Reaction To The Collapse of FTX and Sam Bankman-Fried

He predicts That Sam Bankman Freed is going to get life in prison. And I thought that that was an incredibly interesting prediction. Uh, you know, Bernie Madoff got, you know, hundreds of years. Um, there's this other uh uh Ponzi scheme guy that I was reading about based out of Texas, who also got like a hundred and fifty years. And so it's not crazy that that could happen. You know, people who commit these hundreds of millions and billions of dollars pon of Ponzi schemes, they get life in prison.

All right, we are live. Sean I am in my uh my official Crypto hoodie. What is that? This is fine.

Oh yeah, that's wonderful. Perfect hoodie for today. This is all I've been wanting to talk about. I purposely haven't texted you about this. Because this is all I want to talk about. But Like Maybe just give like a three to five minute background on what's going on. I think you're the guy that should be doing that. And then I want to tell you some of the more interesting points that I think maybe haven't been covered or are less covered that I think are either hilarious or interesting.

Okay, great. Uh and by the way, should we check if my uh I have a twenty five thousand dollar withdrawal that's uh That we will see we'll see if FTX has any money left. I'm gonna check right now and see if it's come through. What do you think? Yes or no? Did I get my twenty five grand out? I think you I think you probably got it.

I did it on November ninth. It's now November fourteenth. It said It would happen by today and it is Not in the bank account. All right, there we go. Just another disappointment. Okay, so why don't I have my deposit? Uh actually it's not even a deposit. They they advertise with us and so they paid me inside F J X and I was just lazy and never withdrew it. Um Okay, so

Yeah. Basically what's happened, uh here's the what happened for those who aren't following it that closely. FTX, which is a big crypto, is a place to go To buy, sell different cryptocurrencies. It was

I think the number two or three largest exchange in the world Used mostly uh internationally. Um Because It was kinda like uh yeah.

People all around the world want to buy, I think, ninety plus percent of people buying crypto are international. Um And so F Coinbase, but bigger than Coinbase.

Bigger than Coinbase. Binance is number one. I think there's technically something number two, but really it's like Binance number one, FTX two, and sort of like Coinbase and the others, you know, come after that. Okay, so F C X, which was this blue chip thing, and it was seen as this like, you know, mega success story. You would see Top investors um in the world that were investing in this. So Sequoia.

uh, which is like, you know, a preeminent V C firm plus like, you know, fifty others. Um, we're investing in this. He's on the cover of Fortune magazine and it says, you know, the next JP Morgan, um, because he's, you know, this this This young guy who becomes one of the wealthiest men in crypto. They say FTX at its peak was worth about thirty two billion dollars. And this company's only like four years old, right? So it was had this like crazy explosive growth and valuation. Sam was said to be worth sixteen billion dollars himself. He's this genius trader and um now entrepreneur.

He's this crazy eccentric guy. The guy looks goofy as hell. He's a uh he's a vegan who doesn't wear shoes and gives away all of his money if they're effective altruism, whatever, you know, he's got this sort of character that everybody wants to talk about. Of which uh I bought into. Very easy to buy buy into. You know, this like You crazy person who sleeps on the floor of his desk and doesn't believe in normal stuff and he's at twenty nine or thirty worth North of ten billion dollars and he previously made a billion plus by doing arbitrage with like Korean crypto, some just some crazy shit. I bought into it. So that's the background. We all go on this this uh that most people are on that train of like, okay, I guess that's what it is. And then

Suddenly last week. There's a series of events we can go into however much detail we want, but there's a series of events that Basically causes a bank run on FTX. So users lose confidence that FTX is solvent, which means they say, I gotta get my money off FTX, just as I did. Uh you go, you hit the withdraw button, just in case there's any weird stuff going on. We've seen many things crash in 2022 in crypto. Uh Luna was one. Uh, Voyager, Celsius, there was a a handful of these things that crashed. So people said, Better safe than sorry, let's start withdrawing our money. That creates a uh solvent a liquidity crisis for FTX. They don't have the money to give. And everyone's like, Where the hell's the money? Why don't you have the money? Uh that's my deposit. That's my funds. You know, you go to the bank, you expect them to have your money. And so

F Tex does not have their money. He comes out, he says everything is fine, all the assets are fine, guys. This is just You know, a hoax from a competitor. There's a competitor trying to F with us. Blah blah blah. Binance is that competitor that he's talking about.

Um, so he basically saying, Oh, the big the big the number one guy's coming after us, but we're fine guys. Don't don't panic. People still panic. And in fact, he was lying. Turns out there's basically this guy was a giant fraud. Uh, you know If you believe all the things that have been coming out, so allegedly, we'll say the word allegedly Uh, this guy was lying, deceiving everybody.

Um, misusing customer funds, et cetera, et cetera. FTX goes under. It goes from a twenty to thirty billion dollar company to a company that is now declaring bankruptcy. billions of dollars. There's like a ten billions there's like 10 billion dollars worth of customer funds that are Gone, vaporized, unaccounted for. This guy's fleeing the country and you know, all kinds of crazy stuff. So th I'll just set that as the background, then w now we can go into whatever parts you want to go into. Alright.

