Sam Bankman-Fried’s Greatest Gift

“F–k regulators.”

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.


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26 thoughts on “Sam Bankman-Fried’s Greatest Gift

  1. I’m glad you threw out that Rounders quote, I was thinking it for most of this write up. I agree, the candor should be appreciated, I can’t think of anyone else who owned who they were and what they were doing when it was all said and done. This should be a cautionary tale for the next bubble and the snake oil salesmen who come bearing false pretenses. This is the way the world really works.

  2. If you fail to internalize that reality, you’ll be among those taken advantage of.

    So cynicism is a learned trait, then?

    I dunno man, on one hand you claim everyone is looking to make a move, on the other you claim everyone’s a sucker. Maybe we’re perpetually stuck being both, and should try to remember that in our social interactions.

    I think you said it best when you described SBF as a young guy alone with his thoughts in the middle of the night whose world just collapsed. I don’t think Effective Altruism ever made any sense, but the guy seemed content to play the role of Nice Guy until his ego outran his balance sheet and people started calling him Bad Guy.

    1. “Maybe we’re perpetually stuck being both, and should try to remember that in our social interactions”

      Exactly. The question is: What part of you is predator and what part is prey? At the very least, you should have an internal estimate of that split so that you can use it to keep yourself alive and not be relieved of your money.

    2. You’re referencing something I speak about quite often. We live in a society that likes to conveniently label people as either good or bad. Our cinema is filled with stories of blameless heroes defeating comically evil villains. No human has ever been either. For every good person that the masses lift up as blameless there are others who think they are a villain. For every villain that the masses shun as evil, someone loves them. The world is very much a blurry grey rather than simply black and white. That’s difficult for the mind to understand, the complexities of humans who both want to do good and want to grow power and wealth. We’re all both a hero and a villain, it just depends on who you are asking.

  3. Importantly, this isn’t to “blame the victim.” It’s not like you finished a tuna sandwich at lunch and said “You know, it’s a beautiful day, I think I’ll take my dog for a walk in this gated community” and then some vagrant who jumped a fence knifed you, took your wallet, kicked your dog and ran off. This was millions of people and a media echo chamber who all, collectively, couldn’t see the potential for Ponzi dynamics in the private money business even after this person talked about those dynamics at length in a podcast, and even after multiple failures across crypto earlier this year. At a certain point, a sucker’s a sucker. How much sympathy can we realistically be expected to have?

    1. I think low rates and yield-chasing let it go on longer than it otherwise would have, meaning people who otherwise wouldn’t have touched it with a 10-foot pole began to doubt themselves. If crypto has rallied for a decade, and lots of people have gotten rich, and everyone is claiming its a paradigm shift that you just don’t understand… maybe you’re the sucker on the sidelines?

      At a certain point, a sucker’s a sucker. How much sympathy can we realistically be expected to have?

      Said the regulators!

  4. We are all suckers at one point or another in this game of life. Viewing the world through a cynical lens has served me well. Could I have made more money investing by only wearing rose-colored glasses? Perhaps. But I also would have lost more. Healthy cynicism can go a long way to navigating bumps in the road.

    Btw, the chat with Kelsey Piper will just add more content for Michael Lewis to string together a movie script. Maybe the title should be SBF’d.

    1. And maybe Michael Lewis was being SBF’d himself, by the way. It’s pretty convenient that SBF decided to let him “embed” just prior to the collapse. I don’t pretend to know how this would shake out, but if FTX (and the associated entities) are limited liability, then it seems at least possible that any profits SBF would derive from selling his story and likeness for a Hollywood blockbuster could be siloed from litigation.

      1. Part of me (the part that really enjoys schadenfreude) wishes Lewis had wrapped his book up just a little sooner. Imagine the epic dunking which would have ensued should Lewis have published a pure hagiography that hit stands a mere week before SBF’s extinction-event level blow-up. Alas for us rubberneckers, Lewis & his publishers will have time to re-write the ending.

  5. It’s a shame our society can’t self regulate some of this shit.

    Heis, I know you’ve stated this 1MM times more eloquently than I ever could, but when Bloomberg dedicates a section of its home page to Crypto it legitimizes and enflames the Ponzi scheme. If this were the 1950’s (I was born in ’83 btw), the white men smoking and drinking around the conference tables at CBS at least knew this sort of thing was dangerous and would have never given it airtime and the public would be better off for it.

