Sam Bankman-Fried (SBF) debacle with FTX (1 Viewer)

[pecorino]

In all seriousness, how can you not find this story morbidly fascinating. SBF had every advantage you could possibly have. He was always going to have a nice, comfortable life no matter what. Then he arranged, somehow, to become incredibly wealthy through what we now know was a scam. Now he's probably looking at spending the rest of his life in prison and he's only 30. My life had barely begun at that point, and his is over. It's both sobering and uncanny to watch somebody self-destruct like this.

It's a great and terrible story. The timing is incredible, too--Michael Lewis had been shadowing SBF for six months prior to the collapse of FTX. Even if that does not happen, Lewis is going to write a compelling, interesting book and you just know it's going to become a movie. Now with the ending served on a silver platter, this is gonna be bigger than Moneyball or The Big Short. Americans love to watch a great train wreck. Link

 

[General Malaise]

Denied bail.

He will be incarcerated until February.

He apparently tried to argue that he couldn't go to jail because he is vegan and depressed.

Wait, hold up - how is that disheveled fat crap burger a vegan?

 

[The Z Machine]

In all seriousness, how can you not find this story morbidly fascinating. SBF had every advantage you could possibly have. He was always going to have a nice, comfortable life no matter what. Then he arranged, somehow, to become incredibly wealthy through what we now know was a scam. Now he's probably looking at spending the rest of his life in prison and he's only 30. My life had barely begun at that point, and his is over. It's both sobering and uncanny to watch somebody self-destruct like this.

It's a great and terrible story. The timing is incredible, too--Michael Lewis had been shadowing SBF for six months prior to the collapse of FTX. Even if that does not happen, Lewis is going to write a compelling, interesting book and you just know it's going to become a movie. Now with the ending served on a silver platter, this is gonna be bigger than Moneyball or The Big Short. Americans love to watch a great train wreck. Link

Like I said, I want to invest in this movie, not crypto.

 

[culdeus]

A lesson here.

This guy and his companies were the darlings of finance and venture capital. There was so much momentum it was tough to stop.

Most importantly, he had the blessings and endorsement / backing from some of the most respected companies in the world.

And when the curtain is pulled back, they all look incompetent.

The lesson I think is simply: Think for yourself. Take in the inputs of "experts" and those respected in the field, but just because everyone's doing something doesn't mean it's a great, or even good idea. This applies to investment and fantasy football and all of life.

Might say take a small step back and evaluate this on the merits of the trading platform which didn't suck. Then he built this on a Ponzi scheme.

Crypto still needs exchanges to justify valuations. So people needed to buy in for their own self interest even if not with their money as well.

 

[Encyclopedia Brown]

Perp walk: https://pbs.twimg.com/media/Fj6dkZXX0AUK0h4?format=jpg&name=large

 

[FairWarning]

That’s rough for the parents. They are likely to blow through all their assets defending him and he’s likely got less than a 10% chance of getting a positive verdict, if that. All you can hope for is your kid(s) to be good people and they probably thought he was being a positive difference for the world. Has to be shattering.

I’m not sure about these parents either:

Bankman-Fried’s parents, Joe Bankman and Barbara Fried, were seated in the third row behind members of the press.
They appeared to oscillate between dejection and defiance, at times holding their heads in their hands and clasping their hands. Bankman-Fried’s mother audibly laughed several times when her son was referred to as a “fugitive” and his father occasionally put his fingers in his ears as if to drown out the sound of the proceedings.

Link

I’m not sold on them either. I’m trying to decide how much is them and their connections vs the system of power and corruption.

It is ironic that he’s arrested right before testifying before Congress though. Who knows how much gets exposed, wish it all would.

 

[General Malaise]

I wonder if they'll put him in a BAWWWWWWWWCKS

 

[timschochet]

So if all the investors lost their money, and this dude doesn’t have any money, who ended up with all the billions?