So there's been a lot of interesting things that have happened, and I wanna name a few. Uh you know, there's this story's a week old now, so a lot of the the stuff has been covered on the facts. We can talk about the facts if we want, but I wanna talk about like some things that I think haven't been covered. First The things happening on Twitter are amazing. This is all unraveling in real time on Twitter. One of the more interesting and funny ones. There's a Twitter handle called

Autism capital. The most based citiz citizen journalism in crypto. We are currently following the FTS t uh sag, but please be patient. We have autism. That's their That's their uh That's our source of truth, by the way. That's it depends who we are living on at times of trouble right now. But listen It's hilarious. And I think it a lot of it's right. It's sort of like TMZ. TMZ is like considered trash because they sit they're fast paced and they say a lot of stuff that eventually every once in a while they have to recant and say, Oh no, you know, we got this wrong. But you know what?

They fucking nail it. They called Prince being dead or be about to die. They call all this other stuff, and that is exactly what's happening. There's so there's all these interesting things that Autism Capital is tweeting, like SBF, that's this guy, Sam, uh the founder, SBF did a masterclass, you know, the company masterclass on trading, and it was set to release in December, and it's already been filmed. That's like an interesting thing they tweeted. Another interesting thing they tweeted is basically SPF's right hand woman was this woman named Caroline, who rumors are that they also were like sleeping together. She ran the hedge fund, so it the SPF owns all this weird collusion. She has a tumbler that Autism Capital found. And uh it it says she had a post called World Optimization, where her kink is men who control most major world governments. Like that's another exactly it's like

People say always say, Oh, I want this, but what I want He's like a man who's like control societies, governments, things like that. It's like what the hell are you talking about? Um Yeah, dude, so I've I've followed them. Like we I mean, if you're in crypto, you follow these people. You you you know, these are con uh Sam was considered one of the like, you know, more blue chip. Of course, there's always some people that are like This guy's full of shit, or I don't trust this guy, or whatever, but they're like the the small, small, small minority. The majority.

FTX was this fast growing company and that Sam was this like Really interesting, really smart, founder. And then you knew the the one part that was always shady. So for example, when they advertise with us They asked us to write a story on FTX and we were like, Okay, great, well write the story about

How you guys grew so fast, what tactics you used. Why you know, why why Christopher. And then Me and Ben were talking, we were like, you know Story's all like you know, perfectly rosy and that makes sense. This is like a sponsor

Like you know, deep dive, basically. Um But like you know, we should put in what are some of the concerns. Even if nothing else, just to like balance out the story so that it's like Not literally just a fluff piece. So uh we were like well what are some of the criticisms? And one was like There well, before he started FTX, he started this company called Alameda Research. And Alameda Research is not a research company. It was a trading company. They just called it research so it sounded a little more serious. And and and the rumors are like in Autism Capital, I think also shared this. They're like, Well, Sam said he wanted to call it Alameda Research because that just had an official sounding name and he didn't also didn't want people to know that they were trading.

Yeah, and in the entrepreneurial circles it was like oh Great little growth hack, right? You know, it's like when you said uh When we wanted to get advertisers for the hustle, I would first just write a fake ad for some other company, then I'd go to their competitor and be like, Hey, you're Do you want this spot and like, you know, there's a fake it till you make it, that's acceptable, and then there's a fake it till you're a fraud, which is where this guy like went went totally wrong. So So he had this training company hit the legend is basically that

Um At the time, Bitcoin was trading at let's say 10 grand in America, but in other countries where it was harder to access Bitcoin, there was a slight premium. People were willing to pay more for Bitcoin because it was so hard to access because the government was, you know, maybe not allowing exchanges to run there properly or whatever. So in Japan and Korea, Yeah. Bitcoin would be 10,000 here, it'd be eleven thousand or twelve thousand there. And so um

The the legend w of the origin story for FTX is that Sam saw this. He was one of the people that exploited this arbitrage opportunity. He you know, he basically hustled, went to Korea, and um set up this like Logistics chain where they could buy a million dollars of Bitcoin here, sell it for a slight premium there, wire the money back and do it again the next day. Just keep recycling the money.

Tons of money. And nobody really understood h exactly how like There was some plot holes in this, but it was like uh I don't know, I guess these guys are just smarter than us, but like It's like, wait, you made a billion dollars doing this? No, that sounds a little unreasonable. So you might have made what, hundreds of millions? But Where did you get the seed capital for this? Like you weren't rich, so like

How much initial money went into this and there was never like some clarity there. So that was a little bit strange, but nobody really. Well, now it appears that the answer might have been that That just never even happened. That might have been a complete fabrication, or they might have done it at a much smaller scale. Um nobody know nobody still knows the answer because this guy's like you know, on the run or you know, hiding, you know, uh right now. So So nobody knows the answer to that, but the the bigger part, the th part that we wrote about was like

Well Alameda Research Um, when FTX launched as an exchange, every exchange needs liquidity. When buyers and sellers come to the the site, they need to be able to quickly get their order filled. So you usually have a market maker or a liquidity provider, basically, who sits there and says, I'll I'll be the one who buys and sells things and I'll take a small Um A small fee for providing that liquidity to the exchange so it runs better. So Alameda was the liquidity power, it was the market maker for FTX. And um so everybody knew that and it was like okay cool, but it's like wait, but Sam owns both? He owns the exchange.