    The transition of the media from advertisers paying for spots for the largest, middle of the road audience was actually a blessing. The new order of eyeballs and clicks has really fucked shit up, so to speak. It’s how Trump attained power, its why some folks today think that the polio vaccine is not worth the trouble.

    1. Anyone claiming they are an effective altruist and getting written up in a major publication is a scammer looking for notoriety and power.

      Any true effective altruist will get taken advantage of until they become a cynic.

    2. “… the white men smoking and drinking around the conference tables at CBS at least knew this sort of thing was dangerous and would have never given it airtime and the public would be better off for it.” Until they realized that filming themselves at the table talking about this kind of junk would make a pretty good show and “60 minutes” was born.

  6. I’m not sure I buy SBF doing EA stuff (or talking to regulators) just to game people.

    Talking to regulators, even if you despise them, is a necessity if you’re trying to create a new industry and set up standards. And, yes, sure, to some degree, if you’re talking with people more powerful than you and whom you need more than they need you, you tone down your hatred and contempt for them.

    But plenty of people have achieved legendary status in crypto (and tech even more so) without tagging EA or rationality. And, from what we know, it doesn’t seem like SBF was sleeping with tons of starlets and models. So it’s a bit hard to believe he just felt “EA is a great con”.

  7. H-Man, SBF is also setting the stage to lay this off on the ex-girlfriend by claiming he loaned her the money and she gambled it away at Alameda. His lawyers have to be going nuts with him having these late night fireside chats. He might want to reach out to Holmes to get some insight of what happens when a Theranos blows up.

  8. Also, SBF shouldn’t be on Twitter in the Bahamas. He should be in the wind, on a jet (or on a boat or, if he has to, on the back of a dolphin). He needs to run. Because a lot of people are coming for him.

  9. Crypto winds up being like history’s failed private banks, updated with the promise of technology to replace an old fashioned bankbook, but failing for the same reasons.

  10. Outside of a few, small enclaves, the Bahamas can be a scary place to hang out. Murder rate is 24/100,000 vs. 6.5/100,000 in the USA. For his sake, hope he didn’t take any “mob” money.

    It is really easy to avoid a lot of bad things in life such as crypto, Theranos et al – you just don’t play there. Even for one time. Get your endorphins elsewhere.

    1. Great points there, ‘Nester.

      Way back in the mid-70s, I was an assistant to a commodity futures broker. (In the days of fixed $50 per contract commissions!) We had an outstanding margin call from a hedger in the potato futures market. I was assigned to try to get the money.

      The client helpfully suggested that I fly down to a casino in the Bahamas to pick up the debit amount. In cash. I still recall his caveat: “Now we’ll get you the cash but I cannot guarantee your safety once you leave the casino.” For some reason we did not take him up on his kind offer.

  11. I think this is all broadly true as it relates to financial relationships, and you should assume anyone or anything promising and delivering a massive windfall in a short period is about as likely as winning the lottery. Cynicism in that regard is warranted.

    On the flip side, actual family, friend, and community relationships rely on trust and doing good for other people is one of the surest ways to be happy. I don’t think it’s reasonable to be cynical when it comes to people doing good things for those around them.

    I think SBF is honestly still a kid when it comes to his maturity level. While it may be unintentionally profound in some ways, I think his comments are just his brain trying to wrap his head around having the world at his fingertips and getting in way over his head. He became a fast billionaire with no checks on his ambition prior to turning 30 and investors falling over themselves to get in on the action. He didn’t have nearly the life experience to really have the perspective on what he was doing and didn’t have or want handlers that might have kept things from blowing up. Obviously his comments don’t come across well and he screwed over countless people, but I think he’s just trying to internalize how badly he messed up.

    I agree with you though that he’s going to be looking over his shoulder. He probably thought he could get away with siphoning off funds and still living large, but I certainly wouldn’t trade my day-to-day sanity for even a large fortune.

  12. So easy to rip people off with crypto, now the Fed and big banks(citygroup!!!) want to get in on the action! The new leader of Britain is a big proponent of digital money too, so much easier to manipulate the masses, you just can’t make this shit up!

  13. I used to limit this belief to politicians but now am including high profile people.
    The only time you will actually hear the truth from their mouths, is when they don’t have a chance of winning or have lost everything.

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