 

[The Big Donkey]

https://www.washingtonpost.com/business/what-did-sbf-and-ftx-lose-in-real-money/2022/12/13/1b693c28-7b02-11ed-bb97-f47d47466b9a_story.html

"Now that Samuel Bankman-Fried has been detained in the Bahamas, US authorities are preparing to finally put the question that everyone’s been trying to ask the chief executive of collapsed crypto exchange FTX: “Where’s the money, Sam?”

But there’s another mystery that faces the Securities and Exchange Commission, which charged Bankman-Fried with fraud on Tuesday: How much real money was ever involved?....."

"The SEC has started with the easier number: It accused Bankman-Fried of defrauding investors of $1.8 billion, which is what it says FTX raised from equity investors. This money bought computers, office space and salaries, political influence and marketing, and a good bit of fun for those involved."

 

[General Malaise]

So if all the investors lost their money, and this dude doesn’t have any money, who ended up with all the billions?

Bahama real estate, friends of Sam and the collapse of dragon's milk lite coin to the astonishment of everybody seem to be leaders in the club house for the disappearance of wealth.

 

[pecorino]

So if all the investors lost their money, and this dude doesn’t have any money, who ended up with all the billions?

I've been assuming (probably wrongly) that the money went to Alameda for investing. Then Alameda likely used some derivative products (like options) or invested directly in their own FTX token, building a house-of-cards on significant leverage. To put it plainly, if Alameda had $1 million in cash to deploy, just to make up a number, on the rise of an equity or on something crypto related, they could have probably leveraged that by a factor of 10, meaning they'd stand to make a 10-fold profit if the gamble paid off. Or they invested that principal in a risky start-up which SBF liked to do. However, in situations like that, it's a distinct possibility that the entire $1 million in principal goes to zero if the underlying equity or the start-up tanks. Or, maybe most likely, they did build a house of cards with Alameda betting on Bitcoin or Coinbase or something else that may have not been the FTX token but they'd have been highly correlated. When one comes down then so does the other. That cycle led to the run on FTX which would have had that cascading effect on Alameda if all their eggs were in the crypto basket. That's my bet--that they were massively leveraged with much of it tied to crypto. It's the opposite of diversification and the consequences are plain as day.

 

[Joe Bryant]

Might say take a small step back and evaluate this on the merits of the trading platform which didn't suck. Then he built this on a Ponzi scheme.

Crypto still needs exchanges to justify valuations. So people needed to buy in for their own self interest even if not with their money as well.

That's not what I'm saying at all. This isn't about the merits of crypto. This is about just because Sequoia Capital thinks it's great, doesn't necessarily make it so.

The lesson I think is simply: Think for yourself. Take in the inputs of "experts" and those respected in the field, but just because everyone's doing something doesn't mean it's a great, or even good idea. This applies to investment and fantasy football and all of life.

 

[Joe Bryant]

So if all the investors lost their money, and this dude doesn’t have any money, who ended up with all the billions?

I understood he used the money to invest and trade in other ventures.

And he's not good at that.

 

[Tom Hagen]

That's not what I'm saying at all. This isn't about the merits of crypto. This is about just because Sequoia Capital thinks it's great, doesn't necessarily make it so.

The lesson I think is simply: Think for yourself. Take in the inputs of "experts" and those respected in the field, but just because everyone's doing something doesn't mean it's a great, or even good idea. This applies to investment and fantasy football and all of life.

One of the things I found most interesting about the Theranos story is how once someone like George Schultz got involved a lot of really smart people seemed to just think "if a former Secretary of Treasury/State is a believer it must be real"

 

[culdeus]

Might say take a small step back and evaluate this on the merits of the trading platform which didn't suck. Then he built this on a Ponzi scheme.

Crypto still needs exchanges to justify valuations. So people needed to buy in for their own self interest even if not with their money as well.

That's not what I'm saying at all. This isn't about the merits of crypto. This is about just because Sequoia Capital thinks it's great, doesn't necessarily make it so.

The lesson I think is simply: Think for yourself. Take in the inputs of "experts" and those respected in the field, but just because everyone's doing something doesn't mean it's a great, or even good idea. This applies to investment and fantasy football and all of life.

What good idea do you think experts were pushing here?