And he owns the market maker, isn't there some conflict of interest? So, you know, like couldn't you know, if this is a hedge fund basically that can go buy things, but then FTX can list those coins they'll know what they're gonna list, right? So there's a little bit of a there's a it's a conflict of interest. It's a little bit of, you know, cousins kissing there. And so we had wrote about that. We go, you know, they have this cussing kissing cousins thing that people don't really like, or nobody knows the true extent to this relationship between the two. And they were like, Hey, we need you to take that out. And we were like, Well, we don't really think we should take it out. We think we're gonna keep it in. And they were like

Okay, cool, like but just pause this whole story of the cryptic prices are going down. We don't want to be bragging about how well we're doing right now. So we were like, Okay, you paid us. You don't want us to run the story, we'll never run the story. So we never ran it. Um but I remember at that time a little small red flag of like I'm surprised that instead of clarifying the relationship, they're like Don't talk about that.

So that was a little bit of a red flag, but you know. Like most things when you have When you're reading nine out of ten things are are just saying how this is the wonder kid and this is the best Best company. And then you just have this one little red flag, you sort of brush it aside. Or at least that's what I did. Which is a mistake. By the way, the the the person that you worked with there, are they still there? Nobody's there, dude. The company's done.

Yeah, but the person that you worked with, what do they list on their LinkedIn now? Uh I I wasn't working directly with my I don't know the guy's name. Um I it's all you know, Ben kinda was running the milk road really. So I I was just trying to like I would do the writing and then he would talk to the guy or whatever. So I don't know the guy's name. But um Anyways, that was just like one small thing. And so what ended up happening, what the the the sort of cause of this was essentially that FTX was

Illegally and um Was lying to customers and was illegally taking customer money. Giving it to Alameda. through either a loan or just like straight up funneling the money there. Um And then Alameda was going and trading using the customer money trying to turn a profit and was actually just like kind of bad at trading.

It was losing money. And so then they didn't have the money to return. When all the customers wanted their money out. And um when they you know, quote unquote lent them the money. the collateral that they put up to take the loan, right, right? Like let's say users put in a more like

solid currency, let's say like Bitcoin. Um Alameda borrows that bitcoin to go trade. And they put up in return as collateral FTT token, which is FTX's own internal token that doesn't have like real that much real value. So when they lost all the bitcoin. For it just for like to make things simple here, when they lost all the Bitcoin

All FTX had was this shitty FTT token that wasn't w that was worthless. So now there's no there's a huge whole they lent basically ten billion dollars out and then couldn't return it and so they went They went under and basically now every day there's more leaks about how crazy this situation was, how these guys were Liars. how they were doing this intentionally, how they were doing drugs, how they were, you know, 15 people sleeping together in this like mega mansion while he pretended to be this like big philanthropist. And um maybe he's an actor for the Chinese state. Who knows? There's like crazy theories all around. And um you know nobody knows the truth. And this guy's coming out

And yesterday he tweets for the first time and everyone's like, Oh my God, here it comes. He tweets out. Like a thread. And you know, like you start a thread with one. And then you just to say the first point, then you're gonna say two, and then the second point. He tweets out one and all he says is

What? And then he sees and then he does nothing. And then we thought two. And then the letter H. What does that mean?

And then just now, an hour ago, he tweeted out A And then eleven minutes ago. P I don't know what he's trying to do. I don't know what's going on. Maybe he's having a break or something. Uh like I mean Might be having a breakdown, he might have been happy. I knew a guy who like was having a breakdown uh and you know, he he had to be institutionalized and he was tweeting crazy shit.

You know, like and this is how it started. Uh maybe he the guy's going through something like that. There's this there's another th interesting thing that happened with uh Chamath on the all in pod. He's and this is another thing that I saw uh I think also Autism Capital. They like clip this clip. And on the all in pod, Shamoth who has a whole bunch of other questionable things happening, but he said something interesting where he was uh looking at investing into FTX and He was like, You know, it's kinda weird how you guys are kind of self dealing. I think you need a board and I think you need rules around what you can and can't not do with this.

And he said the person working at F F T X called them back and literally said Hey, go fuck yourself. And just hung up. And that was the end of of the call. Yeah. By the way, I think there's seventy percent chance that entire story is bullshit. Uh I think Shaboth is generally full of shit and uh you know, so so I I do not believe this story for for for what it's worth.

