Said Sam Bankman-Fried, apparently feeling a little lonely in the Bahamas.
Crypto coverage, which is now synonymous with Bankman-Fried coverage, continued to overwhelm the signal from traditional (read: real) markets on Thursday, which I suppose is fine given it’s more noise than signal right now anyway. There’s no getting around this story. It’s everywhere and it’s not going away anytime soon.
Bankman-Fried reached out to Vox’s Kelsey Piper “just after midnight” in the Bahamas on Wednesday. She’d sent him a direct message a few days previous. Piper works at “Future Perfect,” an “effective-altruism-inspired section” at Vox dedicated to “the world’s biggest challenges.” Bankman-Fried was a kind of patron saint for effective altruism, which New York Magazine described this week as “in crisis.” “Many of the movement’s institutions are suddenly broke,” Eric Levitz wrote, noting that following FTX’s collapse, the FTX Future Fund “will not be able to honor many of its committed grants.” Bankman-Fried’s philanthropic family foundation gave Vox’s Future Project a grant in August for a 2023 initiative, which is now on hold.
“I came away from our conversation appalled,” Piper said, of her exchange with Bankman-Fried who, frankly, was a young man in a lot of trouble, looking for somebody to talk to in the middle of the night. (To Sam: Been there! To Kelsey: I can tell you, from being on Sam’s side of those conversations, the other person rarely comes away anything other than appalled.)
Among other things, Bankman-Fried told Piper that much of what a gullible world took to be an earnest (eager, even) interest in crypto regulation was “yeah, just PR.” “F–k regulators,” he said. “They make everything worse.”
Asked by Piper if, perhaps, “some kind of consumer protection would be good,” Bankman-Fried admitted it would, but said regulators aren’t the people for the job. He went on to lambast regulators in all spheres, including the FDA (which “isn’t helping”), the FTC (“the crackdown on Big Tech has no point”) and, amusingly, OFAC, which Bankman-Fried correctly assessed is “the single biggest threat to the US being a superpower.”
What he didn’t say, to Piper, is that he intentionally helped idiots part with their money. “Each individual decision seemed fine and I didn’t realize how big their sum was until the end,” he remarked. That’s probably the way he feels about it, but at a very fundamental level, there’s nothing “fine” about a decision to get into the private money business, which is what crypto is. I’m tired of entertaining the notion that it’s something else, and so, apparently, is the Fed.
“Private money can generate significant run risk,” Michael Barr, Vice Chair for Supervision, warned on Wednesday. Private money can also create “enormous” risks to financial stability, he added. There’s no lender of last resort, and as one CIO told Bloomberg for an article documenting some $700 million in frozen funds stranded in a product offered by the Winklevoss twins, “at the end of the day… retail investors or crypto-native folks [may not] understand that if I trade something with a counterparty that’s not regulated in the US, I can’t go to the SEC, the CFTC or anyone else and say, ‘Hey I was robbed.'”
(Incidentally, a reader, since dismissed for unrelated transgressions, touted a Winklevoss-linked yield product earlier this year, while commenting on one of my cautionary crypto articles. I can’t say for sure whether it was Gemini Earn, but it certainly could’ve been. Six months later, as the fallout from FTX’s collapse spread, Genesis Global, the lending partner of the Winklevoss Earn program, paused withdrawals.)
In her discussion with Bankman-Fried, Piper wondered if, perhaps, it could all be written off (figuratively and literally) to utilitarianism. She cited a previous conversation with Bankman-Fried, who suggested that even if Philip Morris “had really good ideas about how to improve the world,” the company might be hindered by the reputation of their main product. Essentially, the question is whether you can do bad things (the classic example involves some version of a hypothetical where you’re forced to choose between killing one person to save several, or letting everyone die) if the net result is a better outcome for the whole. You can make conceptually similar arguments about globalization (e.g., it’s better to lift countless millions in emerging markets out of poverty, even if that means the middle-class in advanced economies takes a 40% pay cut).
Ultimately, Bankman-Fried waved it all away. “Man, all the dumb sh–t I said,” he mused, apparently marveling at the sheer scope of the charade he perpetuated. “It’s not true.”
He went on to say something that was true, though, perhaps for the first time in a long time. “Some of this decade’s greatest heroes will never be known, and some of its most beloved people are basically shams,” he told Piper. Winners are heroes and losers not, Bankman-Fried said, in what amounted to a reiteration of age-old adages like, “To the victor go the spoils” and, “History is always written by the winners.”
Bankman-Fried danced around questions about FTX deposits. It’s pretty simple, really. FTX sent people’s money to Alameda, which, in Piper’s words, “gambled it, and lost it.” To me, that’s almost an afterthought by now, although US lawmakers and regulators aren’t likely to see it that way.
I want to be clear: The reason I highlight this exchange (between Bankman-Fried and Piper) isn’t to comment on crypto, or to generate residual web traffic from Bankman-Fried’s Icarus moment. Rather, the point is to underscore what I believe to be a depressing reality that most people simply refuse to countenance, to their detriment.
The world isn’t a place full of “good,” well-intentioned people. As a species, we’re self-interested and inclined to taking advantage of one another whenever and wherever we can, when it serves our purposes. If you fail to internalize that reality, you’ll be among those taken advantage of. As one famous Moroccan-born American rapper aptly put it this year, “You have to think like them / So they don’t pull up and kill you.”
“You were really good at talking about ethics,” Piper told Bankman-Fried. It was actually a question in declarative form. “Ya. Hehe. I had to be,” he responded. “I feel bad for those who get f–ked by this dumb game we woke Westerners play where we say all the right shibboleths and so everyone likes us.”
You might recoil at that. I imagine Piper did. But you should be thanking Bankman-Fried for his candor. Ironically, his greatest gift to the world was the failure of FTX. The downfall of his empire and his flippant, but accidentally profound, remarks to Piper, retaught the most valuable lesson of all.
“I’m sort of putting together a picture where you don’t believe anyone is doing anything for good reasons,” an innocent Piper said. Indeed, Kelsey. And guess what? Bankman-Fried, realizing that in this world, you’re either the prey or the predator, decided on the latter. If you can’t spot the sucker in your first half hour at the table, then you are the sucker, as the famous quote goes. Bankman-Fried spotted the suckers: They were substantially everyone.
I’m reminded of what I wrote on social media Wednesday, just a few hours before Piper’s article was published: “The only realistic lens for reality is a 100% cynical lens,” I said. “Whatever’s in front of you, whether it’s an article, a can of soda or, especially, another person, you’re at risk of being exploited. Typically for money.”
I wasn’t talking about Bankman-Fried, but I could’ve been.