 

[Maurile Tremblay]

FTX’s inner circle had a secret chat group called ‘Wirefraud’

Not sure how accurate this reporting is, but at this point no amount of incompetence would surprise me.

Well, what would you have called it?

 

[jvdesigns2002]

That's not what I'm saying at all. This isn't about the merits of crypto. This is about just because Sequoia Capital thinks it's great, doesn't necessarily make it so.

The lesson I think is simply: Think for yourself. Take in the inputs of "experts" and those respected in the field, but just because everyone's doing something doesn't mean it's a great, or even good idea. This applies to investment and fantasy football and all of life.

One of the things I found most interesting about the Theranos story is how once someone like George Schultz got involved a lot of really smart people seemed to just think "if a former Secretary of Treasury/State is a believer it must be real"

It just goes to show how often times it’s easier to do whats popular than what is right/smart. Kevin O’Leary for example was not a fan of crypto until he magically got paid $15 million by FTX and saw others making a ton of money from crypto and FTX. He’s a seasoned investor that normally does due diligence—and he abandoned that due diligence for two reasons: the $15 million payment—and he claimed that FTX was safe because SBF’s parents are both powerful compliance lawyers.

Just look at people in general these days—even in this forum. Last week a new member clearly made a mistake and posted a fantasy football question that was more of a Shark Pool question in here—and the first poster responded with some humorous schtick. I kid you not—the next 15-20 posts were just more unhelpful schtick. Only after a mountain of schtick and unhelpfulness did somebody direct the poster that this forum wasn’t the right place for that kind of question. I would guess that the vast majority of people in this forum are probably the nicest and most helpful people in person—yet—on this message board—many fall into being unhelpful and being snarky because it tends to be popular/tribal here. I think the point that I’m trying to make is that it is not at all uncommon for people to act in a manner that is against their very nature if it’s the popular thing to do.

 

[General Malaise]

FTX’s inner circle had a secret chat group called ‘Wirefraud’

Not sure how accurate this reporting is, but at this point no amount of incompetence would surprise me.

Well, what would you have called it?

Firewraud would have been my choice to throw the regulators off the scent.

 

[General Malaise]

That's not what I'm saying at all. This isn't about the merits of crypto. This is about just because Sequoia Capital thinks it's great, doesn't necessarily make it so.

The lesson I think is simply: Think for yourself. Take in the inputs of "experts" and those respected in the field, but just because everyone's doing something doesn't mean it's a great, or even good idea. This applies to investment and fantasy football and all of life.

One of the things I found most interesting about the Theranos story is how once someone like George Schultz got involved a lot of really smart people seemed to just think "if a former Secretary of Treasury/State is a believer it must be real"

It just goes to show how often times it’s easier to do whats popular than what is right/smart. Kevin O’Leary for example was not a fan of crypto until he magically got paid $15 million by FTX and saw others making a ton of money from crypto and FTX. He’s a seasoned investor that normally does due diligence—and he abandoned that due diligence for two reasons: the $15 million payment—and he claimed that FTX was safe because SBF’s parents are both powerful compliance lawyers.

Just look at people in general these days—even in this forum. Last week a new member clearly made a mistake and posted a fantasy football question that was more of a Shark Pool question in here—and the first poster responded with some humorous schtick. I kid you not—the next 15-20 posts were just more unhelpful schtick. Only after a mountain of schtick and unhelpfulness did somebody direct the poster that this forum wasn’t the right place for that kind of question. I would guess that the vast majority of people in this forum are probably the nicest and most helpful people in person—yet—on this message board—many fall into being unhelpful and being snarky because it tends to be popular/tribal here. I think the point that I’m trying to make is that it is not at all uncommon for people to act in a manner that is against their very nature if it’s the popular thing to do.

I suggested he PM Shuke for help. Did what I could.

 

[culdeus]

I mean the new Netflix doc "Trust No One" more or less was the idea that FTX was based on and executed nearly identically, except the SBF character died of dehli belly.

 

[massraider]

So if all the investors lost their money, and this dude doesn’t have any money, who ended up with all the billions?