But dude, have you seen the videos so the the woman named I I guess my point would be if you knew that something Fed up was going on with this company, the most popular company in the in the world at that time in crypto, and that if you knew that this was messed up, like that there was fraud going on or deception or any of this stuff, you would have said something, right? Like so maybe what he said is I don't know, I don't feel comfortable with this. Uh, but I I feel like he's trying to take some victory lap of being like No, in the video, in the clip, I believe Chamat said He I he I I I believe he he put emphasis on this. He goes he literally said Go fuck yourself. No no that part I believe. I believe that they would say that. Uh it's Temont's part where he goes

I called them, they pitched me, I said, This doesn't make much sense, but okay, I'll have my guys look into it. And my guys looked into it. We gave them a recommendation, You need governments, you need to do this, you need to do that, you need and like They said go fuck yourself. Uh I don't know, something about that picture being so white knighty, uh uh you know, raises more red flags to me as well. But a few other interesting things. Uh basically another Twitter thing, these guys have been doing these like marathon Twitter spaces. Uh one of the guys' name is Mario Uh and he hosted this Twitter space where Elon pupped.

Popped in. And someone was like, Hey Elon, what did you think when you first met This guy, SPF, he goes, Well, people were telling me when I was buying Twitter that he had lots of money a lot of money, but my bullshit meter was redlining And even all these major investment banks were like, Yeah, this guy's walking on water, he's the best. He's got he has money. And I just didn't think that he had the money. And I actually believe this story to be true.

And it just like was interesting because from an outside you think well, these billionaires all all know each other, they know what's up and you know, like Uh they they they know if someone does or doesn't have money, they know if does they do or do not know if someone's legit. And Elon's like, I had no idea if he was legit, but he didn't seem legit to me, but everyone else said he was. And I thought that was like really interesting. I was like, Oh, I thought this was like a club where you had a like show financials to get in inside of. And turns out that's not true. And also The balls of SBF to be buying stadiums. uh to be hiring Tom Brady and all these other like you know, Larry David, these huge celebrities

This guy took this guy took a scam to the next level, you know, so much hubris to be Tweeting or DMing Elon and being like, Hey I I'm I'm I'm down to put up three billion for buying Twitter. It's crazy. So so did you see the text messages that leaked of that? Yeah. And uh what did Elon say? He goes, please. So basically the the text was that leaked, it's on uh this awesome Twitter handle called internal tech email. So you can go check it out there. Um it's Michael Grimes, who I think is like the head of a banker, I think.

Yeah, I think he's like one of the top guys at Morgan Stanley. So Uh what's his what's his actual he's the managing director uh at Morgan Stanley. So he texts. Elon, he goes, Hey, do you have five minutes for a meeting that I think you'll want to take? Elon's like I'll call you in half an hour.

Microps, perfect. He goes. Sam Bank McFried is why I'm calling. He links to a Uh link of fanbaker free, which is basically A link to a story that like Sam Big McFried is um he was an effective altruist, meaning his goal was to make as much money as possible so that he could give it away. That was the best way that he could help and cause like positive change for society was by maximizing how much money you can make and then giving it away.

Which is like why there's all the memes of like You did it. You took all our money and you gave it away. Wow. Um And so then Elon just responds two question marks like what? And he goes I'm backlogged with a mountain of critical work matters. Is this urgent?

He goes. He wants one to five billion. Serious about partnering with you, same security you own. Not urgent unless you wanted f him to fly out tomorrow. Um he goes he could do five billion if everything is vision lock. Uh he would do engineering for the social media blockchain integration, founded he founded FTX, he believes in your mission, major democratic donor. He was the number two dem largest democratic donor, forty, fifty million, something like that.

Um He goes, so I thought it was worth a an hour tomorrow. He said he could shake hands on five. Five billion. If you like him and I think you will. Um

Can you talk with you know, whatever, but it you know, it could get us five billion in equity in an hour. He's like trying to sell it, like take this meeting. Elon replies, blockchain Twitter isn't possible as the bandwidth and latency requirements, you know. And then it then it says Elon, disliked. Could do five billion if ever if if uh if Vision Lock would do engineering for social media blockchain integration.

And then the bank goes. Got it. I'll for the equity interest of this other guy instead. But even if there's not the blockchain piece, he's interested in investing it uh And Twitter and your mission, but we can we can

Put him on the sideline for now. He like goes. As long as I don't have to have a laborious blockchain debate. Which is honestly one of the cooler things that Elon has done or said in this entire thing, which is like All right, I'll meet the Code Crypto bro. Just don't make me fucking I don't want to get into an hour long talk about blockchain, please. And um that I thought was hilarious. Then he goes.

Does Sam actually have three billion liquid? And then the guy goes like yes, I think Sam hasn't. He actually said up to 10 at one point, but in writing he said up to five. He's into you. And um he said the blockchain's only if you're interested not gonna push it. Blah blah blah. This other super rich guy, uh Orlando referred him And then he's like

Uh we can push him to next week, but I believe you'll like them. Ultra genius. And doer builder like your formula. Built FTX from scratch. After MIT physics. Second to Bloomberg and donations to Biden campaign. And so that was The Grimes. What's this guy's name? Mark Grimes? Dude, he's on the Grimes right now. You're fired, bro. You are fired.

