This week bitcoin found life rising above $30,000 per coin on the news that exchange traded funds will be able to invest in the cryptocurrency’s number one brand. Meanwhile, in a New York courtroom prosecution witnesses have hammered crypto wizard Sam Bankman-Fried with damaging testimony. The Wall Street Journal reports, “a parade of witnesses have testified that Bankman-Fried lied to lenders and investors, doctored balance sheets and spent billions in FTX customer funds on extravagant real estate, risky investments and the repayment of loans. While communicating with Google Docs and disappearing Signal chats, the FTX founder oversaw a company that made illegal political donations, poured more than $1 billion into celebrity endorsements and sponsorships and failed to address a gaping hole in its balance sheet, witnesses told the jury.”
In his book Number Go Up: Inside Crypto’s Wild Rise and Staggering Fall, Zeke Faux writes, “This Is The story of the greatest financial mania the world has ever seen.” Those are strong words and having done some work studying financial manias and living through one, Faux’s statement may be hyperbole. But, then again, the crypto story may not be over. More booms and busts may follow.
Faux is the Captain Ahab of this Moby-Dick tale, but Sam Bankman Fried is not the white whale. That would be Giancarlo Devasini, former plastic surgeon who became the boss of Tether, the stable coin fully backed by Uncle Sam’s dollars. Faux was convinced Tether, which serves as the crypto universe’s reserve currency, was a scam. The investigative reporter for Bloomberg Businessweek and Bloomberg News traveled the world seeking an interview and the low down on Tether from the elusive Devasini. Faux has done plenty of interviews on his book tour, including with Jim Grant on Grant’s Current Yield Podcast, so it’s no secret the brief encounter with Devasini was not fruitful.
Tether it turns out is the coin of the realm to facilitate scams known as “pig butchering.” Armies of scammers in Cambodia use fake friendship come ons to snare the lonely into sending money via Tether. According to the Global Anti-Scam Organization nearly 1,500 people had lost $250 million via pig butchering emanating from floors of slave scammers sending spam messages from office buildings in Cambodia and Myanmar. Of course Faux had to go see for himself and interview ex-forced scammers who had escaped what was called Chinatown, one even showed him how to hot-wire an iPhone.
The author’s eye for detail and story telling bring the crypto world’s underbelly to life whether it’s Cambodia, the Bitcoin blowout convention in Miami, the non-fungible token (NFT) Bored Ape very private party in New York (the author paid about 20 grand for a Mutant Ape NFT to gain access), El Salvador’s “The Coolest Dictator,” and finally hours and hours with Sam Bankman-Fried in the Bahamas.
Of course no vendor in El Salvador would take Bitcoin, even after the president Nayib Bukele announced Bitcoin would be his nation’s currency. Merchants told the author Bitcoin was “trash” and he saw a “NO BITCOIN” sign at a beachfront restaurant. “Traveling around the world investigating crypto had given me a new appreciation for my Visa card,” Faux writes. “El Salvador was meant to be the proving ground for Bitcoin’s application to everyday life, the plan was a total bust.”
He won’t bet against Bitcoin because for Bitcoin followers, “Everything they see is evidence Bitcoin will rise, like the members of a cult certain that the apocalypse–and their salvation–is just around the corner.” Echoing Faux’s view of Bitcoin’s application, a European visitor told me Russians are paying for things in Europe using Bitcoin with a 20 percent service fee, while he can send money back home through his bank for a few basis points.
As for defendant Bankman-Fried, who once was described as the “J.P. Morgan of crypto” and “a future trillionaire,” his empire collapsed the old-fashioned way, a bank run. Six million dollars was withdrawn and poof, the funder of effective-altruism, the world’s richest utilitarian was broke. Eight days after FTX filed for bankruptcy, Bankman-Fried, “shoeless, in white gym socks, a red-T-shirt, and wrinkled khaki shorts” met with the author. The SBF apology tour had begun. “Bankman-Fried is a thought experiment from a college philosophy seminar come to life,” Faux wrote for Bloomberg.
Faux, who met with Bankman-Fried for 11 hours, describes him as delusional, that he believed he was unlucky, sloppy or that he simply had miscalculated the odds. Witnesses for the prosecution remember it differently.
