SBF's Last Stand — With Molly White

Channel: Alex Kantrowitz

Published at: 2023-10-19

YouTube video id: YSBQ5El6ScE

Source: https://www.youtube.com/watch?v=YSBQ5El6ScE

a leading crypto researcher and skeptic
joins us to discuss the Sam bakman freed
FTX trial and what it means for the
broader tech industry all that and more
coming up right after this welcome to
Big technology podcast a show for
cool-headed nuon conversation of the
tech world and Beyond we have a great
guest for you Molly white is here she is
a crypto researcher and critic she
writes Molly White's newsletter which
you can find at newsletter. Molly
white.net I think she's probably the
most Lucid crypto critic in the world
today and she's been following the sand
bankman free trial extremely closely as
have I so it's great to have her on
today Molly welcome to the show thanks
for having me thanks for being here so
let me just start with a really broad
question which is why should anyone care
about the Sam bigman free Trail like you
know if you're not super involved in
crypto if you haven't lost money in FTX
I mean a lot of people right now are
saying like don't even talk to me about
this trial crypto is a sideshow and um
doesn't have any application to anything
more broadly do you agree with them or
do you have a a different opinion on
that front I definitely understand where
they're coming from um but I do think
that this trial is fairly historically
important even outside of the crypto
world I mean this is one of the largest
financial frauds that we've seen in a
long time you know people are comparing
Sam bankman freed to Bernie ma off uh
and I think not
unreasonably um so I think there is you
know reason to follow it just in that
sense but I also think that it is
absolutely important for the crypto
World um you know I think this is
momentous for the crypto world just in
the sense that you know this is by far
the largest litigation that we've seen
uh in relation to that and I think will
have major impacts on the future of the
industry so uh I think it makes sense
you know to sort of have at least an eye
on the trial if if not follow it closely
I think that's a good pitch for
listeners to stay focused for like stay
with us for the next 1550 minutes this
is good stuff I do think it's
consequential that's why we're
dedicating an episode to it
so now I think it's a good time to just
talk a little bit about what Sam is
accused of I mean he's got I think seven
charges against him um can you run
through exactly what he is accused of
doing MH so he's actually got more than
seven charges but there are seven
charges that are being tried right now
there's going to be a later trial for
some other charges right now every
everything that he is uh facing has to
do with fraud on customers on lenders to
his crypto exchange and his trading
firm uh there's money laundering charges
and then there's a bunch of conspiracy
charges so uh all to do with basically
you know at least allegedly
misappropriating customer funds that
were sent to FTX which was the crypto
exchange um and then used by alanita
research which was the trading firm uh
to do their trading which they were
really not supposed to be doing right
and that's so that's the way that I
understand it broadly also is that
people the biggest problem here is that
people put billions of dollars into FTX
to trade crypto they had this secondary
firm Alam research which then Drew on a
massive line of credit uh using the
funds that people had deposited into FDX
and then spent that money and then
couldn't pay it back I mean eight
billion dollars that haven't been
accounted for just the the first thing
that that comes to mind after that is I
mean this is pretty blatant you know it
seems pretty obvious what could possibly
have been going through the minds of s
bakman Fred uh Caroline Ellison who ran
alamida was his ex-girlfriend and
everybody involved in this operation to
say uh there are customer funds in FTX
and we're going to use them bring them
to Alam media and they were used for
pretty unbelievable things that didn't
really seem like they had a chance of
you know returning any money including
almost five billions of loans 5 billion
in loans to Sam and his lieutenants I
mean what could be the possible order of
operations that runs through someone's
mind that allows them to do that and
think they're going to get away with
it well I mean I think that they were
probably hoping that Alan ma researches
trading operations would go a lot better
than they did um you know Alam research
sort of started out in the runup to sort
of a historic cryptocurrency bull market
and so there was a period of time where
a lot of people were making a lot of
money on the market and you know it's
possible that they were hoping that that
would happen again and Alam would just
you know make the right trades and make
it all back or something like that um
but I'm not I'm not really sure how they
Justified this to themselves I mean it
seems like s bankman freed had an
extremely high tolerance for for risk um
even when the possibility of things
going wrong was substantially higher
than the possibility of them going right
he sort of felt that it was still
appropriate to take that kind of risk um
and so I think that might be a part of
it um but you know it's really hard to
say I mean I think that uh they were
just hoping that things would go better
in the crypto world than they were that
um you know that people would be willing
to loan money to have X and Alam if
necessary um and that this would be like
a temporary stop Gap maybe right and so
even if they were good at making these
bets still sounds like a crime um oh
yeah the thing that's that's interesting
is they may actually make the money back
long term with their investment in
anthropics so um I this is kind of a
sidebar but do you think they have a
chance of recouping I mean they led the
series B in anthropic which is a big AI
technology company does research has a
chatbot like open AI founded by exop aai
people now it's worth like a tremendous
amount of money um still a crime I
suppose if if that pays off but how do
you think that might change like the
legacy of Sam and the amount of time he
spends in jail if at all yeah I think
that's an interesting question and it's
one that I think the defense has been
sort of trying to make although it's
unclear at this point to what extent
they'll be allowed to make that argument
because as you point out you know even
if you make all the money back it's
still a crime to you know do fraud on
your customers but yeah I mean I think
it is there is a chance that you know
FTX customers may come out of this at
least better off than customers of some
of the other crypto companies that have
fallen apart which is a fairly long list
um and you know adding to that I would
