crypto strategy

Learn about Sam Bankman-Fried’s crypto-enablers

Things are not going well for Tom Brady.

His team, the Tampa Bay Buccaneers, has a losing record. He is going through a divorce and FTX, the crypto exchange he touted a year ago – and was invested in – went bankrupt. He’s not the only sports star with an egg on his face after the collapse of FTX. Stephen Curry, Shohei Ohtani and Naomi Osaka, to name just three, also got greedy and believed in Sam Bankman-Fried’s vision.

Overnight, Sam Bankman-Fried went from crypto prodigy to infamous peddler. The celebrities, influencers and mainstream media who helped make him a star shouldn’t be allowed to absolve themselves so quickly. Brady and many others have fallen for easy, cheap wins and helped legitimize what appears to be nothing more than a giant scam. In our networked reality, the follies of celebrities, influencers and media are amplified and their impact is intensified.

It has a lot to do with the evolution of our media landscape. In our modern post-social era, it’s hard to tell the difference between a snake oil salesman, an expert, and mainstream media. Social media algorithms don’t discriminate, treating every piece of content with equal respect or disdain as long as it drives engagement. FTX exploited this weakness to use social media, PR and a savvy media strategy to become the biggest crypto brand in the world.

The strategy was ruthlessly simple and effective: feed the unquenchable thirst for content of the modern Internet machine. The more engaged creators are, the more influence they can accumulate; thus, they can earn more money with increased attention. That’s true for a small freelance blogger, TikTok influencer, YouTuber, or mainstream media professional. Knowing these basic rules makes it quite easy to rig the game. Saturate the market with information and it is difficult to distinguish between what is real and what is fake. For the past few years, I’ve seen the face of SBF adorn bus shelters and billboards. For a normal person, this was enough to legitimize SBF and FTX. After all, only experts have their faces on billboards.

Online, it was difficult to emerge from the fog of FTX and SBF. For a while, it felt like every finance or crypto podcast featured SBF or was sponsored by FTX. The company also covered social media inviting micro and macro influencers to discuss their book. To gain mainstream acceptance, FTX even roped in beauty entrepreneur Lauren Remington Platt, founder of high-end beauty company Vensette, to target partnerships with luxury brands.

FTX has built a large social media footprint and a huge following on Instagram, Facebook, Twitter, Discord, and Telegram. They enlisted crypto enthusiasts who helped promote FTX and all the content shared by influencers talking about FTX. Traffic is like an elixir for the influencer crowd, especially for YouTubers looking for ways to game YouTube’s algorithms.

The so-called financial advisers on YouTube were happy to extol the virtues of FTX and hail SBF as a genius – many of them were paid by the company, in some cases to the tune of millions of dollars a year in sponsorship. Their job was not to give financial advice, but to make FTX a household name and generate signups using affiliate links.

Graham Stephan, a YouTuber with over 4 million subscribers, has apologized to his audience for pushing FTX on them for nearly a year. “Even though I trusted the information given to me, I was wrong and I’m sorry,” he said. Coin Bureau, Minority Mindset, Tom Nash and Max Maher have issued their apologies about FTX and their relationship with the company.

These social media personalities acted as railway industry periodicals during the Great Railway Bubble of the 1800s, when Britain experienced a railway building boom. Railway timetables, a publication favored by railway investors, earned £14,000 (£1.12 million in current money) in railway advertisements per issue. This helped sustain the railroad bubble. Other pamphlets, such as “The Short and Sure Guide to Railroad Speculation”, targeted the inexperienced investor.

It was the good old quaint days. FTX and its promoter SBF have done the same thing only better, and on a global scale, thanks to the Internet.

Worse than YouTubers and influencers, however, are mainstream media, including Forbes, Fortuneand Bloomberg Markets. These financially savvy media should have been better informed and they should have asked harder questions of the founder of FTX.

How does a company grow from near zero to $32 billion in just over three years? This stratospheric ascent alone should have raised serious questions. the old Forbes, under the stewardship of the pugnacious editor, the late Jim Michaels, would no doubt have had reporters peering under the floorboards. Instead, we got a flattering profile in the billionaires issue, with then-twenties gracing the cover. Fortune did better, proclaiming Bankman-Fried the next Warren Buffet — what a shame for the Oracle of Omaha, who has consistently made money for a few decades and is a noted crypto-skeptic.

In a classic case of closing the barn door after the horse has run away, Forbes posted a story that started with a half-hearted my culpa“As the autopsy of Sam Bankman-Fried’s crypto empire begins, it’s worth saying that there were red flags everywhere. We missed them. No kidding, Sherlock.” bullshit, of course, and I didn’t see it straight,” Jeff John Roberts, author of Fortune‘s coverage, wrote in his newsletter. “Like any good con artist, SBF told us a story we wanted to hear and couldn’t wait to believe.” It’s cold comfort for any retail investor who reads these stories and decides to put their hard-earned money in the hands of a scammer.

Roberts (who once worked for me) is a seasoned, hard-nosed journalist and almost always a skeptic of everything. I was taken aback by the fact that he got screwed. I am not a crypto-reporter and find the industry jargon tedious. And even I, with a handful of phone calls, was able to learn of SBF’s psychopathic behavior and disregard for his clients and their money. Certainly, crypto reporters with a better Rolodex should have known better.

I contacted Roberts to ask him what had happened.

“Despite fifteen years of experience and a professional tendency to be skeptical, I was blindsided by the narrative,” he admitted in a post. “In the case of SBF, I liked the corny aw-shucks affect, and that, unlike the one-dimensional libertarianism of most crypto founders, he was versed in philosophy, poetry, and social justice issues. He seemed like the kind of person we in the media want CEOs to be.

The media were seduced by his pedigree: his parents are professors of law at Stanford. The idea of ​​giving away all his money, his job at Jane Street Capital and, more importantly, the support of people like Sequoia Capital acted as good social signals for the media. “I mean, how could all these smart people be wrong,” Roberts wrote in a note. “But in the end, I screwed it up. In a hurry to top it off, we didn’t do the necessary homework.

“Generally, the press follows the crowd,” said Andrew Odlzyko, a University of Minnesota professor who has written extensively on fads and bubbles. When he worked at Bell Labs, Odlzyko argued that the notion of “internet traffic doubling every 100 days” was rubbish. At the time, no one believed him, because everyone wanted to believe that the Internet and the bandwidth boom were real. But it’s a lie that helped inflate the telecom bubble. Eventually he was right and the house of cards came crashing down.

“Part of that is because journalists are part of the crowd and get caught up in the mass illusion,” Odlyzko said. “And part of that is the ‘willing suspension of disbelief’ which is accentuated by the need to engage readers, which forces people to emphasize the spectacular.”

In the age of networked media, as I explained above, the illusion is much greater, the impact much wider, and the ultimate pain much deeper. The apologies of the YouTubers and my culpa journalists are not enough. SBF could have been the field marshal of this scam job, but the influencers were the soldiers, the celebrities were the officer class, and the media were like doctors. All of them helped FTX fill its coffers, only to lose everything afterwards.

As for Tom Brady, here’s the bad news. He can’t even claim to be the first celebrity to be taken to the cleaners. After all, even mastermind Sir Issac Newton and author Daniel Dafoe were taken for a spin during the South Sea Bubble in the 1700s.

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