Category: Cryptocurrency

Sam Bankman-Fried signature license plates?

by philg

A sad day for Joe Biden’s second-largest donor (NYT):

Could the federal government reduce the budget deficit by selling license plates and other collectibles made by Sam Bankman-Fried? If he’s going to be in prison for at least a few years why not start up a line of Effective Altruism plates at $5,000, each one signed by Mr. Bankman-Fried? (partnership with the states, of course, and some of the profits shared with each state that participates)

Separately, when and by which president might Sam Bankman-Fried be pardoned?

Also, with Bitcoin now at $70,000, is it possible that Bankman-Fried, if left alone, could have paid everyone back? FTX melted down in November 2022 when Bitcoin was worth about $20,000. What if Bitcoin had gradually moved from its $65,000 November 2021 price to today’s $70,000? Would FTX have been okay despite the diversions of funds and the girlfriend’s investment decisions?

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Predictions for what happens to Sam Bankman-Fried and his co-conspirators?

by philg

Let’s see if I got the Sam Bankman-Fried (SBF) trial right… All of the co-conspirators who enabled the fraud at FTX agreed to testify against SBF in exchange for reduced punishment. They all then testified that everything was SBF’s fault and they were helpless puppets (somehow incapable of quitting FTX or exposing the fraud before it got bigger). Now SBF has been found guilty and will be sentenced to up to 110 years in prison in March 2024.

CNN:

Over the four weeks of his trial, Bankman-Fried watched a parade of people he once considered his closest confidantes testify against him. They included friends from math camp and MIT who became his co-founders; and, critically, his ex-girlfriend and trusted business adviser, 28-year-old Caroline Ellison.

The most damning evidence against Bankman-Fried came from Ellison, who testified for the prosecution over three days.

As both the CEO of Alameda and Bankman-Fried’s romantic partner for two years, Ellison was uniquely positioned to comment on what was happening within the tight inner circle of Alameda and FTX executives, many of whom lived together in a $30 million luxury apartment in the Bahamas.

Ellison’s at times emotional testimony offered a narrative of events in which virtually every decision at both Alameda and FTX came down to Bankman-Fried, who founded and was the majority owner of both firms. A common refrain from Ellison, when asked who directed her to carry out various actions, criminal or otherwise, was a variation on the words “Sam did.”

From reading early reports on the meltdown, I got the impression that it was Ms. Ellison’s investment losses that had created the necessity for the fraud. Did that turn out to be false?

What happens to all of the co-conspirators, without whom SBF couldn’t have stolen a dime? Back in December, the New York Post predicted that Caroline Ellison might get off with probation.

This TechCrunch article is titled “Ex-SDNY prosecutor says Caroline Ellison, Gary Wang and Nishad Singh probably won’t get jail time”:

‘I’ve had cooperating witnesses who did get jail time, but it’s the exception not the rule.’

When Wang testified, prosecutors asked at the end of their examination how many years he was hoping to be sentenced. “Ideally hoping for no time,” he replied, which prompted some quiet laughter in the courtroom.

If this plays out as predicted, do we think it is fair? One altruist goes to prison for 100 years while co-conspirators who stole at least $millions for themselves are free to move on to the next scam? If SBF’s guilt had been challenging to establish, maybe this would make sense in some practical way, but it didn’t seem like a tough case for prosecutors to make.

Related:

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Sam Bankman-Fried continues to make people rich

by philg

Having previously enriched the campaign treasuries of Democrat politicians nationwide, the great Effective Altruist Sam Bankman-Fried continues to enrich at least some Americans, according to “A $700 Million Bonanza for the Winners of Crypto’s Collapse: Lawyers” (New York Times):

Lawyers, accountants, consultants, cryptocurrency analysts and other professionals have racked up more than $700 million in fees since last year from the bankruptcies of five major crypto firms, including the digital currency exchange FTX, according to a New York Times analysis of court records. That sum is likely to grow significantly as the cases unfold over the coming months.