We're calling him Mark Grimes instead of Michael Grimes for whatever reason. The um we did this in the milk road. We were like, you know, it's just it's hard to report bad news every day, but it's like hey, bad news. F Tech's the biggest exchange, insolvent. Bad news. Wasn't even just a miscalculation, you know, in good faith. It was actually fraud and deception, and we think. And that's what it looks like. Oh, bad news. the money that they would have otherwise had to pay out the remaining customer deposits Oh uh somebody just hacked it last night. Took six took the last six hundred million. There's actually zero in the bank accounts now. So there is nothing left for anybody. Uh because a guy literally just did this and oh, by the way, there's a plane going flying his private jet is flying to Argentina tonight. Uh we're tracking it here. And it's like Dude, this is horrible. And we're like, what are we gonna do? We're like

We're no longer calling this guy SBF. Nicknames are for winners. This guy is now Samuel. We're calling him his government name and like uh Mr. Bankman. No, not even. No, not even he's Samuel uh from now on. Our software's the worst. Have you heard of HubSpot? See most CRMs are a cobbled together mess, but HubSpot is easy to adopt and actually looks gorgeous. I think I love our new CRM. Our software is the best. HubSpot, grow better. We uh I wanna ask you about Milk Roads engagement, but first um you tweeted something and I agree with basically you're talking about like I it just like I lose trust in so many things. I'm losing so SPF or not SP uh FTX owned I think ten percent of Robin Hood, which I have money in, uh not a huge sum, but I think he personally, uh him and Alameda owned the the nine percent or something of I'm gonna sell I'm gonna I'm getting all my money out of Robin Hood. It this did that too. I don't I I don't trust anything. I don't trust any new startup that is in banking I by default

Don't believe you. Whereas before I wouldn't be like, Oh, this is kinda cool, I guess. Like you have MasterCard's logo on there. I guess you're okay. Yeah, I'm not team innovation anymore. Yeah, no, fuck that. I'm going to e trades. I'm getting my money off of uh uh Robin Hood I to all the people who I said, Oh, you don't you know you just don't get the disruptors. I'm sorry. You are right. I was wrong. I'm sorry, Daddy. Uh you are you are absolutely right. I do not I I think I trust Coinbase for some reason because uh the guy Brian seems a little bit legitimate and they are publicly traded, so they do report quarterly. But uh I guess. You gotta trust somebody, right? Like you gotta trust something. So for example, I was like

Dude, I'm getting all my crypto off Robin Hood at the minimum because I had way back I had bought crypto on Robin Hood. And then I was like Wait, I can't just send it to another wallet. It's like no, because Robin Hood actually wasn't buying crypto, you were buying a crypter. I was like, What the fuck? Why did they say buy bitcoin? Like this is not Bitcoin. This is a Bitcoin tracking derivative. It's not even you don't even own the coins. Then it was like okay. Now you could after years, it was like you could transfer it off. So I was like okay, I'll get to that when I get to it. And um I bought a bunch of ETH on there and I was like uh I was like. I'm getting it all out of there.

I go Hit send it to ETH wallet. It's like oh you've exceeded your five thousand dollar max one. I was like five thousand dollar max. Every day you can only do five thousand? First of all, why? Um, second of all, that's bullshit. This will take forever to get all my money off this thing. It's just like yet another

You know, yet another strike against, you know, innovation. I'm the old guy on the lawn now shaking my fist saying, you know, uh, all all you rascals, you know, stop playing with my money. It's like Yeah and it's not like It's like crypto. It's not like Bitcoin. It's like The people building the companies around this that are literally like committing fraud or taking so much reckless risk that they're it that they're Their whole exchange goes insolvent overnight or gets hacked. That's insane.

So I was like, you know what, I'm gonna self-custody or I mean uh take this portion, move it over here, do this over here. You know, I have this kind of strategy. I was like, I'm gonna move more into self-custody. And um Our buddy Greg was like um I was like, What do you think, man? Should I Should I do this? And he's like, Well Аза, вот I trust more myself.

Or One of these exchanges. And he's like He's like, uh, you know, and I was like no, I said, What would feel worse? If I just lose my crypto or if these guys lose my crypto he's like well Let me ask you a different question.

How many AirPods do you own? And he's like, How many AirPods have you lost? He's like, If you can't keep your AirPods You really think for ten years you're gonna like not lose your crypto? And I was like, Fair point. Uh like, you know, okay, cycling through options of how to hold this stuff so that A, I don't lose it, but B, you know, I'm not trusting anybody. Luckily I wasn't really that affected by FTX, but like, you know, a lot of people were. And that's extremely, you know, sad and disappointing. And like Those people are you know.

They're traumatized, right? That's like They got daddy issues now. They got trust issues. They're they're they're not coming back to the game and just being like, Yeah. I understand, even if you intellectually understand. That okay, this guy was a literally a criminal, right? Or like you know, somebody who was uh Yeah, doing something that was that was uh wrong, misappropriating user funds.