say the FTX bankruptcy team has been
very aggressive in trying to claw back
funds from all kinds of different places
you know they I mean right now they're
trying to get money back from Stan
bankman Freed's parents like there's all
these you know from different companies
there's all these different actions in
uh progress pertaining to that so you
know I think that it's still going to be
challenging but there is some potential
that you know people might be made whole
or at least close to it uh I think that
may ultimately not be super relevant to
S bankman Freed's Legacy I think it's
hard to
overcome the perception in the public
eye that he was a fraudster which you
know he was regard regardless of whether
or not customers are made whole um and
then I'm not sure necessarily how it
will affect sentencing you know I know
that the amount of money involved is
relevant when uh the judge is
determining what sentence to apply I
don't know if you know they made the
money back is something that would be
considered there or if it's just the
amount of money involved in the first
place and they don't take into account
you know later activities that um
recovered some of the funds so I really
can't speak to that part right okay so
talk a little bit about the mechanics of
how this worked so obviously you know
Alam research this investment arm uh had
had taken the money from FTX but what is
it do they just go and transfer the
money or how did this work and I mean
obviously like you know they knew again
that comingling funds from customer
deposits is wrong so is there like a
technical way that they did this to
justify themselves or like what did it
look like inside these this Exchange in
this investment house yeah so I think
there are a couple of ways that it
happened um one was that there was this
long history with the two firms where it
was really challenging for FTX to get
banking um banks have historically been
hesitant to work with crypto firms and
so there was a period of time where FTX
did not have bank accounts but Alam
research did and so they decided they
would just circle IR vent that which
itself is legally questionable by um
send having customers send money to Alam
which would then be sort of credited on
their FTX accounts and so a lot of the
issue here came down to the fact that um
as things progressed as FTX was able to
get bank accounts there was still an
amount of you know US Dollars pretty
much that was in an account that
belonged to Alam research and so you
know part of the argument that the
defense has been trying to made is
trying to make is that the accounting
was bad they forgot about it and oops
you know they used all that money um but
that's not the extent of the ways that
money was being pulled from FTX so Alam
research also traded on the FTX exchange
and they served as a market maker there
and they were given the ability on that
exchange to draw down a line of credit
such that that they could have a
massively negative account balance on
FTX and that's something that was not in
place for other firms or other market
makers on FTX it was specific to Alam
research and so they were given what was
effectively a line of credit that was
capped at like $65 billion which is just
an obscene amount of money that they
should really never have needed you know
to to draw down upon but they did draw
down on that line of credit to a fairly
substantial amount over various times or
various points in time
um you know around1 billion or so and
they were able to basically just
withdraw crypto from the FTX exchange
and then do with it what they liked you
know they could be making trades with it
but they were also just withdrawing it
and using it for other purposes as well
what are those other
purposes uh a lot of it went to venture
Investments so s bankman freed was
investing in a bunch of different
companies anthropic being one of them uh
and he decided to do so through alamida
for a lot of them um just to avoid
having his name associated with it I
mean there are all sorts of reasons so
if you're basically an FTX customer
you've now become an unwitting limited
partner in Sam bankman freed Investments
right yes which is not very not very
good at what it was doing well it
doesn't appear so except except for
maybe anthropic anthropic yeah yeah um
and then there were also a whole series
of loans that were being made to alamer
research Executives mostly for the
benefit of s bankman freed so even
though the money was going to his
deputies it was often being used to make
those Investments or to make political
or charitable donations uh sort of on
his behalf but via other
people right and one of the things to me
that was wild being in the courthouse
watching Caroline Ellison testify is
that the alamer research line of credit
keeps getting bigger as the net asset
value inside FTX keeps getting smaller
can you kind of take us into exactly
what was going on as it became clear
that FTX had less money than Alam
owed yeah so there was a period of time
where um things were going really badly
in the crypto markets uh you know crypto
prices were falling and a lot of crypto
companies were going under uh as a
result of both the market and also just
these sort of cascading failures
um and as that was happening it started
to put strain on some of the companies
that were lending money to alamer
research and so they started to recall
their
loans um and so they deci you know they
needed to pay back these loans they
didn't necessarily have much in the way
of liquid assets because so much of the
money had been put into these you know
long-term Venture Investments and things
like that and so they paid back these
loans by taking basically drawing down
that line of credit at um replacing
effectively the loans with loans from
FTX um and so you know as things went
poorly as FTX was or and Alama were both
struggling because of the wider crypto
markets they were also racking up this
enormous debt effectively to FTX
customers because that was where the
money was coming from yeah and that's
what you can see in the court is just
that they keep on borrowing more and
they keep on having less and it seems
like it's eventually going to you know
hit a wall and it does I mean so one of
the key questions is that whether Sam
was aware of this and I think Caroline
Ellison's testimony of that she kept on
preparing balance sheets and rearranging
things and naming them in interesting
ways to make sure that you know Sam
understood what was going on but the
general public might not if they came
across the documents was very
interesting so can you talk a little bit
about that yeah so there was a lot of
sort of Creative Accounting going on
that was trying to uh really mask all of
this debt that Alam had um and so
Caroline Allison testified to Preparing
balance sheets for the company um and
