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  • Richard Murff

Get Your Head Out of Your Ass


The truly dim-witted thing was that not only did he admit it, he outlined it in an interview with Bloomberg news on 25 April. Sam Bankman-Fried actually described how to build a token – make it worth $20m – and borrow against it. “…maybe there hasn’t been $20m to flow into it yet…” Yet, “you can… finance this, right? You put X token in a borrow-lending protocol and you borrow dollars against it.” The trick then proceeds, according to SBF, to fix itself once you use it as collateral for a loan in exchange for dollars. “If you think it’s worth less than two-thirds, you could even put some in there, take the dollars out.” The key at that point is, “Never… give the dollars back.”


This was two months before the crypto hedge fund Three Arrows Capital publicly imploded and Alameda, a trading firm also owned by SBF, seems to have started falling apart. According to a tweet by a former Alameda employee, the firm was going long on crypto assets based on “narrative market-drivers.” Which, evidently, is what MIT grads are calling Elon Musk’s tweets.


Well, that sort of accounting and market research works well enough until someone bothers to have a look at the books. Which is exactly what the people at Binance, the world’s largest – and even shadier – crypto exchange did when asked to bail out their rival FTX. Binance was founded by a guy named Changeng Zhao, who goes by CZ, but that’s how these crypto dudes roll. At any rate, the collapsing exchange had ransacked depositor’s accounts to loan money to Alameda which, in turn, used those made up tokens (affectionately known a “shit-coins”) as collateral. This gave CZ and the Binance gang pause, and they stepped away from the deal. A run ensued and, like that, FTX was gone – along with a pile of depositor money.


The speed of the fall shocked the world: FTX was the third largest crypto exchange and what it lacked in size, it made up for in, well, bullshit – the hair, the baggy shorts, the video games. Like his co-host in the Finance Shame Oscars, Elizbeth Holmes, SBF has that “autism on que” vibe that wowed VC sorts in need of a roadshow gimmick. Like Holmes, there isn’t too much doubt the dweeb wasn’t a crook, but unlike the tightly-wound Holmes, SBF has the administrative capabilities of a smallish cocker spaniel.


If we’re going to be honest, most of finance is a shell-game. Still, the promise behind the technology was and is real: A way to intermediate finance that was faster, cheaper and more efficient. For that matter, Holmes’ Theranos promised the same in testing and diagnosis. Every innovation has a promise, unfortunately, so does every con. The way to tell them apart is to stop being in awe of the dog & pony and just do your damned homework. In short, investors, VC and the media all need to get their head out of their collective asses.


Those of us who’ve been in investment banking know the feeling of talking to some hotshot who can’t quite explain the game-changing product they are selling. When you ask for the research, data, the poop sheet you get an answer – any answer – other than, “It’s right here.” For the record, any other answer is wrong. Including the one I got just before the world went boom in 2007, “Fuck you, Murff. I could explain why these CMOs are AAA, but you wouldn’t understand.”


Then again, what do I know? The last person to give me a lecture on bitcoin swore eight ways from Sunday that he had several friends who was a retired bitcoin millionaire. Personally, the kid was a pains to explain to me that he wasn’t actually homeless, because his car was his home. So, point taken.


FTX was basically being kept aloft with hot-air, most of Silicon Valley still is. They play the part with their bushy hair and shorts, the hoodies, the weird chin beards, but the truth is, most of these people don’t really know why they are rich and powerful: Some VC guys picked them out of line-up of options with reasonable potential. They got lucky and now they’re being told they are cultural icons. Which is why visionary techies all seem to dress and act like actors and indie rock bands. They are famous, they are rich, they are as powerful as all that money can buy, and legions of people are kissing their asses to find out how they can do it to. And they simply don’t know.


Elizabeth Holmes is no fool, neither is SBF. A couple of crooks, sure, but not a pair pf fools. On the other hand, neither is as smart as they, or their followers, think they are.


In the book he’s yet to write (but the movie rights are going for a fortune) Michael Lewis has reportedly cast SBF as “Luke Skywalker” and his rival CZ as “Darth Vader.” If we now know that SBF was running almost entirely on hype, shouldn’t it would be best to assume that CZ is as well?



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