Even if you Acknowledge that that was one bad actor. It's like, dude, there's a lot of bad actors in crypto. And um, how the hell am I supposed to know? It's not like you get to go sit. and audit the books of these companies. It's not like you get they they say they say one thing they do another. Like twenty four hours before it went insolvent. The CEO comes out and says.

All assets are fine. We do not lend out customer deposits. Twenty four hours later, gone, and turns out this guy was lying. Well, dude, an interesting thing about San Francisco and Silicon Valley, where we both kinda started our careers is It's all based on trust. So there's like a lot of times where you uh give people money, you just wire them money without contracts, you Yeah.

Pump people up and make intro even though you don't entirely know. You don't say, Okay, I need your you know, I need to go into your database and I need to go check to see this. Oh I need to check Like I need to check that this database number is also not fudged by You know

bots or you know, fake downloads or whatever. Oh, I also need to check that your pixels not firing twice or you're not like hiding costs over here with your shell companies. You don't know all that stuff. And it would take a tremendous amount of time to do that. This whole thing or our little world is based on this type of trust. And you and I have both kind of m got started right when uh a great economy was was kicking off and Uh I basically didn't ever think

people were lying and that was incredibly naive. And now I feel, even though I haven't really been burnt by this, but I do feel I'm like, oh I don't I don't really trust anyone anymore. And I think that everyone might be lying just a little bit. And uh it has changed my perspective on that. One hundred percent. And so I used to see Robin Hood as like Oh, you're the underdog, like you're you know, you're on my side. It's like oh no, you're you you definitely can lose my money. Uh I I don't I don't I don't believe you. Um What about Milk Road? So for the new listeners, Milk Sean uh started this thing called Milk Road. It's a daily email for crypto with hundreds of thousands of people. Is your engagement

Skyracketing or people just telling you to fuck off'cause they they hate the whole industry. Um no it's Yeah, because engagement's very high because during a crisis A lot of people want to read. I think what we will see though is

Over the coming months. That's not gonna bode well for us, right? Like even if engagement's high right now. during, you know, the play by play craziness of what's going on, right? We get you know record open rates and shit like that. You know, what happens three months from now as People are just sort of disillusioned. The news is over, the crisis is over.

It's like you know Dude, nobody's talking about Ukraine right now, the in my world, like day to day, people aren't talking about Ukraine every day. I remember when that shit broke out, it was like my mom, my sister, everybody I knew was like glued to their phone, watching these videos, fucking getting Zelensky tattoos and being like Oh my God, I can't believe this. My heart goes out. Thoughts and prayers, blah, blah, blah. And then you're in day ninety-eight. And you're like Your thoughts and prayers go back to like, you know, I I wish this whatever you know, just whatever your daily life was. You like sort of revert.

you stop caring as much in the same way, like I think what's gonna happen for us with the milk road is that engagement spikes during this time. But actually It's not good for anybody in the industry when Somebody breaks like

Cust and customer trust gets shaken this badly, that sets it back like Potentially years. Um Oh yeah, the I mean it it's not a question is d is it set back by years. It's is is this gonna ruin it. I mean like that that's how big this is in my in my mind. Yeah, and I I think that one's probably not if it was good like if crypto is gonna fail, I don't think it's gonna fail because of this. Like we've seen actually before the number one exchange go down before. It's just like as the industry grows.

Disasters cost a lot more money and they affect a lot more people. But like we've actually seen literally this disaster before with Mt. Gox and there's a Netflix documentary for I've talked about on the pod. About a Canadian exchange that was literally doing this. You would go in, it was like same thing, guys a boy genius, everybody loves him, media loves him. Starts this exchange becomes the biggest one in Canada. Turns out

There was literally never anything at the deposits. Like you would click buy Bitcoin, you'd send him the money. would never buy Bitcoin. He would just show the number in your uh on your computer screen. He would Yeah, you got ten. And uh he would just take the money, go do whatever he wanted with it. And it was literally just Like a criminal. He was lying and like And he faked his own death. Then he mysteriously died or faked his own death. And you know, Sam Bank McFree's tweeting out one letter at a time here is you know, who knows what's what's what's going on with this guy too. So like

We've literally seen this exact disaster before. But it's higher profile, it's louder, it affects more people, and now instead of losing millions, tens of millions, hundreds of millions, now it's billions that we're playing with that that got lost here. So I think it's definitely bad, but I don't think this is like The death blow to crypto. I think if It's like same thing with startups. Like startups don't usually die due to competition. You don't y you don't die because you got hunted, you died because you starved.

And I think if it happens for c if crypto dies, it's gonna be for the same reason. It's gonna die not because FTX blew up and then people just all gave up and you know decided I don't trust this thing ever again, forever and ever and ever, and everybody decided that. It's that Really the y the use case and the utility wasn't strong enough. To draw people in continually over time. Um, and like maybe, you know

the use case just wasn't big enough, or it wasn't strong enough. There wasn't product market fit. So I think startups and and in this case crypto it'll die if it dies of starvation, not of competition. You know who's one of the big winners here is Martin Screlli. So basically Martin Screlli, farmer bro, went to jail for a couple years for scamming his farm c far pharmacy company or s something like that. Pharmaceutical company or something like that, you know, finance guy. But Very smart, I think, a very smart guy.