then at Sam bankman Free's request
preparing what he referred to as
alternative balance sheets uh and those
were
basically copies of the balance sheet
where she would move around or rename
entries so that it looked like you know
the the loans to FTX Executives were
just a part of some other
spending uh she sort of removed some of
the liabilities from some of the balance
sheets you know it was all stuff I think
I think in accounting you know there's
some degree of flexibility where you
know some of it's up to interpretation
just exactly how you present things but
this was like well beyond anything that
would be accepted by any competent
auditor um and so they she basically
testified that she prepared those
balance sheets at his request and then
sent some of those alternative balance
sheets to uh lenders and investors so
that they thought that Alam was in a
much better financial position than they
were and you know there was testimony
later on in the week from one of those
lenders who basically said that had he
had access to one of the more truthful
balance sheets there's no way that his
firm would have lent to to
Alam exactly I mean there was a line
item there where Ellison prepared it and
she it was called FTX borrows and right
it's like huh what does that mean but
it's code for Alam borrowing money from
FTX and you know during the court you
during the case you saw month after
month that line item go from like 8
billion to 10 billion to 13 billion and
then the net asset value within FTX uh
hover somewhere around 6 to 8 billion
it's sort of even maybe even less
because it's unclear they like marked
their own token as being worth more than
it was yeah that's another big part of
this is that there was a lot of assets
that they were holding that were
strongly tied to the success of the FTX
exchange and which a lot of these
insiders have testified would never be
able to be liquidated at anywhere near
the price that they were putting on
their balance sheets and so a lot of
this money was sort of made up in the
first place and talk about how it all
comes to a head in November 202 2022
well that was a big part of it is the
sort of madeup tokens um so FTX had this
token called ftt which was effectively
the the FTX token and there was a one of
these balance sheets that had been
prepared in in fact it was one of the
sort of falsified balance sheets that
showed a Rosier picture of things at
Alam um was leaked by a crypt media
Outlet called coindesk and even that
falsified balance sheet was enough to
really get people concerned conned about
the financial stability of alam research
and the extent to which it was really
linked with FTX so you know Sam bman
freed had spent a long time trying to
maintain that FTX and Alam research were
very separate that they were sort of
firewalled and people realized that that
really wasn't true once this balance
sheet was leaked uh and so that sort of
set off the initial concern around FTX
there was then a later incident in which
the CEO of uh FTX is largest competitor
basically announced that he was going to
sell a substantial amount of ftt tokens
that he had this is easy the head of
binance right uh he had you know the
stash of ftt tokens that he had been
given as uh FTX pretty much bought him
out as an investor in the exchange and
so he announced that he was going to
sell these tokens which really sparked a
panic that uh such a massive sale would
decrease the price of ftt which would
then make FTX potentially uh insolvent
because of the degree to which they were
relying on ftt as a part of their
balance sheet and so that was when
things really went badly um there was
sort of a run on the exchange where
everyone tried to withdraw their assets
lenders were really concerned about
loans to Alam so they simultaneously
were trying to call back those loans um
and so FTX you know for a a day or two
was trying to meet these withdrawals and
and repay these loans but very quickly
that $8 billion hole in the balance
sheet uh became an issue and they could
no longer process withdrawals or repay
those loans and that's the point at
which FTX filed for bankruptcy yep so
where is that $8
billion uh well some of it has been
clawed back by the bankruptcy team but
there's sort of a big question mark
around you know exactly where it all
went um it seems like it was a
combination of bad trades uh Venture
Investments loans you know donations to
political and charitable
causes uh real estate in the Bahamas I
mean it's a really long list they were
spending pretty uh extravagantly it
seems like right does does this sound
like a typical Ponzi scheme too like on
one hand it's like yes it needed money
flowing in the door but
on the other hand they were making
Investments I mean does does maybe it's
like more of like just old school theft
versus Ponte scheme or it's hard for me
to kind of even wrap my head around how
to classify this one what do you think
yeah I mean I think it shares some
traits with Ponzi schemes in the sense
that they were sort of co-mingling funds
they were trying to keep things afloat
by bringing in more and more investors
and trying to keep sort of trust in the
whole scheme alive so that people would
continue to put assets into the company
but yeah I think I mean I think there's
you know there are parts of it that are
a little bit different as well um but it
seems pretty clear to me that it was
fraud one way or the other I mean
everyone's flipped on Sam seems like
everybody who was around him has flipped
on him maybe outside of his parents um
and Michael Lewis and Michael Lewis so
well why don't we talk about his parents
Michael Lewis and then kind of like
where the the trial goes from so first
of all his parents there were some
emails that came out that like made it
seem like his parents weren't just
bystanders but active participants in
this what can you tell us about that
right so that was sort of what I alluded
to earlier when I spoke about the FTX
bankruptcy team trying to claw back
funds from spf's parents um they filed a
lawsuit against them which was quite
descriptive of the activities that they
were doing to try to prove that you know
they were not being given these funds
for any business purpose it was really
just for for you know their own
enrichment it was a gift pretty much um
and there as a part of that lawsuit
there were some emails back and forth
where it really appeared that um his
parents were sort of complicit in a lot
of this so you know for those who aren't
aware his parents are both Stanford law
professors they teach ethics so well yes
his mother was an Ethics Professor his
father was a tax law professor and his
his father were trying to pull off a
I know it's like the Dream Team yes um
and so his father was very active in
some of the business where he was giving
legal advice he was helping them recruit
other
