Caveat Emptor! —Investigate Before Investing

Paula LabrotBy Paula Labrot

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Caveat Emptor! —Investigate Before Investing
Photos by crypto’s golden boy, Sam Bankman-Fried. (Left) Crypto’s golden boy, Sam Bankman-Fried got some of the most famous people in America to hustle for him. (Right) ChangPeng Zhao, CEO of Binance, he largest crypto exchange in the world.
As a documentary filmmaker I learned very quickly that real life is more fascinating than fiction. Nothing illustrates this more than the true tale of the fall of crypto’s golden boy, Sam Bankman-Fried (SBF). Huddle up, dear readers, this story is a corker! Sam Bankman-Fried, son of two Stanford professors, went to MIT where he encountered the Effective Altruism (EA) movement. Essentially, the EA idea is to make a lot of money for the purpose of giving it away. Using wealth for good became SBF’s talk, “My goal is to do as much good as I can for the world.” His walk turned out to be quite a different path. The Beginning After college, SBF headed to Wall Street. He became bullish on crypto. He made a ton of money buying cheaper crypto in Asia and selling it for higher prices elsewhere. Big profits! He founded Alameda Research to make the crypto trades. Two years later, he founded FTX, his Futures Exchange. FTX established its own digital coin called FTT. Crypto Exchanges are online platforms where you can exchange one cryptocurrency for another cryptocurrency (or for fiat currency). Cryptocurrency Funds are pools of professionally managed cryptocurrency assets. These are strictly for investment and are managed by people like SBF. Charming, folksy, “altruistic” SBF, wearing hoodies, scruffy shorts and often appearing in bare feet, became the darling of crypto. He had zoom meetings with investors during which, unbeknownst to his customers, he played video games while negotiating for millions of venture capital dollars to be invested in FTX. He had meetings with Bill Clinton, Tony Blair, celebrity CEO’s…a lot of biggies. No one ever checked to see he had no board of directors, no chief financial officer to hold accountable for their investments. The elite capitalists just liked the little swindler. They gave him their money. The Middle—The Fallacy of Celebrity SBF used his customers’ assets to fund political donations ($5million to Joe Biden’s campaign), to buy properties ($300 million in mansions and beachfront vacation homes for SBF, his parents and senior executives), and for sports investments (paid $135 million for naming rights to the Miami Heat’s arena) and lots of other projects, including his brother’s foundation. So far, it looks like he used $8-10 billion dollars of his customers’ money. And…this little fiend got some of the most famous people in America to hustle for him! Using wealth for good was SBF’s pitch. Validated and celebrated in Vogue and The New Yorker magazines, SBF became a media darling. You know who supported him? People like Tom Brady, Shohei Ohtani, Larry David, Stephen Curry, Trevor Lawrence and others. But I say, “SBF, how dare you involve my beloved Shaq?! Now, you are on my permanent villain list, SBF, because Shaq is the kindest, most loving, generous, most walk-the-walk-for-good celebrity on earth, and I know he will take this betrayal hard, because so many people got hurt.” People who invested in FTX lost their money. Big and little people. The top 50 investors alone are owed $3 billion dollars. There is no FDIC insurance like banks have. And not just investors lost. Employees, who believed in the mission for good, had taken their salaries in the now worthless FTT coin FTX created and had held for them or had siphoned off to the Alameda Research Group. The crypto world is un-regulated. What is so ironic is that SBF was the darling of the Congress last summer, testifying about the crypto industry and touting the need for more transparency and regulation. You know what SBF calls ethics? “A dumb game we woke westerners play.” You can’t make this stuff up! The End Last October, in Riyadh at the Davos in the Desert financial summit, SBF was trying to hustle funds from wealthy investors who attend the affair. In some private meetings, he trashed ChangPeng Zhao, CEO of Binance, another crypto exchange…actually, the largest in the world. At one time partners, now the two men were about to shake the crypto world to its core. SBF made derogatory remarks about Zhao in private meetings. On Nov.4, Substack published a sort of “anonymous” crypto researcher called Dirty Bubble Media who essentially questioned if FTX were solvent. According to The Guardian, on Nov. 6, Zhao set off alarm bells among investors when he tweeted, “...due to recent revelations that have come to light”, Biance would liquidate its holding of FTT tokens. “We are not against anyone, but we won’t support people who lobby against other industry players behind their backs.” FTX could not pay. SBF had drained its assets. And poof, FTX collapsed. The fall of FTX has resonated throughout the crypto world. A crisis of confidence in the crypto market has emerged. The lack of regulation, a failure of management, and the destruction of investor trust have impacted the entire crypto industry. My feeling is that digital currencies are here to stay, but require careful thought and skillful management if you are going to invest in them. Meanwhile, Sam Bankman-Fried is under supervision in the Bahamas and has resigned as CEO of FTX. FTX has filed for bankruptcy and investors are suing. The FTC is trying to put together criminal charges…at least, they say they are. But it’s kind of a “ya pays your money and ya takes your chances” situation. The Sam Bankman-Fried movie is already in development. For real. Vamos a ver!
Paula Labrot

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December 9, 2022

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