I have a feeling the amount of actual deposits lost is significantly less that the number we are hearing.
Lot of people had leveraged accounts. So they sent over 10 grand, were able to leverage that, and hold 40 grand worth of garbage FTT token.

I get it, their account said what it said, they SHOULD have been able to pull 40 grand, but worth noting

 

[General Malaise]

@timschochet

Mom gives you $10 to open a lemonade stand. Instead of buying ingredients, you visit a neighborhood bully who says "Give me your $10 to hold and you can buy $100 worth Magic Lemons at the street corner of 1st and 1st".

So you race over and buy not just Magic Lemons but Fairy Dust Sugar and Ice Tears of a Clown and you rush home, excited with glee to open your lemonade stand with all your fancy ingredients. You broadcast to other kids how great and profitable your lemonade stand is going to be. Other kids want in, give you $10 to add more Magic Lemons etc.

When you open the first lemon, it's rotten. Tears of a clown? Melted. Fairy Dust Sugar? Baking powder. Nobody wants your lemonade. There is no lemonade to sell.

So you race back to the bully and demand your $10 back and all your friends' $10 but he says "Sorry Tim. You knew the rules going in. I got to keep this $10 as collateral so you could buy more than you could afford. Your greed got the best of you. Have your mom call me."

 

[timschochet]

@timschochet

Mom gives you $10 to open a lemonade stand. Instead of buying ingredients, you visit a neighborhood bully who says "Give me your $10 to hold and you can buy $100 worth Magic Lemons at the street corner of 1st and 1st".

So you race over and buy not just Magic Lemons but Fairy Dust Sugar and Ice Tears of a Clown and you rush home, excited with glee to open your lemonade stand with all your fancy ingredients. You broadcast to other kids how great and profitable your lemonade stand is going to be. Other kids want in, give you $10 to add more Magic Lemons etc.

When you open the first lemon, it's rotten. Tears of a clown? Melted. Fairy Dust Sugar? Baking powder. Nobody wants your lemonade. There is no lemonade to sell.

So you race back to the bully and demand your $10 back and all your friends' $10 but he says "Sorry Tim. You knew the rules going in. I got to keep this $10 as collateral so you could buy more than you could afford. Your greed got the best of you. Have your mom call me."

Thanks. I think I understand this. Just wondering what happened to the $10 we all gave to the bully since he doesn’t have it anymore.

 

[Joe Bryant]

I think the point that I’m trying to make is that it is not at all uncommon for people to act in a manner that is against their very nature if it’s the popular thing to do.

I think you're right.

And to add, I think it's especially tempting for people when it's not just the popular thing to do, but the leaders in the group are all doing it.

There's an implied "approval/confirmation" aspect when a firm like Sequoia invests a ton. Regular people can think, "Wow, the sharks at Sequoia think it's a good investment. I'm sure they've done all the necessary due diligence and investigation and they approve it". When the reality may just be that Sequoia simply wrote a big check.

 

[General Malaise]

@timschochet

Mom gives you $10 to open a lemonade stand. Instead of buying ingredients, you visit a neighborhood bully who says "Give me your $10 to hold and you can buy $100 worth Magic Lemons at the street corner of 1st and 1st".

So you race over and buy not just Magic Lemons but Fairy Dust Sugar and Ice Tears of a Clown and you rush home, excited with glee to open your lemonade stand with all your fancy ingredients. You broadcast to other kids how great and profitable your lemonade stand is going to be. Other kids want in, give you $10 to add more Magic Lemons etc.

When you open the first lemon, it's rotten. Tears of a clown? Melted. Fairy Dust Sugar? Baking powder. Nobody wants your lemonade. There is no lemonade to sell.

So you race back to the bully and demand your $10 back and all your friends' $10 but he says "Sorry Tim. You knew the rules going in. I got to keep this $10 as collateral so you could buy more than you could afford. Your greed got the best of you. Have your mom call me."

Thanks. I think I understand this. Just wondering what happened to the $10 we all gave to the bully since he doesn’t have it anymore.

He still has it and under contract isn't required to give it back. Sam took on the risk without telling his friends.