lawyers um he was advising them on tax
stuff you know there were there were
emails where he was talking about trying
to make assets bankruptcy remote uh
taking advantage of Bahamian uh sort of
tax law to to try to you know uh avoid
paying taxes on a lot of the stuff
and then there were also emails um from
his mother who was a very active
political uh sort of philanthropist she
ran a fund to try to donate to
Progressive causes and she was
effectively making you know giving
advice in these emails about making
straw donations where you know Sam Bank
pfree didn't want his name tied to some
of these Investments for various reasons
or maybe he was reaching caps on the
amount that he could donate to some
cause and so she was suggesting that the
donations be made through the names of
other FTX Executives um so I think it's
pretty bad news for them you know I
think there could be criminal charges
filed against them if you know someone
decided to go after it I don't know if
they will but um I think they definitely
face a strong risk that money given to
them by their son will be clawed back by
the bankruptcy estate uh money that is I
think currently financing uh Sam bankman
Freed's legal defense yeah one of the
things that uh kind of struck me is like
Caroline Ellison was sharing some of the
things that Sam talked about inside the
company was that he was very keenly
aware of like these ethics tests like
the New York Times tests where like you
shouldn't say anything you don't want to
see in front of like the New York Times
it's like what you would teach in like
day one in an ethics class and it's kind
of showing up inside FTX as he's doing
this crime I know we said we want to
talk about Michael Lewis but I actually
kind of want to go back to you know what
happens from here I feel like we've
talked about Michael Lewis enough on
this podcast we'll give him a break this
week um the the um everybody's flipped
on him Caroline Ellison has some of his
other business partners people who
didn't even really have like charges
brought against him have flipped in
exchanged for immunity um does does he
stand a
chance I don't think he does um I didn't
really think he did even before the
trial started but now that we're you
know a week or two into the trial it's
looking pretty bad for for him and I
don't see a strong defense being made
honestly his his defense team has not
been particularly impressive it seems
like for reasons that are a little bit
unclear to me um and so I really don't
see a strong chance that he gets out of
this without serious uh jail time yeah
like their their cross-examination of
Caroline Ellison like we thought that
you know the people in the courtroom
thought that the cross of Caroline
Ellison was going to be fireworks in the
case and it was extremely Meek actually
that turned out the most interesting
part of the case was Caroline just kind
of walking through all the internal
documents I mean I think it's rare that
you have someone who is so directly
involved in in a fraud uh just say all
right well here are the receipts and I'm
going to walk you through exactly what
happened so yeah and in this case he's
got several of those people all doing
that you know people who are involved in
various facets of it I think it's going
to be really challenging to come back
from that what is his defense just that
he hired these people and they should
have known better um like he didn't
necessarily order the code red like they
should have hedged or something I mean
what do you say yeah I mean we've only
really seen a preview of it because the
defense has not made their case yet but
um they have I think they at least
towards the beginning were hinting that
they might try to implicate Caroline
Ellison in this and say that she you
know technically she was the CEO over at
LM to research they were trying to argue
that s bankman freed had very little
insight or control over what was
happening there I think evidence maybe
has painted a different picture on that
um where there's sort of evidence that
he was directly involved in a lot of
this stuff even after she took the CEO
role um they've also tried to make
arguments uh well they're they're
starting to sort of preview a new
argument now which is that FTX terms of
service maybe technically didn't prevent
them from using the the funds and the
ways that they did uh again I think it's
going to be challenging to sort of watch
that play out um but you know that they
can try it I guess um and then yeah I
mean I think I think the argument is you
know one thing we were seeing a lot
early on was it wasn't intentional he
was maybe incompetent or you know not
paying enough attention but he wasn't
intentionally doing it right yeah he was
just a small boy who made a mistake you
know kind of the argument yeah and I
don't think that's D drives a boring car
right yeah that's that's a tough one to
put up I mean it's just kind of if none
of his contemporaries testified maybe
that would have worked but they all did
and showed that he was effectively in
full knowledge of we'll see what he says
yeah we'll see what happens but do you
think he's going to
testify so I don't know uh technically I
have a bet going that he will um
but a friend of mine who also sort of
watches crypto uh
markets uh but I actually don't know if
there's a more likely chance than not
that he will but you know as the trial
goes on I feel like I'm getting more and
more convinced that he will just in the
sense that like what does he have to
lose you know the defense has not been
very strong uh maybe he'll do it as sort
of a Hail Mary um I also am a little bit
uh skeptical of his ability to um or his
legal team's ability to sort of keep him
in check I think his legal team probably
would love for him to not
testify um but you know go ahead I was
just saying uh in the you know as in the
early days of his uh you know as he was
preparing for the defense after the
charges had been filed against him he
was talking to everyone who would listen
because he seemed very convinced that
like if he just talked in enough he
would be able to convince people that he
was innocent and so he was like blogging
and tweeting and talking to journalists
and talking on Twitter spaces with
random people and like you know just
trying to uh to make this argument any
way he can and so you know that makes me
think that he might believe the same
thing like oh if I just talk to them I
can get the jury to understand right and
the judge has told him I mean people
were buzzing about this in the court
this was kind of the dramatic moment
that everybody's been waiting for the
judges said that if his lawyers don't
advise him to testify and he still wants
to anyway all he has to do is stand up
and state his intention and he can take
the stand I mean what a moment that
would be huh yeah I mean I think the