And he has a sub stack. now that is incredibly interesting. And he's been doing Twitter spaces where he's been like commenting on this and he's like, Well, you know Jail's not that bad. Like you know, like he's saying all this funny stuff and he wrote in his sub stack this morning That he predicts That Sam Bankman Freed is going to get life in prison.

And I thought that that was an incredibly interesting prediction. Uh, you know, Bernie Madoff got, you know, hundreds of years. Um, there's this other uh uh Ponzi scheme guy that I was reading about, based out of Texas, who also got like a hundred and fifty years. And so it's not crazy that that could happen. You know, people who commit these hundreds of millions and billions of dollars p Ponzi schemes, they get life in prison, which is kind of crazy that you can get life in prison for a nonviolent crime. But Uh, his prediction is that he's gonna go to prison forever. So the Enron guy Enron got twenty four years.

As his sentence. Uh let's see. Bernie Madoff. Well he Bernie died in prison, you know, he got sentenced when he was in his seventies, but I think he got hundreds of hundred and fifty years was like the Yeah, the the the headline number. And then I think the one of the another big Ponzi scheme guy, I think I believe his last name was Sanford, Mark Sanford, I believe. He uh at age sixty something got a hundred and fifty years. So he it's uh you know, regardless of when you get that hundred and fifty years, it's a life sentence. And so it doesn't believe it doesn't appear that this is literally a Ponzi scheme. A Ponzi scheme works in a specific way.

Like I think Madoff basically would like He like had all the money in like one checking account. Did you know this? He had like a million dollars in a chase account. It was just like whenever somebody requested he would Pay him out out of that. And and you know, show these great returns or whatever. But um in this case basically The the effect's the same here, you know, like someone he defrauded people to the tune of billions and billions of dollars. Exactly. Uh

And not only that, but Uh the interest you know, Bernie Madoff I don't know if you notice know this, but do you know that he was the head of the SEC for a minute? Of the security exchange. Yeah. He was that or it was either that or Nasdaq. I think I think he was the head of the SEC and he had and so he was like a big deal, you know? And so uh so that was like you know, bold on his part, but SPF did this in a even bolder way because he was mainstream. You know, he owned or they they had the naming rights to the Miami Heat.

And they had commercials with Tom Brady. And so to me, it's m if I'm a judge, I'm like, dude, you're even you're you're rubbing it in all of our faces. This is more egregious than Bernie Madoff, who was a little bit more quiet about it. So you're just like taunting me while you're stealing. So of course I'm gonna like get you as hard as I possibly can. Right. Yeah, yeah. It it's it's bad. I mean it's very, very visible.

Very, very painful. Very like a I mean, just the the gall of people. I mean this guy's a real motherfucker for what he did. That's like a crazy crazy thing to do. And you know, there's like I could see one version of it. Which is basically the there's one version of it which is

He believed that this would Like he wasn't trying to steal people's money. He was like, you know what, like Alameda.

Like basically what people think is that Alameda when Luna blew up Uh Alameda lost a bunch of money. And in order to save Alameda from having to like liquidate everywhere. He's like okay, let me just Loan you this money.

You will make it back'cause you're good and then I'll like make it all good in the end. Nobody no harm, no foul. Um, I know all that I shouldn't do this, he didn't tell anybody about this. That's like one version of reality that could exist. There is some evidence against that. But like It's hard to know, you know, we're talking about like autism capital as a source, right?'Cause there's hard to know if this evidence is like anybody just like making a screenshot of whatever. You know, like it's it it's hard to know.

At this point. So Um You know, so so basically i there's one version of reality that's that. Uh, which is he got stuck in a in a in a in a spot where he was gonna lose a bunch of money and the his thing was gonna go under and it was gonna be very public and bad. And he tried to cover it up and he kinda panicked. He made a terrible decision and he did something that was wrong and illegal and um against terms of service, at least for for FTX.

And But he he intended to like make it all right. And then there's another version which was As of now, that does not seem like a very likely scenario. And what part makes you what what evidence makes you say that? Uh like the was like you know, th the people were saying that like he was he's

Allegedly none of this has been proven that he's been wiring himself for five hundred million dollars. Uh And that coincidentally the FTX has been hacked. Uh, things like that. Like I I I I don't I don't feel as though that's Yeah.