 

[timschochet]

@timschochet

Mom gives you $10 to open a lemonade stand. Instead of buying ingredients, you visit a neighborhood bully who says "Give me your $10 to hold and you can buy $100 worth Magic Lemons at the street corner of 1st and 1st".

So you race over and buy not just Magic Lemons but Fairy Dust Sugar and Ice Tears of a Clown and you rush home, excited with glee to open your lemonade stand with all your fancy ingredients. You broadcast to other kids how great and profitable your lemonade stand is going to be. Other kids want in, give you $10 to add more Magic Lemons etc.

When you open the first lemon, it's rotten. Tears of a clown? Melted. Fairy Dust Sugar? Baking powder. Nobody wants your lemonade. There is no lemonade to sell.

So you race back to the bully and demand your $10 back and all your friends' $10 but he says "Sorry Tim. You knew the rules going in. I got to keep this $10 as collateral so you could buy more than you could afford. Your greed got the best of you. Have your mom call me."

Thanks. I think I understand this. Just wondering what happened to the $10 we all gave to the bully since he doesn’t have it anymore.

He still has it and under contract isn't required to give it back. Sam took on the risk without telling his friends.

You’re saying SBF still has all the money investors gave him?

 

[thecatch]

That’s rough for the parents. They are likely to blow through all their assets defending him and he’s likely got less than a 10% chance of getting a positive verdict, if that. All you can hope for is your kid(s) to be good people and they probably thought he was being a positive difference for the world. Has to be shattering.

I’m not sure about these parents either:

Bankman-Fried’s parents, Joe Bankman and Barbara Fried, were seated in the third row behind members of the press.
They appeared to oscillate between dejection and defiance, at times holding their heads in their hands and clasping their hands. Bankman-Fried’s mother audibly laughed several times when her son was referred to as a “fugitive” and his father occasionally put his fingers in his ears as if to drown out the sound of the proceedings.

Link

Apparently the parents were paid by the company and gave legal advice. (Link).

 

[massraider]

And to add, I think it's especially tempting for people when it's not just the popular thing to do, but the leaders in the group are all doing it.

There's an implied "approval/confirmation" aspect when a firm like Sequoia invests a ton. Regular people can think, "Wow, the sharks at Sequoia think it's a good investment. I'm sure they've done all the necessary due diligence and investigation and they approve it". When the reality may just be that Sequoia simply wrote a big check.

There are many examples of what you are talking about.
Crypto is a little different.
There was a lot of people waving warning flags.

Anyone planning on getting rich from crypto (aka everyone involved in crypto) is clearly saying, "Warren Buffett has no idea what he's talking about, crypto is gonna be huge."

And along the way, there has been more and more red flags. There are Twitter accounts dedicated to cataloging the scams, rug pulls, and collapses. And people still had their life savings on a kid's laptop in the Bahamas. The only reason to USE an exchange is to make trades, and make money. No one who had their money with FTX was socking away Bitcoin for a long term investment.

This is not about taking bad advice, and following the crowd. It's a Get Rich Quick scheme, that's all it is. With fancy tech words.

 

[General Malaise]

@timschochet

Mom gives you $10 to open a lemonade stand. Instead of buying ingredients, you visit a neighborhood bully who says "Give me your $10 to hold and you can buy $100 worth Magic Lemons at the street corner of 1st and 1st".

So you race over and buy not just Magic Lemons but Fairy Dust Sugar and Ice Tears of a Clown and you rush home, excited with glee to open your lemonade stand with all your fancy ingredients. You broadcast to other kids how great and profitable your lemonade stand is going to be. Other kids want in, give you $10 to add more Magic Lemons etc.

When you open the first lemon, it's rotten. Tears of a clown? Melted. Fairy Dust Sugar? Baking powder. Nobody wants your lemonade. There is no lemonade to sell.

So you race back to the bully and demand your $10 back and all your friends' $10 but he says "Sorry Tim. You knew the rules going in. I got to keep this $10 as collateral so you could buy more than you could afford. Your greed got the best of you. Have your mom call me."

Thanks. I think I understand this. Just wondering what happened to the $10 we all gave to the bully since he doesn’t have it anymore.

