Crypto “smart” money? Big traders fell to Sam Bankman-Fried

I was shocked when I first learned how a mess like Sam Bankman-Fried got away with convincing seemingly smart people—big money managers, venture capitalists, and all those celebrity ambassadors—that he was an investing genius. hand over a lot of money to play with it.

That is, until the fallen crypto star witnessed what happened Wednesday after he tried to tell reporter Andrew Ross Sorkin his side of the FTX disaster. Billions in lost client funds, ruined lives, and more. it wasn’t illegal, just “hit” as a result of one big, innocent mistake, or as he put it, a “bad month.”

Sounds absurd, right? Believe it or not, many sophisticated financial types still say they believe in SBF’s latest sales plan, further proof that suckers are born every minute, and many of them occupy Wall Street’s C-suites.

Of course, not everyone involved in high finance bought the bar of SBF even when it was riding high. Veteran trader Marc Cohodes and Chicago Mercantile Exchange CEO Terry Duffy were early skeptics of his business prowess and Bankman-Fried’s claim to have devoted his entire life outside of crypto to some wake-up fad known as “effective altruism.” give it all

Sam Bankman-Fried's henchmen gambled away customers' money at a global crypto casino.
Sam Bankman-Fried’s henchmen gambled away customers’ money at a global crypto casino.
Tom Williams/CQ-Roll Call/Sipa USA

But they were one of the lonely few who saw signs that something was wrong. Most of the media and many Big Finance types didn’t give a second thought to his shambolic appearance and odd behavior. They thought it was cute. They didn’t think twice that relatively overnight he became a billionaire and Democratic megadonor, controlling cryptocurrency and giving big bucks to pols.

I guess it’s good to get influence as long as it involves Democrats.

A business full of conflicts

They certainly didn’t care about its conflicted business model: venture-backed trading fund Alameda Research — known for taking a lot of risk — joined cryptocurrency exchange FTX, which is supposed to keep client deposits safe. It’s almost a set-up for failure, which is what happened when SBF’s minions gambled away customer funds in a global crypto casino.

Sam Bankman-Fried
Sam Bankman-Fried claimed to have “miscalculated” $8 billion in FTX funds.
via Reuters

Worse still, some members of the so-called “smart money” set still eat up his blunt explanation of one of the biggest scandals in recent market history without indigestion or anger.

Bill Ackman is one of the prominent hedge fund managers. He’s been known to “short” or bet against stocks he considers to be scams, and once went on a years-long campaign to prove (albeit unsuccessfully) that the nutritional supplement company Herbalife was a massive pyramid scheme.

But Ackman was so sold on SBF’s pretense that the crypto sibling “never tried to cheat” in stacking the house of cards that didn’t meet minimum risk-adjustment standards — Ackman tweeted: “Call me crazy, but I think @sbf is telling the truth.”

I don’t know if Ackman is really crazy, but if he believes SBF’s accounts of how he built a financial firm without basic risk management plumbing, he might be a real sucker.

Kevin O'Leary takes part in an ABC panel discussion
Kevin O’Leary is said to have lost millions in the FTX collapse.
Tom Brady meets with reporters on November 27, 2022 in Cleveland.
Tom Brady was a “brand ambassador” for FTX.

Also consider Kevin O’Leary of “Shark Tank” fame. This is a friend who presents himself as someone who has been around the block many times, able to separate the good business ideas from the dogs. A real shark.

O’Leary is said to have lost millions of dollars in the collapse of FTX. He, along with NFL legend Tom Brady and other celebrities, were called “brand ambassadors” and were part of the crew that appeared in those flashy ads that SBF produced to sell the investment community that FTX was a safe place to trade. crypto.

Not a good look, but what’s worse is that O’Leary still doesn’t suspect the SBF’s motives.

After watching SBF’s performance with Sorkin on Wednesday, “Mr. Awesome,” he tweeted, “I lost millions as an investor in @FTX and got sandblasted as a paid spokesperson for the firm, but after listening to this interview I’m in the @BillAckman camp on the kid!”

Who was responsible?

For starters, the “kid” is 30 years old. It’s a grown man who agrees with Sorkin, “There was no one at FTX who was responsible for the risk of the clients’ position,” the functional equivalent of a doctor performing surgeries without going to medical school.

SBF also told Sorkin that he was speaking out about things against his lawyer’s advice because he wanted to do the right thing and help anyone who lost money. Maybe that’s what sold Ackman and O’Leary.

I’m sure the Manhattan US Attorney’s Office will not be an easy mark for the SBF excuses investigating this sordid mess.

Source link