What is the NYT’s evil twin, the New York Post, writing about? “Migrant arrested 6 times for 14 crimes in first two months in NYC”:

A man who arrived in New York City two months ago from Venezuela has randomly attacked at least three strangers and two cops, and gotten arrested – and released – six times on 14 different charges, police and sources said.

Daniel Hernandez Martinez, 29, arrived on June 27 and allegedly committed his first crime the following day.

On Aug. 21, he violently attacked a woman in Midtown, cops said. He “grabbed a stranger by the hair, dragged her across the floor and kicked her,” and smashed her phone on West 45th Street around 1 a.m., court documents show.

What else has been interesting in recent news? “Maryland elementary school brings back MASKS for kids as it forces third-graders to don N-95s again after spate of pupils testing positive for COVID-19” (Daily Mail):

In a letter sent to parents on Tuesday, Rosemary Hills Elementary School principal Rebecca Irwin Kennedy said she made the move after ‘three or more individuals’ caught the virus in the last ten days.

She demanded students don thick N95 masks to ‘keep our school environment as safe as possible’, despite a recent study finding the mask may expose users to dangerous levels of toxic chemicals.

And while even embattled medical guru Dr Anthony Fauci admits there is a lack of evidence the masks stop the spread of Covid, Kennedy told parents the N95s will only become optional after 10 days.

This is my old school district, as it happens, Montgomery County Public Schools. It’s interesting that there is no explanation of how SARS-CoV-2 will be stopped if the students remove their masks “while eating or drinking”. The letter from the principal doesn’t mention any changes to lunch procedures. So the kids all sit in the classroom together wearing masks and then they all sit together at lunch not wearing masks?

What the Maryland principal did, of course, would be illegal under Florida law. Not contrary to a governor’s order, but illegal under a statute passed by the legislature. Third graders in Florida could tell the fearful Fauci-denying adults where to put their N95 masks.

Readers: What’s caught your eye in recent news?

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What’s new with Sam Bankman-Fried?

by philg

It’s been two months since Sam Bankman-Fried returned to the U.S. (BBC). How is my prediction that Joe Biden will appoint him as U.S. Treasury Secretary and that he will be confirmed by Senate Democrats looking? Any other news from this cryptocurrency trailblazer?

Most of the $121 million in real estate that Mr. Bankman-Fried and his Stanford professor parents owned is within gated communities, according to my friends in Nassau, but they did drive me, in January, to see the police station and courthouse:

The locals say that the prison where our future Treasury Secretary was held is not worth the 20-minute drive for a photo. “All that you can see is a wall with a sign.”

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Bankman-Fried as a verb

by philg

How is everyone’s favorite Effective Altruist doing? Regardless of how the legal and financial situation gets untangled, I’m wondering about the linguistic aspects. Could “Bankman-Fried” become an English verb?

“I’m going to try to Bankman-Fried the investors” would mean to tell people about one’s charitable and political plans for wealth to be acquired using their money.

“I Bankman-Frieded the local election” would mean “gave money to ensure a Democrat victory.”

“We’re Bankman-Frieding the C suite” would mean “installing a sex partner as the CEO of a related enterprise.”

We can also look at Sam Bankman-Fried’s mom explaining complex ethical issues and how they could be handled (“Frieded”?):

(A 2014 Stanford Center for Ethics in Society presentation. The tax-exempt institution for exchanging ideas seems to have decided that it wouldn’t be Tethical to allow comments from viewers. As a test, I posted the following:

Great to have Sam Bankman-Fried’s mom’s perspective on this complex topic. I am running a bank right now and am trying to figure out whether it is ethical to steal all of the money that customers have deposited with me. I need some help from the big brains of Stanford.

Let me know if you can see it on YouTube!)