He still has it and under contract isn't required to give it back. Sam took on the risk without telling his friends.

You’re saying SBF still has all the money investors gave him?

No, I am saying he gave that original money to somebody else and created a fantasy world using that money as leverage to invest in make believe. Along the way, he marked up what he believed he was worth and we all believed him. He was able to get others to invest in this vision and used that new money to pay older investors who wanted out.


SBF has only hard assets and land and loans to show what he did with the money. The original stake went to the entity that gave him the leverage to launch. It's never coming back.

TLDR; he convinced people his crypto trading platform was a safe way to invest in crypto. It worked well when all crypto coins went up and folks kept pumping money into it. When crypto went south, the poop hit the fan.

 

[Desert_Power]

So if all the investors lost their money, and this dude doesn’t have any money, who ended up with all the billions?

The short answer is that they, on a consolidated basis, lent money to firms/exchanges that went bankrupt.

 

[Capella]

The movie on this is going to be so amazing. Can’t wait.

 

[New Binky the Doormat]

The movie on this is going to be so amazing. Can’t wait.

l'd rather see a really good, in-depth documentary.

 

[fatness]

The movie on this is going to be so amazing. Can’t wait.

I think it'll be closer to Office Space than to The Big Short.

 

[Capella]

The movie on this is going to be so amazing. Can’t wait.

l'd rather see a really good, in-depth documentary.

Both, please

 

[DA RAIDERS]

I get that if you play/ed. crypto correctly you make/made money. But from where I sit, it’s always been an obvious house of cards, borderline scam.

 

[The Commish]

So if all the investors lost their money, and this dude doesn’t have any money, who ended up with all the billions?

The billions were all "on paper"....crypto isn't a currency really. At BEST it's a security. Pragmatically, it's a house of cards created from nothing...back to nothing it goes.

 

[Joe Bryant]

This is not about taking bad advice, and following the crowd. It's a Get Rich Quick scheme, that's all it is. With fancy tech words.

Sorry but no. My point was completely about following the crowd. I'm certain there are plenty of other valid points on this. But my point was to be careful about following the crowd and to be careful of assuming that because the "smart people" are doing something must mean they've done their due diligence.

 

[Captain Cranks]

Sorry but no. My point was completely about following the crowd. I'm certain there are plenty of other valid points on this. But my point was to be careful about following the crowd and to be careful of assuming that because the "smart people" are doing something must mean they've done their due diligence.

As someone who's been involved in the investment research process of start-up crypto projects, I can attest that there's certainly more than meets the eye when you see huge, big name funds as investors. I used to think, "Whoa, Animoca is a headline investor. This must be a good project since you know they did their due diligence." Now I think, "Ugh, Animoca is the headliner. What sweetheart deal did they get to have their brand attached to the project."

ETA - Everyone has an agenda and there's a good chance they're not aligned with your own.

 

[The Commish]

I get that if you play/ed. crypto correctly you make/made money. But from where I sit, it’s always been an obvious house of cards, borderline scam.

This is me. I've never understood it. I mean, over time the currency we've come to be confident in (over thousands of years) has become pretty similar in that it's value now is based pretty much on confidence. This started out that way but with no tangible commodity as its justification for value.

 

[massraider]

Sorry but no. My point was completely about following the crowd. I'm certain there are plenty of other valid points on this. But my point was to be careful about following the crowd and to be careful of assuming that because the "smart people" are doing something must mean they've done their due diligence

I'm not disagreeing with you.
I was making a (small) point that there was a lot of the crowd that were sounding the alarm.
Which really doesn't change the good advice you are giving.


Your point also makes reminds me of the excellent advice of Wu-Tang Financial. You gotta diversify your portfolio, mutha*****.

The percentage of people who had all their money with Madoff was astounding. Smart, successful, retired people, who knew better, but saw the returns (which no one could reverse engineer to actually see where they came from, BTW) and got greedy. They didn't need the money, they were living off interest, and still they ignored this basic rule. Because of greed, and that's it.