Is Gonna be the outcome. Yeah, so let's say uh whatever, there's some probability that that that's what happened. And then there's another probability, the more egregious possibility is like basically he's like Screw everybody. Uh we're gonna take the money, we're gonna funnel it over here. I'm gonna grease the you know, he lives in the Bahamas. He's like, I'm gonna grease all the politicians here. I'm gonna grease the politicians in the United States, be the second biggest donor to Biden, and I'm gonna, you know, go to the there's like this crazy stuff where like His the girl who was running Alameda, her dad was like

Work with Gary Gensler and who's like the SEC chair and like that's why SPF and Gensler kept meeting and like we're about to pass this bill that was gonna be very bad for DeFi, but very good for FTX. And it was like all this like, you know, game to basically like lock in this like money machine. that he was gonna, you know, continue to use for his own benefit and Alameda was like abusing the information that they had front running the trades. There's like the like everything was evil and then there's like

V Slippery slope type thing. Like if you watch the Theranos documentary, for example Um I I shouldn't say documentary, like you know The Theranos fucking movie. Yeah, whatever. The the show. Um

They make it look in that like what actually happens is She's wants to do something great. She's sort of delusional about her own abilities. thinks that I'm an entrepreneur, I can prove everybody wrong. Thinks that the technology will work. Thinks that she's buying time to fake it till you make it to get it to work.

And then at some point gets so trapped in the lie that she just goes all in on the lie,'cause at that point, like her entire image, ego, company, fortune. is based on this working and she's like You know, eventually starts just, you know. Actually lying and committing crimes. And so like that that became like but that wasn't the intention day one. It's like I'm gonna do this scam. I'm gonna scam everybody. And so I think that's the the only question here, but in if regardless, the result is the same. Scam happened whether he intended to do the scam from day one or halfway through got into in a spot, panicked, and started to lie and started to to commit these uh

Um You know, sort of I don't know if I should call them crimes, but you know Do what he did. To add to the story, do you know who this kid's parents are?

Yeah, they're like ethics teachers at Stanford. Dude, they teach they are. They're perfect They're perfect They're both professors of law. at Stanford Law School. I I think they also like taught at Yale. I mean so they're supposed to be like No, but they and also literally teach ethics. Yeah. In relation to to law from a legal perspective, I believe. And they uh the dad, I think Joseph is his name, he is involved in FTX where he like helped them raise raise some money. So If this guy is Full on lying criminal. Crazy man. Screw the I mean, screwing people out of money is is is bad.

Also screwing your family and your parents is the worst. Right uh so like the the this whole entire story. r you know, uh it hurts a lot of people, but in terms of just like story arc and soap opera. It is just the best. It is the best. Are you not entertained? If nothing else is entertaining. Dude, I don't even like crypto. You know, I'm I've I've been like the crypto. What is your prediction uh for crypto? Not not uh FTX I mean it's pretty clear what kind of We don't know the details exactly what happened, but we know the result for crypto. What do you think is the uh

Do you think this all just goes to zero? Do you think this sort of peters out for a long time? Do you think this rises again? What is your prediction? I think and keep in mind my perspective here is only emotional. So and and basically I learned from crypto just from talking about you. So everything that I've learned about crypto, it's been live on this podcast. So I would say I'm not incredibly educated. I think that It's gonna peter out for the next five to ten years. I think that NFTs are gonna go to zero. I think that all the alt coins uh basically Ethereum and Bitcoin are the only ones that are gonna ever have the chance of being interesting.

virtually all of them go out of business. I think that um Coinbase stays in business and actually might grow because people are like, Okay, fine, you're the only place that I can trust. Uh, I think that uh like Luna and all this other stuff, I that one's already dead, but like all these other like other One hundred percent go to zero and never work. And I think that this guy gets sentenced to Twenty five to fifty years in prison.

All right. There's the prediction. What do you think? Um I predict uh Bad news bears for the next um Couple years.

Is my guess. I I don't know the time scale there, but I'm just gonna guess a couple of years, crypto winter. I mean i I think that's Probably True for the entire economy right now, but I think particularly worse for crypto. Um

But I do think that in the end crypto is real and is gonna work. Um and you know, I know that's kinda sort of but maybe now unpopular, maybe it was always unpopular. I'm not sure. I don't really pay too much attention to that, but Um Yeah, I do think Bitcoin, Ethereum, and then replacements to some of the other use cases that that were built are going to rise. And I I think some of the things that are still the true I think this guy goes down I think Coinbase does well. I think that most of the current

Coins. that are completely overvalued, go to zero. But I do think that Bitcoin and Ethereum are here to stay. And I think that they won't be the only two forever. I think there will be new ones that come and and do well. Um in the future. But I think it's a I also think it's another down cycle. Anyone who raised money. And they had the word web three in their deck.

I think Virtually one hundred percent of'em. Are gonna fail. And not work. Uh, not necessarily because they are bad entrepreneurs or because their products are stupid, although I do think that is the case in the vast majority of them.

Uh, I think that they're just gonna be laughed out of like existence and just be like, dude, we're never working with you. Like this is Like both consumers. Now because they're ugly, which they are. Not because they're dumb, certainly so. But because they're gonna get laughed out the room by investors. It's not because they're ugly, it's not because they're dumb. It's just because they're pathetic. Ha ha ha. I think that's gonna happen. Not all, but but close to all.

Yeah. Well that's true, I think, for most startups. All right. Uh I gotta go visit my door to keep knocking. Alright, that's the pod.

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