judge wants him to testify too you know
if if uh if he gets up there and starts
talking under oath you know I think that
for the judge that would be the dream
because like how do you appeal that
right like at that point you know you
have a pretty solid case but we'll see I
mean we've got a couple weeks before
that you had a something that you wrote
a little bit about how this might not be
as good for Sam as he thinks if he
testifies because he's used to
effectively talking circles around
journalists and the jury might not
appreciate that yeah exactly I mean he
you know has previously you can just
watch interviews with him both before
and after charges were filed where
someone will ask him a tough question
and he'll just go into this long sort of
rambly response where he doesn't always
answer the question sometimes he just
like changes the subject uh and you know
gets into these really weird sort of
verbose explanations of things and I
think just relies on the fact that
people don't understand him and aren't
going to press too hard but in you know
he's never had to testify under oath in
front of a competent cross-examiner and
so I think that you know his uh past
experience might lead him to think that
he can successfully just
people on things whereas you know in
real life in front of a judge and a jury
that might go very differently right
you've interviewed him before did you
feel he was giving you the Run
technically yeah oh yeah for sure uh he
I think was probably lying to me when we
were speaking um and you know he like I
said that's just his sort of standard
demeanor in interviews right okay I want
to go to break but before we do what's
your prediction of of where this case
ends up is it is it going to I mean it
seems like pretty clear that you think
he's going to be found guilty what do
you think the sentencing could look like
if that's the case yeah I think I think
you will be found guilty at least on you
know substantial number of the charges
uh it's hard to say and I'm certainly
not legally qualified to to you've done
the search though so yeah so speculate I
think that you know 10 20 years is
probably the minimum that we'll be
seeing um but I also think that some of
the headlines that I've been talking
about 100 plus years might be a little
bit overstating it just in the sense
that those tend to rely on sort of
flawed uh logic around how sentencing is
done um but I think you know there's a
good chance that he spends the rest of
his sort of meaningful life in prison he
could be pretty old by the time he gets
out I mean he's 30 now so give him 30
years in prison and he's already 60 when
he gets out and then the question is
what does his legacy look like because
it's not just okay so his sentencing is
one thing but it's he will have shock
waves that that will Ripple through not
just the crypto industry with the tech
industry and venture capital for years
and that's why this is an interview
that's not just about Sam's crimes
although I think it was important that
we laid it out what what's being alleged
in court on in the second half of this
conversation though we're really going
to talk about what this is going to mean
for venture capital for the effective
altruist Community which is quite
interesting and um and and where where
else this could reverberate so we'll be
back here in just a moment with Molly
white stay tuned back right after this
and we're back here on big technology
podcast with Molly white she is a crypto
researcher and critic she writes Molly
White's newsletter you can find it at
newsletter. Molly white.net so let's
talk about the implications here first
of all Molly I'm curious uh how do
people get involved uh in this I'm not
talking about the actual principles here
I'm talking about the masses right that
not only went to FTX to trade these
crypto tokens uh but also went to Banks
like Celsius and thought that they were
going to get like a 20% return on their
money and I'm just paraphrasing here you
know citing broadly I'm sure I'm off by
a percentage point or two um this was
obviously something that was too good to
be true how did so many people get
caught up and believe in
it well I think there was uh just sort
of mass hysteria to some extent in the
sort of 2020 2021 time period where you
know everywhere you looked people were
talking about crypto it was in the news
it was on social media it was on
advertisements and some people at least
on paper were making a lot of money and
so I think a lot of people decided they
didn't want to get left out uh that was
a lot of the marketing as well was you
know don't be left behind come put your
money in this crypto thing and um people
really fell for it you know it was I
think there's nothing like a good old
get get-rich quick scheme where you know
people always fall for those and the
veneer of the technological
sophistication was there you know there
were really high-profile people talking
about this stuff and then I think also
people just aren't used to getting
straight up lied to that was something
that came out a lot in a bunch of these
cases is they they were like you know
Celsius was a was based in the US you
know surely they must have been
regulated surely someone was making sure
they weren't just lying to us and turns
out no that there was no one doing that
until everything fell apart um so I
think a lot of things went into it but
you know it was it was this weird period
of time where it was like reality had
just been paused for a second yeah it
was definitely a combination of greed if
I'm summarizing right and fomo and then
legitimacy conferred upon this type of
uh company from people like Tom Brady
who I wrote it down he was paid
something like $55 million for 25 for 20
hours of work and you're like oh that's
pretty good money for Tom but that $50
did a tremendous I mean sorry that 50
million did a tremendous they probably
got great Roi on that I mean this is
probably where all the billions are not
only that they named stadiums uh after
FTX down in crypto Capital the world
Miami and uh you know I recall walking
around downtown San Francisco and I
still live there and you couldn't go 5T
without seeing Sam's face being like
plastered on some vestibule or bus stop
or whatever it was right I mean it it
does go to show you that spending that
kind of money you know I mean they stole
the money but allegedly but but you know
that money did serve a purpose they were
able to buy public opinion and get
people to trust them it almost a Perfect
Crime until they got caught yeah and I
mean we've already seen FTX customers
testifying that it was Those ads and the
sponsorships and things like that that
really made them think that this was
legit you know they were like surely no
one would be ad vering on the Super Bowl
if you know they weren't in a
financially good position and then you