 

[jvdesigns2002]

On a bit of a tangent——CZ (the head of Binance) was just interviewed on CNBC. The answers to the questions that he was asked were not confidence inspiring imo. Seemed to pushback when asked about if he would allow top auditors to check out binance (he claimed that auditors do not really know how to investigate crypto exchanges)..etc. Hopefully they put the interview up on YouTube.

 

[Sammy3469]

Sorry but no. My point was completely about following the crowd. I'm certain there are plenty of other valid points on this. But my point was to be careful about following the crowd and to be careful of assuming that because the "smart people" are doing something must mean they've done their due diligence

I'm not disagreeing with you.
I was making a (small) point that there was a lot of the crowd that were sounding the alarm.
Which really doesn't change the good advice you are giving.


Your point also makes reminds me of the excellent advice of Wu-Tang Financial. You gotta diversify your portfolio, mutha*****.

The percentage of people who had all their money with Madoff was astounding. Smart, successful, retired people, who knew better, but saw the returns (which no one could reverse engineer to actually see where they came from, BTW) and got greedy. They didn't need the money, they were living off interest, and still they ignored this basic rule. Because of greed, and that's it.

The “genius” of Madoff is that there are lots of high net worth individuals (ie wealthy folks who aren’t wealthy enough to have a family office) that put all their assets with one asset manager for simplicity’s sake. That’s frankly not uncommon.

 

[Joe Bryant]

As someone who's been involved in the investment research process of start-up crypto projects, I can attest that there's certainly more than meets the eye when you see huge, big name funds as investors. I used to think, "Whoa, Animoca is a headline investor. This must be a good project since you know they did their due diligence." Now I think, "Ugh, Animoca is the headliner. What sweetheart deal did they get to have their brand attached to the project."

ETA - Everyone has an agenda and there's a good chance they're not aligned with your own.

Yes. That's a great point. Just because you see a big name on board does not mean they're on board with the same deal you're being offered.

 

[Joe Bryant]

Seemed to pushback when asked about if he would allow top auditors to check out binance (he claimed that auditors do not really know how to investigate crypto exchanges)..etc. Hopefully they put the interview up on YouTube.

That's the big thing I see people missing it seems. They want to act as if crypto is some magic new thing and not a currency. And somehow basic business principles of credits and debits and assets and value don't apply.

On a bigger scale, you see this sometimes with business and the "internet". They'll say "The internet changed business". Yes and no. The internet is a communication medium. It changed business in how people communicate. To a lesser degree, radio and television changed business too.

But the basic business principles of providing value for a customer and making a profit and running a business didn't change.

 

[Joe Bryant]

I'm not disagreeing with you.
I was making a (small) point that there was a lot of the crowd that were sounding the alarm.

Thanks GB

 

[TLEF316]

Sorry but no. My point was completely about following the crowd. I'm certain there are plenty of other valid points on this. But my point was to be careful about following the crowd and to be careful of assuming that because the "smart people" are doing something must mean they've done their due diligence.

As someone who's been involved in the investment research process of start-up crypto projects, I can attest that there's certainly more than meets the eye when you see huge, big name funds as investors. I used to think, "Whoa, Animoca is a headline investor. This must be a good project since you know they did their due diligence." Now I think, "Ugh, Animoca is the headliner. What sweetheart deal did they get to have their brand attached to the project."

ETA - Everyone has an agenda and there's a good chance they're not aligned with your own.

Yeah, this is so key.

My dad (who is a very smart retired guy with significant net worth) is generally a very conservative and prudent investor. My youngest brother (Who is basically the stereotypical gen Z'er/late millennial who believes anything Joe Rogan tells him) spent MONTHS trying to convince our dad that he HAD TO get into crypto....that it was foolish not to do. My dad totally blew him off until eventually he saw that one of the HUGE mainstream financial firms (I want to say it was Goldman, but I honestly dont remember) had set up a crypto division (or was backing a project. I honestly dont remember).

This inspired him to do some additional research based on the "hey if Goldman is doing it...." thought process. He eventually decided against it, thankfully.