Related:

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Why didn’t Sam Bankman-Fried go to Russia?

by philg

Sam Bankman-Fried must have had a few loose $millions, in the same way that many of us have $500 credit balances in miscellaneous accounts that we’ve forgotten about. Why didn’t he gather these up and fly to Moscow as soon as the stories broke regarding his crimes?

My November 3, 2017 post… Where can Harvey Weinstein go for a peaceful retirement?:

Plainly Harvey Weinstein is not going to be working in Hollywood again. In any event, at age 65 he has reached normal retirement age. If he stays in the U.S. he risks prosecution for whatever happened during meetings with actresses in California, Connecticut, New York, and perhaps some other states. Even if evidence against him is weak, what prosecutor could resist becoming famous by bringing charges? (See Window into American criminal justice system from the daycare sexual abuse trials of the 1980s for some stuff that influences prosecutors in deciding whether to pursue a case.)

Harvey could probably beat the “beyond a reasonable doubt” rap a few times, given that most of the situations were private encounters and there were no unbiased witnesses. … Why would a 65-year-old with money want to stick around to spend the remaining years of his life as a defendant?

Harvey, of course, did not take the advice from my blog. On May 25, 2018, therefore, he was forced to turn himself in to the NYC police and surrender his passport. Harvey Weinstein will be in prison for the rest of his life rather than seeing if foreign actresses have the same flexible attitude about what is reasonable to do with a fat old guy in exchange for a role as American actresses had.

Perhaps Sam Bankman-Fried does not read this blog, but why wasn’t it obvious to him that he would likely have a much better life going forward in Moscow than in a U.S. prison? (It seems safe to assume that the Russians wouldn’t be in any hurry to extradite the 2nd largest donor to Joe Biden and wouldn’t cry about some American crypto enthusiasts losing $billions. And perhaps even Joe Biden and fellow Democrats who got money from SBF wouldn’t be inclined to pressure the Russians to send him back either.)

The front desk gals at the Marriott in Moscow (2017) where Bankman-Fried would have been welcomed:

The downtown Moscow shopping mall where he could replace all of the stuff that he left behind in mom and dad’s Bahamas houses:

Related:

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Did the Silicon Valley TV show predict Sam Bankman-Fried?

by philg

Sam Bankman-Fried was notable for his ethical approach to doing business, particularly “effective altruism”. New York Times, May 2022:

He lives modestly for a billionaire and has pledged to give away virtually his entire fortune, which currently stands at $21.2 billion, according to Forbes. A growing force in political fund-raising, he has a super PAC that recently gave more than $10 million to a Democratic congressional candidate who supports some of his philanthropic priorities. … a straight-talking brainiac willing to embrace regulation of his nascent industry and criticize its worst excesses.

Both Mr. Bankman-Fried’s parents are Stanford Law School professors who have studied utilitarianism, an ethical framework that calls for decisions calculated to secure the greatest happiness for the greatest number of people. “It’s the kind of thing we’d discuss in the house,” said Mr. Bankman-Fried’s father, Joseph Bankman.

As might be expected for a young man raised on dinner-table discussions of moral theory, Mr. Bankman-Fried is also an admirer of Peter Singer, the Princeton University philosopher widely considered the intellectual father of “effective altruism,” an approach to philanthropy in which donors strategize to maximize the impact of their giving.

Mr. Singer, whose scholarship helped inspire the movement, said he has gotten to know Mr. Bankman-Fried over the years and called his philanthropy “wonderful and really quite amazing.”

(Speaking of those donations to Democrats, will Joe Biden and other politicians refund the money that they received, fraudulently, from FTX customers? The Securities and Exchange Commission says that FTX and Sam Bankman-Fried were stealing money from customers all the time:

in reality, Bankman-Fried orchestrated a years-long fraud to conceal from FTX’s investors (1) the undisclosed diversion of FTX customers’ funds to Alameda Research LLC, his privately-held crypto hedge fund; (2) the undisclosed special treatment afforded to Alameda on the FTX platform, including providing Alameda with a virtually unlimited “line of credit” funded by the platform’s customers

The Democrats are now in the position of Ponzi scheme investors who got paid from other investors and the typical remedy for that is clawback. Joe Biden and fellow Democrats would return their ill-gotten money so that the small depositors at FTX can get some of their money back.)

