remember.
This is fascinating analysis. Not just the specific details about SBF and FTX, but the insight into the short seller’s process of company analysis.
One thing became apparent to me. Our industry (tech) is rife with so many snake oil salesman. During the decade-long bull run, it was easy to look like a genius. But the water is going out and we’re going to see who is swimming naked.
It’s time for the tech business cycle to end. The waste needs to be purged. A Fed pivot is just a pipe dream.
Every so often I would come across articles on CNBC written about this crypto genius (SBF) and they always reminded me of the media buzz around Elizabeth Holmes back in the day.
The safer bet given the history of exchanges, scam coins, and NFT is that they are crooked. This is why Coinbase sent out an email this morning pleading with people not to withdraw because they aren't crooked.
How many people trusted SBF_FTX because of his celebrity supporters, his appearances with politicians, his Stanford professor parents?
"I'm a big advocate for Sam because he has 2 parents that are compliance lawyers. If there's ever a place I can be where I'm not going to get in trouble, it's gonna be FTX" https://twitter.com/Guruleaks1/status/1591086077489844224
We outsourced trust to people in his proximity and because he was one of the main crypto advisors to congress.
I see this logic all over the place(parents did X, so kids raised by parents will be super Xers). But it completely misses one of the key elements - the parents doing X may have done X because they believed in it, whereas the kid might do X simply because it's the family business. So the motivation is entirely missing, and it's seen as a birthright rather than a calling.
Maybe his parents became compliance officers because they are assiduously moral law and order types. That's not necessarily a trait that gets passed down to your offspring.
[+] [-] notlukesky|3 years ago|reply
https://youtu.be/VbDiWXFxqr8?t=2140
Here is an interesting tweet on this worth reading after watching the video:
https://twitter.com/RudyHavenstein/status/159116117646521139...
[+] [-] unknown|3 years ago|reply
[deleted]
[+] [-] cavisne|3 years ago|reply
[+] [-] rlt|3 years ago|reply
I don’t know if his adherence to effective altruism had anything to do with this outcome, but taken to an extreme I could see someone rationalizing fraud to redistribute wealth in a way that maximizes benefit to others. Basically Robin Hood.
[+] [-] factsarelolz|3 years ago|reply
[+] [-] anm89|3 years ago|reply
His criticism seems to break down to:
1) Look at him, he's ugly
2) He doesn't have the proper lineage of insider mentors to be allowed to be a billionaire
3) We don't have the full story on the original arbitrage mixed in with some political pandering
4) The compliance officer was sketchy
4 seems to be the only valid point. 3 is worth further research but not really anything in itself. The other 2 reflect more poorly on this guy than SBF. Overall, I don't think this guy really had anything, I think he just didn't like the smell and ended up getting lucky on the timing.
But he 100% did not call out any meaningful elements of what ended up happening in any detail.
[+] [-] bmitc|3 years ago|reply
The short seller also mentions that this is only “3%” of what he has and is working with an investigative journalist to blow this up. And that was weeks ago, and they were probably working on it before that.
It’s not about credentials. It’s that you have 20 year olds out of nowhere suddenly managing tens of billions of dollars. Like the guy says, it doesn’t make any sense.
In interviews, FTX never gave reasons of why they moved to the Bahamas from Hong Kong. He really doesn’t ever explain anything.
[+] [-] propter_hoc|3 years ago|reply
Now I actually think that although this take is realistic, it is actually overly cynical and actually underestimates the possibility of disruption in finance. In actuality, not knowing the complexity allows a young entrepreneur to develop a simplistic plan and pitch it with conviction to VCs who also don't know any better. The mistake experienced people are making is that their experience tells them it is only reasonable to do a thing "correctly" or "scalably" when in fact the incorrect, illegal, unscalable way wins you valuable proof points. And with enough proof points and follow-on VC rounds the simplistic plan can mature enough to actually become functional.