As a relatively old fart pushing 40, crypto, NFT's, ect. never looked like anything other than a total scam to me. Just a way for greedy smart people to milk money from greedy less smart people chasing what someone has tricked them into thinking was an easy buck. I know some people who saw some pretty nice gains (including my brother) but nearly all of them have given it all back as the crypto market has tanked. None of them actually realized any gains because they never cashed out. Some dude on tik tok convinced them to reinvest in project X because it was "OMG. GOING TO THE MOON!!1111!"

Obviously all investment is risky to some degree. But I'll stick with what has mostly worked for 100+ years and look at my 401K balance in 15-20 years when I'm hopefully ready to retire.

 

[CletiusMaximus]

Seemed to pushback when asked about if he would allow top auditors to check out binance (he claimed that auditors do not really know how to investigate crypto exchanges)..etc. Hopefully they put the interview up on YouTube.

That's the big thing I see people missing it seems. They want to act as if crypto is some magic new thing and not a currency. And somehow basic business principles of credits and debits and assets and value don't apply.

On a bigger scale, you see this sometimes with business and the "internet". They'll say "The internet changed business". Not really. The internet is a communication medium. It changed business in how people communicate. To a lesser degree, radio and television changed business too.

But the basic business principles of providing value for a customer and making a profit and running a business didn't change.

It does seem there are strong parallels between many different historical debacles like Enron, sub-prime MBS, Madoff and the S&L "crisis." All of these and many others were driven by the kind of groupthink you first mentioned, and there were in all cases a few voices who asked questions about the emperor's new clothes but those voices were drowned out.

 

[culdeus]

Is sbf the only arrest? Sure seems like Caroline had as least as much if not more involved on the actual scam side here.

 

[massraider]

(he claimed that auditors do not really know how to investigate crypto exchanges)

Yeah this makes my eyes roll violently.

We are about two years past "oh you normies just don't understand crypto"

 

[Captain Cranks]

Sorry but no. My point was completely about following the crowd. I'm certain there are plenty of other valid points on this. But my point was to be careful about following the crowd and to be careful of assuming that because the "smart people" are doing something must mean they've done their due diligence.

As someone who's been involved in the investment research process of start-up crypto projects, I can attest that there's certainly more than meets the eye when you see huge, big name funds as investors. I used to think, "Whoa, Animoca is a headline investor. This must be a good project since you know they did their due diligence." Now I think, "Ugh, Animoca is the headliner. What sweetheart deal did they get to have their brand attached to the project."

ETA - Everyone has an agenda and there's a good chance they're not aligned with your own.

Yeah, this is so key.

My dad (who is a very smart retired guy with significant net worth) is generally a very conservative and prudent investor. My youngest brother (Who is basically the stereotypical gen Z'er/late millennial who believes anything Joe Rogan tells him) spent MONTHS trying to convince our dad that he HAD TO get into crypto....that it was foolish not to do. My dad totally blew him off until eventually he saw that one of the HUGE mainstream financial firms (I want to say it was Goldman, but I honestly dont remember) had set up a crypto division (or was backing a project. I honestly dont remember).

This inspired him to do some additional research based on the "hey if Goldman is doing it...." thought process. He eventually decided against it, thankfully.

As a relatively old fart pushing 40, crypto, NFT's, ect. never looked like anything other than a total scam to me. Just a way for greedy smart people to milk money from greedy less smart people chasing what someone has tricked them into thinking was an easy buck. I know some people who saw some pretty nice gains (including my brother) but nearly all of them have given it all back as the crypto market has tanked. None of them actually realized any gains because they never cashed out. Some dude on tik tok convinced them to reinvest in project X because it was "OMG. GOING TO THE MOON!!1111!"

Obviously all investment is risky to some degree. But I'll stick with what has mostly worked for 100+ years and look at my 401K balance in 15-20 years when I'm hopefully ready to retire.

The industry is certainly rife with greed, scams and ponzi schemes. However, the underlying technology will revolutionize the world as much, if not more than the the internet. What has mostly worked for the last 100+ years is investing in new technologies. Writing off an entire industry because of the Terra Lunas and FTXs of the world would be akin to writing off the internet because of the dot-com bubble.