Who could have predicted all of this? The writers of the HBO series Silicon Valley! In Season 6, which aired in 2018, Gavin Belson, the Hooli founder, introduces a hollow code of ethics for tech companies: “tethics”. Facebook and other California behemoths eagerly sign onto these empty words.

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Is Sam Bankman-Fried the Zillow of Crypto?

by philg

Zillow managed to lose nearly $1 billion buying and flipping houses during the most dramatic real estate inflation in the history of the United States. They could have bought houses at random and made money, at least in nominal dollars, yet they managed to lose.

MIT alum and major Joe Biden donor Sam Bankman-Fried managed to lose his own money and also money that he stole from depositors in the crypto marketplace. But how? His trading operation, Alameda Research, was started in November 2017. Bitcoin was about $7,000 back then. Today, however, Bitcoin is quoted at over 16,000 Bidies. Adjusted for inflation, perhaps this is not a great return but it looks good in nominal dollars at least.

How did a guy celebrated as a genius by Sequoia Capital and the rest of the Silicon Valley smart set manage to lose money while operating in a strong tailwind? Is it like the Florida real estate boom of the mid-1920s in which people who’d been successful kept doubling down and, therefore, the recent dip in crypto prices caused losses far greater than what had been earned on the way up?

Let’s look at what was motivating this rare genius. “How the newest megadonor wants to change Washington” (Politico, August 4, 2022):

… part of life as Sam Bankman-Fried is about embracing paradoxes. The 30-year-old, who has amassed an estimated $20 billion fortune over the last four years through cryptocurrency, drives a hybrid Toyota Corolla.

He was also one of just a handful of donors who spent $10 million-plus backing President Joe Biden in 2020, and in the last year, he’s hired a network of political operatives and spent tens of millions more shaping Democratic House primaries. It was a shocking wave of spending that looked like it could remake the Democratic Party bench in Washington, candidate by candidate. Looking ahead to the 2024 election, he has said he could spend anywhere from $100 million to $1 billion.

… Bankman-Fried has what it takes to be the biggest donor in politics — an eleven-figure bank account he’s committed to giving away before he dies…

Looks like he followed through on that last commitment. What was his main political objective? More and better coronapanic:

In politics, that’s led Sam Bankman-Fried to dual objectives. There’s the one he has talked about most: preventing the next pandemic, which he fears could be more lethal than Covid-19 and would pose a huge threat to humanity, an obsession for effective altruists.

But if he needed only $1 billion to deliver a Democrat-ruled paradise to Americans and that was his main objective, why did he keep placing risky bets? He already passed the $1 billion mark a long time ago, right?

Maybe it was his parents who were motivating him to bet big and steal big? His dad is a Trump-hating Stanford Law professor, Joe Bankman. Mom is Barbara Fried, another Stanford Law professor, who was a leader of a Silicon Valley PAC funneling money to Democrats (Vox). Perhaps the parents said that they needed $10 billion to prevent Republicans from exercising any political power in the U.S. going forward? (plus another $300 million for vacation houses in the Bahamas to be owned by mom and dad that would also be nice enough to host Bill and Hillary Clinton)

Maybe it was about J.K. Rowling and the 2SLGBTQQIA+ community? “Sam Bankman-Fried shifts blame for FTX collapse to ex-girlfriend’s crypto firm” (New York Post, 11/17/2022):

Disgraced crypto mogul Sam Bankman-Fried unleashed a wild, wide-ranging interview in which he appeared to shift blame for the collapse of his company FTX to the trading firm run by his ex-girlfriend, Caroline Ellison.

Bankman-Fried is under intense pressure to address his decision to funnel $10 billion in FTX client funds to prop up Alameda Research, where Ellison — a 28-year-old, professed “Harry Potter” enthusiast who has tweeted about taking amphetamines — served as CEO.