In the specific case of SBF and FTX, I do think the critic's seemingly superficial cynicism was actually both well-founded and ultimately correct. Launching an exchange functionally, legally and scalably was in fact too much for the inexperienced leadership of the business. They tried really hard to make a business model that worked and scaled fast. But in doing so, they ended up with effectively designing a circular reference (trading their own token) which made a lot of money for a while, but ended up crashing their business. I think they were well-intentioned, but it is true that more experienced leadership would not have tried the self-referential growth strategies FTX/Alameda engaged in. And in retrospect the critic's spidey sense was right; the pace of growth of FTX was bizarrely unsustainable and likely pointed to an underlying system that didn't make sense.
[+] [-] jmmoses|3 years ago|reply
This is highly irregular and a potential indicator of a scam on the backs of retail investors.
2) He noted the chief regulatory officer of FTX, Dan Friedberg, was the general counsel for a poker site that defrauded its players.
A big red flag for anyone thinking of interacting with FTX in any way.
3) SBF has a record of deploying capital poorly (making losing investments and falling for scams) and he provided no good rationale for making these bad bets
A clear sign he isn't a good businessman and it creates even more skepticism that FTX could be viable.
4) He sees through their obvious attempts to paint a rosy picture of SBF and FTX with their very vague but positive marketing, but no ability to explain concretely what is positive about FTX, what their business model is (why the founders are getting so rich!)
These things are "smelly". They are like "code smells". On their own, they don't necessarily indicate anything, but taken together they could be an indication of much deeper problems with the codebase.
Marc was saying that the microscope needed to be put on FTX, SBF, and Gary Wang ASAP, because things stunk to high heaven. He was saying questions needed to be answered and the fact they were seemingly purposely being evaded was a big red flag to him.
[+] [-] dottrap|3 years ago|reply
Molly White's most recent article on the collapse was posted on HN just yesterday.
https://news.ycombinator.com/item?id=33547102
[+] [-] eigenvalue|3 years ago|reply
[+] [-] ralph84|3 years ago|reply
[+] [-] subroutine|3 years ago|reply
https://youtu.be/BH5-rSxilxo
[+] [-] rootsudo|3 years ago|reply
[+] [-] paxys|3 years ago|reply
[+] [-] roncesvalles|3 years ago|reply
[+] [-] willnonya|3 years ago|reply
[+] [-] eigenvalue|3 years ago|reply
[+] [-] naikrovek|3 years ago|reply
[+] [-] unknown|3 years ago|reply
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[+] [-] doorman2|3 years ago|reply
One thing became apparent to me. Our industry (tech) is rife with so many snake oil salesman. During the decade-long bull run, it was easy to look like a genius. But the water is going out and we’re going to see who is swimming naked.
It’s time for the tech business cycle to end. The waste needs to be purged. A Fed pivot is just a pipe dream.
[+] [-] foogazi|3 years ago|reply
[+] [-] ethotool|3 years ago|reply
[+] [-] andrewstuart|3 years ago|reply
[+] [-] bagels|3 years ago|reply
[+] [-] zen21|3 years ago|reply
[+] [-] unknown|3 years ago|reply
[deleted]
[+] [-] throwup|3 years ago|reply
> Giant crypto exchange founder Sam Bankman-Fried promises to give away most of his $21 billion fortune
Sounds like he kept his promise in a way!
[+] [-] unknown|3 years ago|reply
[deleted]
[+] [-] memish|3 years ago|reply
"I'm a big advocate for Sam because he has 2 parents that are compliance lawyers. If there's ever a place I can be where I'm not going to get in trouble, it's gonna be FTX" https://twitter.com/Guruleaks1/status/1591086077489844224
We outsourced trust to people in his proximity and because he was one of the main crypto advisors to congress.
[+] [-] googlryas|3 years ago|reply
Maybe his parents became compliance officers because they are assiduously moral law and order types. That's not necessarily a trait that gets passed down to your offspring.
[+] [-] unknown|3 years ago|reply
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