There comes a moment in the development of a new technology when the hype becomes so common that it goes beyond common sense. Lawyers, accountants and regulators are nowhere to be found. Investors insist that entrepreneurs take their money. The world is trembling on the brink of change.
For dot-coms, that moment was 1999. For artificial intelligence, it was just nine months ago. For cryptocurrencies, it was 2017.
Six years ago, Sam Bankman-Fried knew very little about alternative currencies. But they bet correctly that there were huge opportunities to grab a small portion of millions of crypto trades. In the blink of an eye, its value was said to be 23 billion dollars. Only Mark Zuckerberg had accumulated so much wealth at such a young age.
The Facebook co-founder has his critics, but he looks like Thomas Edison next to Mr. Bankman-Fried. Following a speedy trial in Manhattan federal court, the one-time crypto king, now 31, was convicted on Thursday of seven counts of fraud and conspiracy involving his companies FTX and Alameda Research.
Mr. Bankman-Fried once partied with the stars and the bigwigs, donated the looted money to politicians and himself, and was admired as The next Warren Buffett, Employed his friends and made them rich for a while, the news media welcomed him and printed his most trivial comments. For a time, everyone liked Sam Bankman-Fried – with the obvious exception of Sam Bankman-Fried.
“I and most of my adult life have been tragic.” That plaintive statement appears at the end of testimony Mr. Bankman-Fried had hoped to give to Congress last winter before his arrest foiled his plans. He was on to something.
In photographs of his heyday, Mr. Bankman-Fried always looked awkward, embarrassed and as if he was playing a video game, Even when Gisele Bundchen had her arm around her, Everyone kept insisting that he was exceptionally talented, an entrepreneur who would create the future. Maybe he knew better.
As journalists – and now prosecutors – have made clear, FTX and Alameda were run by a group of hapless young men who did not have the necessary skills, maturity or patience. The people who actually had a moral compass and sensed something wrong were soon cast aside, leaving the main crew in trouble – or perhaps diving.
“When I started working at Alameda, I don’t think I would have believed you if you had told me that I would send false balance sheets to our lenders or take customers’ money, but over time it became something like this. was someone I had become more comfortable with,” Caroline Ellison, Mr. Bankman-Freed’s co-worker and sometime girlfriend, testified during the trial.
When Ms. Ellison started working at Alameda, this thing called blockchain was going to change everything, one way or another. Silicon Valley poured billions of dollars into crypto in search of people like Mr. Bankman-Fried who got in early and looked smart.
Sequoia Capital, a top venture firm that has funded Apple, Airbnb, Instagram and WhatsApp, all begged Mr. Bankman-Fried to take their money when crypto was shiny and new. FTX founder did. Sequoia then followed up with a very long celebration of Mr. Bankman-Fried by longtime Silicon Valley writer Adam Fisher, which was very difficult for the man whose fans call him SBF.
“After my interview with SBF, I was convinced: I was talking to a future trillionaire,” Mr. Fischer wrote. He added: “FTX competitive advantage? ethical behavior.”
Less than two months after the interview was published, FTX collapsed. Sequoia inserted a note at the top of the story saying it was an “unexpected turn of events.” It later took down the story and wrote off its $214 million investment in the exchange. Sequoia and Mr. Fisher declined to comment.
The central myth of Silicon Valley is that techies are here to save the world. If they get extremely rich in the process, it only proves how great their idea was in the first place.
This was the appeal of Elizabeth Holmes and her blood-testing company, Theranos. She was young, female and attractive, who looked good on the covers of magazines. But the notion that really propelled her to fame and fortune was that she was a kind of high-tech Florence Nightingale, working all night to refine medical technology that would improve people’s health. will be. (The truth was that his technique did not work and put clients at risk by giving them unreliable results.)
FTX allowed people to bet on cryptocurrencies. In essence, it was a casino. It is difficult for even the most sympathetic journalist to portray a casino as a savior of humanity, so the focus of the stories was always on Mr. Bankman-Fried.
He calculated the probabilities of everything – he thought he had a 5 percent chance of becoming President of the United States. He thought he would help humanity by making a fortune and then giving it all away, a philosophy known as effective altruism. The details don’t matter. as flattery forbes profile Put it in 2021: “He’s a mercenary, dedicated to making as much money as possible (he doesn’t really care how) just so he can give it to (he doesn’t really know who, or When).”
During the trial, it emerged that Mr Bankman-Fried had spent $15 million on private plane travel. He never did anything to hide the fact that he lived in a $35 million penthouse with some of his FTX friends. The question is never asked whether these young people should be sleeping on the beach instead of living the high life if they are truly following the principle of effective altruism.
Mr. Bankman-Fried was happiest when playing video games, which he did as often as possible. Even when he spoke to Sequoia over Zoom about his grand plans to build a financial super-app inside FTX and eliminate every bank in the world, he was playing League of Legends.
Repeatedly, he expressed his contempt for what he was doing, and seemed to urge officials to take a closer look at his companies. For example, take this statement He created in August 2021 In one of his many interviews: “If we’re doing something the regulator doesn’t want, you don’t have to sue us. Just reach out and let us know what you want.”
The magic of starting a company with a boom is that the bar is low. When Sequoia was looking for a crypto exchange to invest in, FTX was “Goldilocks-perfect”. According to its profile, One big reason: “No concerted effort was made to evade the law.” It’s hard to find a bar much lower than that.
Mr. Bankman-Fried tried to warn everyone.
“In terms of the number of Ponzi schemes, there are far more in crypto per capita than in other places,” He told The Financial Times In May 2022.
It didn’t matter. Investors, customers, journalists all saw the talent they were told about. And if he had even the slightest doubt, Mr. Bankman-Fried had an ace up his sleeve: His parents were Stanford law professors.
“Two of his parents are compliance lawyers,” said “Shark Tank” star Kevin O’Leary, who was both a promotional spokesperson for FTX and an investor in it. “If there’s ever a place I can go and not have any trouble, that place would be at FTX.”
What Mr. O’Leary might not have known was that the attention of tax law expert and clinical psychologist Joseph Bankman and Barbara Fried, professor emeritus at Stanford Law School, was elsewhere. According to the lawsuit filed by bankrupt FTX, his son gave him a $16 million house in the Bahamas, $10 million in cash and several other things through FTX. The couple’s lawyers described the claims as “completely false”.
In that glossy Sequoia profile, Mr. Bankman-Fried said: “I am very skeptical of books. I don’t want to say that either book isn’t worth reading, but I actually consider it something pretty close to that. He also did not like films.
It is impossible to read the sad saga of Mr. Bankman-Fried without thinking that he and many people around him would have been better off if they had spent less time in math camp and more time in English class. Sometimes in books, characters find their own moral guide; In the best books, the reader does too.
As I read about Mr. Bankman-Fried, the historical play “A Man for All Seasons,” once a staple of high school students, kept coming to my mind. It is about a man who knows right from wrong and a man who doesn’t. Richard Rich is a bit like Mr. Bankman-Fried: a young man with big ambitions and no doubts. He begs Thomas More for a place at court. Moray tells Rich that he would be a good teacher.
Who knows if I was a good teacher? Rich asked contemptuously.
“You, your disciples, your friends, Lord,” more answers, “She’s not a bad person.”
Rich rejects the quiet life, betrays Moray and is rewarded with a post in Wales. The audience is made to realize that he loses his soul. Mr. Bankman-Fried rejects the quiet life, betrays almost everyone he knows – and ends up with neither money nor Wells.