Of that money, at least $1 billion in customer funds is still missing.

The company ran its own cryptocurrency, i.e., Ponzi scheme, in which the bits that they pulled out of their servers’ butts were worth more than $2 billion (CNBC). So we need to try to understand how Sam Bankman-Fried and Caroline Ellison managed to lose at least $2 billion.

How did these two lose so much money? The modern equivalent of CDOs?

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Crypto friends weigh in on the FTX meltdown

by philg

Friends who bought private jets and luxury waterfront property with their crypto profits were discussing the FTX meltdown and Sam Bankman-Fried‘s return to financial Earth.

One cited the Sequoia Capital investment memo regarding the vegan MIT graduate founder:

The FTX competitive advantage? Ethical behavior. SBF is a Peter Singer–inspired utilitarian in a sea of Robert Nozick–inspired libertarians. He’s an ethical maximalist in an industry that’s overwhelmingly populated with ethical minimalists. I’m a Nozick man myself, but I know who I’d rather trust my money with: SBF, hands-down. And if he does end up saving the world as a side effect of being my banker, all the better.

This is a purportedly hard-nosed Silicon Valley venture capital firm. Another chat participant cited a mixture of truth and fiction:

A comment from one of the participants:

Makes Madoff look like an amateur. He Played everyone. And I mean everyone. Absolutely insane. He was clearly insolvent in June and knew it. Then the real fraud began.

Good old fashioned segregation of funds issue.

Some tweets these guys liked:

Related:

  • “Andreessen Horowitz Went All In on Crypto at the Worst Possible Time” (WSJ, October 26, 2022): “a 50-year-old partner named Chris Dixon who was one of the earliest evangelists for how the blockchain technology powering cryptocurrencies could change business. His unit was one of the most-active crypto investors last year, and in May announced a $4.5 billion crypto fund, the largest ever for such investments.”
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MIT weighs in on the future of cryptocurrency

by philg

The May/June 2022 issue of MIT’s alumni magazine, Technology Review, asks “Is cash over?” and answers the question with an implicit “yes” via the issue title: The Dawn of New Money.

When the enormous brainpower of all of MIT is harnessed, what do we learn?

A new generation of cryptocurrencies is emerging that promises to fix many of Bitcoin’s flaws. Stablecoins, cryptocurrencies whose stable value comes from being backed by reserves of US dollars or other reputable fiat currencies, are proliferating. Stablecoins are billed as reliable, easily accessible digital payment systems that will make both domestic and international payments cheaper and quicker. However, unlike Bitcoin, which is fully decentralized, they require transactions to be validated by the issuing institution—which could be a bank, a corporation, or just an online entity. This means users must trust that institution to validate only legitimate transactions and hold adequate reserves, and regulators currently do not require independent verification of either of those actions. Thus, despite their laudable goal of meeting the demand for better payment systems, stablecoins have raised a raft of concerns.

What happened with crypto while the issue was going through editing, printing, and mailing?

“Stablecoin implosion shows it has ‘no role’ as a form of money, says Bank of International Settlements’ Asia chief” (SCMP):

The recent collapse in the value of stablecoins shows they are ill-suited as a form of money and that their attempt to piggyback on money issued by central banks does not give them the stability their name suggests, according to the Asia-Pacific head of the Bank of International Settlements (BIS).

The implosion of several stablecoins, including TerraUSD which saw its value reduced to almost nothing in May from being the third-largest with a US$18.7 billion market capitalisation at its peak, has revealed the pitfalls of cryptocurrencies, said Siddharth Tiwari, chief representative of the BIS Asian office.

What about the #1 cryptocurrency? Bitcoin was at $38,000 on May 1. It finished out June (this is the May/June issue) at around $19,000 (i.e., half the value was lost during the on-the-newsstand time for the issue celebrating crypto).

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