crypto strategy

How Everyone Fell In Love With SBF – Me Included

It’s not a good feeling. In July, I sat with Sam Bankman-Fried for over an hour in a hotel overlooking Central Park, an encounter that was to be the basis of a Fortune cover story. I was charmed by his nerdy effect as an SBF, unkempt in a T-shirt and bushy hair, as he spun a choppy spinner and rattled off on everything from M&A strategy to macroeconomics. to the importance of trust in trade agreements. It was bullshit, of course, and I didn’t see it straight.

Today, SBF’s name is mud and its crypto empire, valued at $32 billion just a week ago, lies in shambles. FTX Clients and Investors Are Billion-Strapped and, If the Worst Allegations Are True, SBF Could Go in prison. The question is how hardly anyone saw this coming. The media missed the story (until CoinDesk’s Ian Allison hold of a key index), but also venerable investment firms like Sequoia Capital and Ontario Teachers Pension Fund, which rushed to throw hundreds of millions at SBF’s feet.

The answer is that, like any good con artist, SBF told us a story we wanted to hear and couldn’t wait to believe. He presented himself as a trading genius who outstripped elite quantitative firm Jane Street Capital and seemed to run around everyone else in the industry. His pedigree was immaculate with a degree from MIT, parents who both teach at Stanford Law School and Connections to leading power brokers in Washington, D.C. SBF also discussed philosophy and poetry and took thoughtful stances on topical issues such as climate change and animal welfare, offering a more sympathetic humane alternative to other crypto CEOs, whose libertarian views may come across as stark and unsettling. .

Almost everyone came to share the view that SBF was a unique and transformational figure who could bring crypto into the mainstream, and at some point we all stopped checking references. Looking back, there were a lot of red flags – FTX using cute numbers like 69 and 420 in its funding announcements, the absence of a board of directors or any other oversight, a CEO who played League of Legends instead of working, but we ignored them.

Of course, a handful of people have seen through him and they will receive the same praise as those who predicted and bet against the subprime mortgage boom in 2007. And in the days to come, many more will join Elon Musk and Mark Cuban in affirming they knew SBF was a fraud all along, even though they didn’t say anything until last week.

The lesson here for me and others is the old adage “trust but verify”. I should have pushed harder for SBF and his company to show me documents proving FTX was what he said, and not assume that people like Sequoia would never support a house of cards. Finally, in business as in life, beware of messiah figures. This caution extends to the crypto community, which time and time again rushes to create cults around leaders rather than stick to the blockchain ideal of decentralization.

Jeff John Roberts
[email protected]
@jeffjohnroberts

DECENTRALIZED NEWS

An unconfirmed report indicates that SBF and two FTX execs are “under surveillance” in the Bahamas and they hope to flee to dubaiwhich does not have an extradition treaty with the United States (Corner Telegraph)

Crypto.com transferred over $400 million in Ether to another exchange instead of a cold store; it got the funds back, unlike last month when it sent a customer a refund of $7.2 million instead of $68. (The edge)

The Bahamas Securities Commission said he had not ordered FTX to process local withdrawals, contrary to claims by FTX last week that regulators had forced them to allow locals to withdraw funds. (CoinDesk)

A FTX The investment deck showed it had $9 billion in liabilities but only $900 million in assets that could be quickly sold. (FT)

Following the collapse of FTX, Binance and others tout “proof of reserves” as a way to prevent such debacles – what exactly do they mean? (Fortune)

EVEN OF THE MOMENT

The Onion do what he does best:

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