know turns out like this do some of the
celebrities that were part of this are
do they bear some responsibility like
does Tom Brady have to think if it's too
good to be true maybe there's something
wrong
here yeah I mean I'm kind of split on
that I I do think that celebrities
should be more thoughtful about the type
of stuff that they're promoting and that
you know they have to realize that they
really do carry a lot of clout but on
the other hand I don't necessarily know
that it is the celebrities who should be
tasked with making sure that these
companies aren't frauds you know I feel
like that's where the Regulators really
should be stepping in saying that SEC
has bigger responsibility than Tom Brady
and Shaq for knowing whether this was a
Pon scheme yeah I mean I think so I know
it's a controversial opinion right there
uh there but there was another part of
it too which is Sam was like part of
this effective altruism movement and uh
I bringing Mike Lewis into it cuz I'm
reading his book and he actually
explains it quite well talking about
basically that if you can if you can
earn a ton of money over your life even
as like a banker or you set up an
exchange and you spend that to help
people out you're going to be much more
effective than let's say dedicating your
life to be like in Doctors Without
Borders actually that is more more
impactful and Sam was part of this group
which sort of and he he like maybe he
didn't front and center talk about it
too often but he always talked about how
he's earning to give and he's he's
trying to improve the world um and that
Community also bolstered him I mean that
that seems to me and that Community has
Deep Roots through the tech world so
what do you think is you know what do
you think about that and what do you
think the impact is going to be now that
like he's the most famous or inFAMOUS
effective altruist to walk the planet
well yeah I think that a lot of people
didn't know about effective altruism
until the S bankman freed Saga happened
and he unfortunately for them was the
face of effective altruism in a good way
before everything went wrong and then in
a very very bad way um I don't know how
they're going to recover from this
honestly as a community other than maybe
rebranding but uh you know the I think
for sure yeah no for I think there's
really no chance they don't but um you
know he he was really the figurehead for
this in a lot of ways because he was so
visible and he was speaking so
prominently about these
philosophies and uh you know they were
really trying to manage their reputation
manage the reputation of the movement as
Sam was the face of it and then you know
as things went poorly uh I think they've
discovered that there's sort of no
coming back from this so it's
interesting because anthropic right that
open that open AI competitor that he
invested in they're all not all but
largely effective altruists at the top
Dustin moscovitz uh the Facebook
co-founder is ALS an effective altruist
who by the way was behind that um the
big pledge about AI pausing AI research
talk about its dangers so they're very
powerful group in Silicon Valley and it
is very interesting to see how this is
going to verberate with them yeah and I
I mean I think that even if effective
altruism under that name does not
continue to exist I think the philosophy
will um you know we've already seen sort
of variations of it around like uh
effective accelerationism and all these
weird sort of spinoffs of it that are uh
becoming weirdly popular especially in
the tech sector I kind of hold two
things when I think about effective
altruism first of all it's obvious now
like when someone comes and tells you
their business is going to save the
world so you should give them your money
like maybe that's a big red flag on the
other hand like I kind of like the
philosophy of effective altruism like
there is some logic behind what they're
trying to do so I mean am I being like
delusional think that effective altruism
makes sense sort of on the face of it
where like yeah obviously you want to
donate money to the most effective
causes you know you don't want to donate
to ineffective altruistic causes that
makes no sense um but then once you
actually sort of dig into the philosophy
and the way that they make decisions and
the types of decisions that they've been
making it gets really really weird
really quickly to the point where like
people in the movement start to yeah
they start to talk about you know the
the idea that future lives are more
valuable than any life today on Earth
and so therefore instead of spending
money to prevent starvation or pandemics
or whatever it might be we should all be
focusing on the risks that uh are facing
far future Generations like AI you know
dystopia and all these crazy things or
you know moving the whole world
population to Mars or something like
that and so it becomes you know it goes
from being like yeah right effectively
donating your money to like what you
know very quickly where you know people
would even talk about like sure we
should sacrifice you know people today
to save Millions tomorrow wow so that
sort of now makes me understand that AI
pledge a little bit more the fact that
that's why there's so much of it yeah
that's why the AI and effective alism
overlap is so
substantial oh that is very interesting
hm yep wa they actually say that it's
better to lose lives today to save lives
tomorrow some of them do yeah there's a
there's sort of a long-termism
uh subset I guess so that's what their
belief is in terms of long-termism
that's they're talking about saving
lives in the long term as being the
number one priority even if it means
that people are dying today yeah it's
really really strange yes I could see
how logically someone might talk
themselves into it it's just like I
don't know the deprioritization of
people living today is a little bit odd
and you did have Sam basically admitting
that this was a do you think that he
actually believed this stuff or did he
kind of use it as a front because there
was a Vox journalist who dm'd him and
then published the DMS and said you were
really good at talking about ethics for
someone who kind of saw it as a game
with winners and losers and he goes I
had to be it's what reputations are made
of I feel bad for those who got effed by
it by this dumb game we woke westerners
play where we say all the right she
Bolis and so Everyone likes
us yeah I think I mean I think to some
extent he did believe it and I think to
some extent it was just a convenient way
to rationalize his behavior um he you
know I think that the thing about
effective altruism and especially about
the earning to give portion of that
Community is that you can rationalize a
lot based on that type of philosophy I
mean you could rationalize stealing $8
