It might be a bit too early to lump Sam Bankman-Fried into the identical bucket because the infamous fraudster Bernie Madoff — or possibly not.
The total post-mortem of his epic collapse from crypto wunderkind and billionaire to broke crypto villain extraordinaire won’t be ready for a while. Prosecutors within the US attorney for the Southern District are eyeing possible charges before the tip of the yr, I’m told, so barring exculpatory evidence we are able to’t label him a criminal yet.
The bankruptcy trustee is just beginning to get into the mess. He calls what went down — the disappearance of billions, massive losses in allegedly segregated accounts in Bankman-Fried’s FTX crypto exchange — “unprecedented.” But he has stopped in need of calling it a fraud.
On the very least, the 30-year-old man-child known by his initials as “SBF” may be best described as a world-class schemer. Armed with the good thing about hindsight, you may see how cultivating his image of nonconformity along with his unkempt hair, and coupling it with the halo of woke politics, SBF built his one-time crypto empire on a pile of quicksand.
In fact, all scammers have their shtick. In Madoff, those that fell for his hustle desired to imagine that a fatherly figure from Queens, savvy within the markets and looking out out for his or her interests, would help them retire in style. Should you convinced him to allow you to within the door, the “Madoff Bond” took care of you and your kids in perpetuity. The promised guaranteed returns turned out to be a mirage because nothing in finance can ever be guaranteed.
Bernie Madoff was an infamous fraudster who’s in the identical category as “SBF.”Dennis Van Tine/MediaPunch
More recently, Elizabeth Holmes’ hustle was a well-cultivated image of tech-geek cool. She faked her Steve Jobs act right right down to the black turtleneck and husky voice as she pushed what now appears to be a life-altering, and improbable, innovation: a do-it-yourself blood-testing product that might have revolutionized health care.
SBF’s hustle was the diversionary strategy of virtue signaling his way into the hearts and minds of the media and financial elite in order that they didn’t hassle to look at the logical holes in his business model.
Signs of those holes were definitely there. He amassed his paper fortune, around $16 billion, on the back of a dubious crypto, FTT. There have been untoward links between his FTX crypto exchange and a prop-trading fund he ran on the side.
He made a number of money — for a time. SBF was in comparison with Warren Buffett by the geniuses at Fortune Magazine. But Buffett made his fortune over a protracted profession. SBF earned nearly all his “money” in about three short years.
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How did he pull it off? SBF went to MIT in order that gave him the imprimatur of smartness and marketable to investors. He wore a hoodie, so which will have made him hip to the fawning tech media at all times looking out for the following nonconformist to vary the world. During our Fed-induced financial bubble and irrational exuberance in crypto, he was capable of ride the wave of easy money and crypto-trading opacity.
He can have been smart but real skillful traders avoid life-altering losses by seeing markets turning against them and moving on. When crypto began to correct and crash, SBF famously doubled down investing in distressed crypto outfits. That ought to have been an indication of his deception.
Yet nobody asked where he got the cash to do it because he built up such a rep as a do-gooder who was on the suitable side of investing. He gave to progressive pols within the Democratic Party and $10 million to President Biden in 2020, which bought him cover. He spoke incessantly concerning the need for the super wealthy like himself to embrace something often called “effective altruism” — you generate income for the aim of giving it back to make the world a greater place.
You possibly can see it within the deference people like Tony Blair or Bill Clinton gave him at conferences just before his collapse. Or how congressional committees sought his advice, nearly to the minute he imploded, on all matters crypto.
Sam Bankman-Fried built a broken empire off cryptocurrency through FTX.Christopher Sadowski
The chattering classes, the Blairs, the Clintons, the financial press, ate it up.
The absurdity of all of it didn’t stop Sequoia Capital, the VC heavyweight, from giving him money, or news anchors from begging him for fawning interviews or Congress from getting his two-cents on regulatory matters. SBF was being introduced to Middle East investors for even extra cash just weeks before his fall. Hell, he recruited Tom Brady and Larry David as FTX brand ambassadors.
SBF cozied as much as crypto regulators on the Commodity Futures Trading Commission, the Securities and Exchange Commission. He met with chairman Gary Gensler to pitch an idea for a latest crypto exchange despite Gensler’s skepticism concerning the industry, without anyone considering, “is that this guy too good to be true?” — except a lonely handful, including possibly SBF himself. He recently remarked in a moment of candor that his virtue signaling was “a dumb game.”
Now ya tell us.