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Crypto ‘smart’ money? Big traders fell for Sam Bankman-Fried

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I used to be shocked after I first learned how a hot mess like Sam Bankman-Fried got away with convincing so many seemingly smart people — big money managers, enterprise capitalists and all those celebrity ambassadors — that he was such a boy genius of investing, they need to turn over plenty of money for him to play with. 

That’s, until I witnessed what went down Wednesday after the fallen crypto star tried to elucidate his side of the FTX disaster to reporter Andrew Ross Sorkin. The missing billions in customer funds, ruined lives, etc., wasn’t illegal, only one big, innocent mistake, or in his words, he “screwed up,” the results of one “bad month.” 

Sounds absurd, right? Imagine it or not, many sophisticated financial types say they still imagine SBF’s latest sales pitch, further proof that suckers are born every minute, and lots of of them occupy the C-suites of Wall Street. 

After all, not everyone in high finance bought SBF’s shtick even when he was riding high. Veteran trader Marc Cohodes and Chicago Mercantile Exchange CEO Terry Duffy were early skeptics of his business prowess and the way Bankman-Fried claimed he dedicated his entire life outside of crypto to some wokeish fad referred to as ­“effective altruism” — where he made money in an effort to give all of it away. 

Sam Bankman-Fried's minions gambled away customer funds in the global crypto casino.Sam Bankman-Fried’s minions gambled away customer funds in the worldwide crypto casino.Tom Williams/CQ-Roll Call/Sipa USA

But they were among the many lonely few who saw signs that something was amiss. A lot of the media, and much too many Big Finance types, didn’t seem to offer a second thought to his shambolic appearance and odd demeanor. They thought it was endearing. They didn’t think twice that relatively overnight he had grow to be a billionaire and Democratic mega­donor, giving big bucks to pols with oversight into crypto. 

Buying influence is OK, I assume — so long as it involves Democrats.

Conflict-ridden biz

They actually paid no heed to his conflict-ridden business model: the risk-taking prop-trading fund Alameda Research — known for taking an excessive amount of risk — attached to his FTX crypto exchange that was presupposed to keep customer deposits protected. That’s something that was almost designed for failure, which is precisely what happened as SBF’s minions gambled away customer funds in the worldwide crypto casino. 

Sam Bankman-FriedSam Bankman-Fried claimed he “misaccounted” $8 billion in FTX funds.via Reuters

Even worse, some members of the so-called “smart money” set are still eating up his line-of-crap explanation of certainly one of the largest scandals in recent market history and not using a hint of indigestion or indignation. 

Bill Ackman is certainly one of the pre­eminent hedge-fund managers. He’s known to “short,” or bet against, stocks he thinks are frauds, and once went on a years-long campaign to prove (albeit unsuccessfully) that the nutritional-supplement company Herbalife was one big pyramid scheme. 

But Ackman was so sold on SBF’s excuse — that the crypto bro “never tried to commit fraud” in assembling a house of cards that failed to satisfy minimum risk-compliance standards — that Ackman tweeted, “Call me crazy, but I believe @sbf is telling the reality.” 

I don’t know if Ackman is admittedly crazy, but when he believes SBF’s explanations for a way he created a financial firm without even basic risk-management plumbing, he could also be an actual sucker. 

Kevin O'Leary takes part in a panel discussion of ABC's Kevin O’Leary is claimed to have lost thousands and thousands because of this of the FTX collapse.Reuters

Tom Brady meets with reporters on Nov. 27, 2022 in Cleveland.Tom Brady was a “brand ambassador” for FTX.AP

Also consider Kevin O’Leary of “Shark Tank” fame. It is a dude who bills himself as someone who’s been across the block so repeatedly, he can distinguish good business ideas from the dogs. An actual shark. 

O’Leary is claimed to have lost thousands and thousands of dollars within the FTX collapse. He, together with NFL legend Tom Brady and other celebs, were so-called “brand ambassadors,” a part of the crew who appeared in those sleek commercials SBF put out in an effort to sell the investing public that FTX was a protected place to trade your crypto. 

Not an excellent look, but even worse is that O’Leary still isn’t suspicious of SBF’s motives. 

After watching SBF’s Wednesday performance with Sorkin, O’Leary, referred to as “Mr. Wonderful,” tweeted: “I lost thousands and thousands as an investor in @FTX and got sandblasted as a paid spokesperson for the firm but after listening to that interview I’m within the @BillAckman camp concerning the kid!” 

Who was in charge? 

For starters, the “kid” is 30 years old. This a grown man who conceded to Sorkin “there was no one who was chiefly in command of positional risk of consumers on FTX,” which is the functional equivalent of a health care provider performing surgeries without going to med school. 

SBF also told Sorkin he’s speaking publicly about what went down against his lawyer’s advice, because he desires to do the correct thing and help make everyone who lost money whole. Perhaps that’s what sold Ackman and O’Leary. 

My bet is that the Manhattan US Attorney’s Office, which is investigating this sordid mess, won’t be such a simple mark for SBF’s excuses.

sportinbits@gmail.com
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