billion from your customers if you
thought that it was going to be spent
you know in a better way than they might
have spent it themselves well there is
this moment right in the trial where uh
Caroline Ellison mentions that he told
her that he was utilitarian and
therefore if he thinks it makes the
world better over time it's okay to lie
and and steal right on the trial right
and and he's talked about yeah and he's
talked about uh you know his risk uh
appetite for you know she said something
about how he would say that if he were
given the opportunity to flip a coin and
if it came up Tails all of humanity
would be destroyed he would do it so
long as if it came up heads all of
humanity would be more than twice as
good like he had these types of risk uh
equations in his head I guess where he
was able to justify sort of whatever
Behavior he wanted and and sort of
understand himself to be a good person
as a result of it um so I do think you
know he did believe some of the stuff
but I also think that it was very
effective to tell people that you know
oh no I'm not making money for myself
I'm making money because I want to save
the world you know that's an attractive
cell to people who might not otherwise
care too much for you well it worked
obviously to great a great effect um
we'll see if people are skeptical after
this I I hope so so where do you think
crypto goes after this I mean obviously
we've seen a great evaporation of wealth
both in the falling of uh so many coins
like going from basically 3 trillion to
a$1 trillion industry uh within a couple
months and then these billions of
dollars that were lost in FTX what is
the future for
crypto well I think it's going to be
challenging uh reputationally to come
back from this but I do think that they
will certainly try um you know the I
think people in sort of the general
public see FTX and bankman freed as
almost synonymous with crypto where you
know because he was so prominent the
advertising was so prominent because he
was talking to Congress you know he was
very visible um for a lot of people that
was all they really knew about crypto
and so seeing this failure to them is
like seeing crypto fail and I think
that'll be really challenging for the
crypto industry to move past um they've
certainly been trying to sort of say
like oh well Sam bankman freed wasn't
crypto he was just one fraud you know
real crypto is is all better than this
um but I think that's a challenging
distinction for a lot of people to make
in sort of the more lay public um but I
also know that you know if there's one
thing about crypto it's that it's very
good at rebranding itself you know we've
seen crypto go through these boom and
bus Cycles where it gets really big and
then something goes bad and it all
crashes down again and then you know 2
years later it's like nobody remembers
what just happened I mean you could look
back at the collapse of like mount gaau
for example which was devastating to
crypto it was you know the one of the
biggest uh scandals in the crypto world
this was for those who are not familiar
it was an early crypto exchange that
eventually basically lost everyone's
money but by 20120 when people were
talking about putting their money into
crypto exchanges again it was like no
one remembered that ever happened so you
know I have some worry that people will
just sort of move on from this or that
crypto will so successfully Rebrand
itself as something else that you know
in a couple years we'll be going through
this all again now Molly I asked on
Twitter earlier uh what should I ask you
and uh and and basically the questions
boiled down to there was a number of
varieties of this but I'm going to try
to synthesize them you know are there
legitimate uses for crypto and can this
industry sort of function in a way that
does not include some of the stuff we've
seen with the maloes and the FTX so I'm
curious what you
think well I mean I think there it
depends sort of how you define that
question I think there are people trying
to do legitimate things with crypto I
don't necessarily think that they are
succeeding at them very well um you know
there are all kinds of things you could
potentially do with crypto it's just you
know in the when you get down to it it's
just sending money from point A to point
B uh but you know the the actual
implementations of these things have
been really flawed to to date and sort
of poorer implementations of systems
that already exist I would say in the in
the broad Strokes um but do you see any
good use cases for let's say like you
know the blockchain or nfts or anything
like that or is it just sort of only in
the very limited circumstances you know
I think that you can point to instances
where people have benefited from crypto
you know you could say like oh look at
this person who was trying to a flee an
authoritarian government and they were
able to get their assets out of the
country you know despite Capital
controls you know using Bitcoin or
whatever and it's like yes okay good
that was a use case that was you know
helpful for a person but I don't see
that as sort of a promising future use
case in any sort of scalable way and I
also don't think it's by any means
something you can base an entire
industry around um and so you know the
the companies that are trying to create
you know the future of finance using
blockchains or you know tokenize your
Rolex using an NFD I don't think there's
much future for them what do you think
this is going to mean for a venture
capital firm like andrees Horowitz right
they raised billions of dollars they
told us that crypto was going to not
only you know save the world but create
well not only create a new internet but
effectively save the new world save the
world right just like the evangelism
from that company um was something I've
never seen come from a VC firm and they
were the most outspoken proponents of
crypto I me of course plenty of VC firms
and I guess as a VC firm you have to bet
on it but they it did seem like they
went a little overboard um yes what
happens to all that money what happens
to their
reputation um what do you make of this
whole moment with Andre and Horowitz and
crypto well I mean I think sadly Andre
and Horowitz probably came out of this
financially kind of okay because with
the the well the crypto Venture Capital
model is
very landed towards the venture
capitalist where they can invest money
in a firm they receive these tokens
before anyone else gets access to them
the firm launches their token and then
there's this huge spike in price because
people get really excited about it
especially if Andre and Horowitz has
been promoting it or you know some other
uh high-profile person has been
promoting it and then andrees and
Horowitz or or whichever Venture Capital
firm can immediately sell those tokens
and make massive returns effectively off
of the backs of these retail customers
who then lose money because the token
goes down in price there's this like
graph that you see in the crypto world
where um a firm launches a token it goes
way up in price the venture capital is
sell and it comes way back down again
and so everyone else loses money but the
Venture capitalists are fine and so you
know I think that that model served them
really well and it's unpleasant you know
if people understand that that's how it
works but I think that people don't and
so they're like great you know they're
making great returns um I think the
reputational aspect of it you know I
think they should be embarrassed by this
and I think people should view them
negatively for this pretty blatant tux
turism that they were involved in
because you know they this evangelism
that they were doing where they were
saying that web 3 is the future and
crypto is going to be how everything
works in 10 years was you know pretty
nakedly being done to promote the tokens
so that they could make these returns
and so I think people should really
think twice about these firms and and
you know any statements that they're
making like this uh you know especially
as we're entering sort of new tech hype
Cycles every couple of years you know if
you see a firm that's saying stuff like
that about for example AI like maybe you
should question the motives Behind These
bold predictions that they've been
making um I don't know necessarily how
much people will actually hold them to
account for their past statements or you
know actually if there will be any shift
in the
impression you know most people have of
Andre Horwitz but I certainly think
there should be well the thing is that
the constituency that they have really
is the limited partners who are going to
get paid back like um if a network of
companies like screw retail investors
like they're going to be I mean I guess
some might be meted into recent horites
but it's they lose little by building up
the hype and gain much
uh even if it turns out to be a complete
aberration I think that's exactly right
and it seems to be that's what happened
um two more questions for you first of
all uh Bitcoin seems like if you're if
you're talking about how like crypto
might have a future as a place to move
money Bitcoin might be that future right
and it it does seem like there's some
move from institutional investors like I
believe it's called grayscale they're
putting together a uh coin de uh sorry a
uh an ETF of Bitcoin and the SEC is sued
to stop it and now and they lost and
they're not going to appeal and
everyone's like oh these banks are
bringing legitimacy to bitcoin and
bitcoin's going to Skyrocket again what
do you make of that I think beyond
anything else it is enormously ironic um
because if you actually look back at the
history of Bitcoin and like the white
paper that was released when Bitcoin was
first created it's all talking about how
banks are
so uh you know
uh Twisted that the financial system is
broken I mean Bitcoin was created in the
wake of the global financial crisis and
so there was this enormous lack of trust
in the banking system and in traditional
finance and Bitcoin was created pretty
much to do away with that whole system
and so now we're seeing grayscale and
black rock and all of these you know
huge financial institutions Fidelity JP
Morgan you know they're they're starting
to talk about crypto they're looking at
these ETFs and I think it's just
hilarious that that's sort of where
we've come from this you know now the
same system that was supposed to subvert
the financial system is being adopted by
them because they feel like they can
make a profit off of it um will it add
legitimacy I mean it it it did it does
look like when Bitcoin when these uh the
appeal was basically dropped uh Bitcoin
went through the well it surged and
right that is because people believe
that if the banks are adopting it
there's going to be legitimate use for
it yeah I think it's important to note
that Bitcoin prices surge on the news of
this not because there is an influx of
institutional investors or you know
retail investors who would who are
buying these products but because the
crypto people believe that there will be
future inflows of money and so it's
really just the belief it's not actual
money coming in when these uh Market
moves happen based on that news
um I think that to some extent you know
these types of things are used to
legitimize crypto but I think it's
important to note that we've had that
type of institutional adoption for years
now where you know grayscale Bitcoin
trust has been around for years um you
can if you want to say that grayscale is
involved in crypto you don't need a spot
ETF to make that argument they've
already been doing that um people have
been pointing at headlines that claim at
least to show that these huge
institutions are involved with crypto
even if that's not always the case uh
for a very long time and so I don't
actually know to what extent the
approval of a Bitcoin ETF a spot Bitcoin
ETF or something like that will actually
move markets versus um you know just the
belief that maybe it will someday you
know we've seen there was recently an
approval of an ethereum ETF that people
thought was going to be the biggest
thing and it was extremely embarrassing
the you know the lack of attention that
people put into this and the the level
of volume that was being traded so you
know I think people have their hopes
really high but it remains to be seeing
exactly what happens if if these types
of products are approved okay last
question well do you do you own any
crypto yourself uh I have a small amount
that I use just for research purposes
but it's not anything substantial so
here's the last question there was kind
of a joke that came in when I sent that
tweet about what I should ask you but
I'm going to ask it anyways someone goes
uh should I buy
Bitcoin no okay I mean do whatever
floats your boat but I I wouldn't Molly
thank you so much for joining this was
great hope to have you back sometime
soon thanks for having me okay great
thanks for being here thanks everybody
for listening thank you nck guatney for
handling the audio thank you LinkedIn
for having me as part of your podcast
network uh and thanks to all of you the
listeners really appreciate you tuning
in appreciate your feedback week after
week it's great to hear from you as we
drop these and uh get a sense as to how
you feel about them so thanks for
chiming in okay uh that'll do it for us
this week join us again Friday we're
going to be covering the week's news
probably a little bit more on the trial
but lots more about the tech World more
broadly so thanks again for listening
and we'll see you next time on big
technology
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