#303 — The Fall of Sam Bankman-Fried
Episode Stats
Words per minute
152.03253
Harmful content
Misogyny
2
sentences flagged
Toxicity
14
sentences flagged
Hate speech
5
sentences flagged
Summary
Sam Bankman-Friedrich was one of the most successful crypto-exchange traders in the world, but he was also a fraud, a con artist, a liar, and a fraudster. And now, we know that he was all of these things, but who was he really? And how did he get to where he was, and why did he do it? In this episode of the Making Sense Podcast, I try to figure out who he really was and why he did what he did, and how he got away with it. And I also try to make sense of why he should have been fired from his position as CEO of a cryptocurrency exchange in the first place, even if he was a fraud and a scammer, not a good guy, and that he did it in order to enrich himself and the people he was supposed to be working with, not to do good, and not to make a profit. And that's not a bad thing, but it's also not good at all. a very different picture than Bernie Madoff, and I think we can all agree that this is a much, much better picture of who he was really, and what he really really was. The problem is, I have no idea who he actually is. I don't have any idea, and neither do most people I've ever met him, so I can t even begin to guess who he is really, really, or what he's really all of that really is. I don t have a clue about him but I can tell you that he seems to me that he's not to be a bad guy, at least in any way, and maybe not in the least likely at least not the kind of person I ve ever been except in any kind of way . and that's a very strange person I could be or not even a bad person in a way that I ve had any idea maybe not even good , but like that I have ever had a chance to get to know any -- at least of people ever I have a good sense so - and that s let me know that is a good friend he s a good person, right? this is not ? well, right And ...
Transcript
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Okay, well, I want to say something about the Sam Bankman-Fried fiasco.
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As many of you know, I spoke to Sam once on the podcast.
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We also put that conversation on the Waking Up app.
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We've since removed it from the app because it really no longer belongs there, given what happened.
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But it's still on the podcast. It's episode 271.
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I'm not going to give a full account of what Bankman-Fried did to destroy his reputation and his wealth
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and the wealth of many investors and customers.
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It seems in record time, many details are still coming in.
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And this is all being very well covered by the press with schadenfreude and cynicism to spare.
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But briefly, Bankman-Fried had made tens of billions of dollars trading cryptocurrency
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and he had built one of the world's largest crypto exchanges, FTX,
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along with his own investment entity called Alameda Research.
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And the connection between FTX and Alameda was always unclear.
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something that investors and the business press should have been more interested in.
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But my interest in Bankman-Fried was entirely due to his stated commitment to effective altruism.
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He appeared to be the world's greatest example of what has been called earning to give in the EA community,
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which is setting out to make a lot of money for the express purpose of giving most or all of it away.
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And at the time I interviewed him, everything suggested that he was doing this.
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In any case, what seems to have happened last week is that concerns over the financial health of FTX
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and its links to Alameda Research triggered essentially a run on the bank.
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FTX customers tried to withdraw their assets en masse.
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And this revealed an underlying problem at FTX.
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Unfortunately, Bankman-Fried appears to have used customer assets
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that should have been safely stored there to fund risky investments through Alameda
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in a way that seems objectively shady and unethical.
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Whether or not it was also illegal, I don't think we know.
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All this happened outside of U.S. jurisdiction,
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as a majority of crypto trading, in fact, does.
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Bankman-Fried seems guilty of enormous financial malfeasance.
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He appears to have lost something like $16 billion in customer assets.
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And then there were clearly moments where his public comments
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about the state of the business amounted to lies.
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These were lies that seemed calculated to reassure investors and customers
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that everything was fine when everything was really falling apart.
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Now, I have no idea when all the shady and unethical and probably illegal behavior started.
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Thinking that he could use customer funds just this one time,
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The truth is, I don't even know whether Bernie Madoff was Bernie Madoff from the beginning.
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I don't know whether he was a legitimate investor who was making his clients a lot of money,
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and then got underwater, and then went Ponzi in an attempt to get back to dry land,
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But it's a very different picture than of a man who was an evil liar from the very beginning.
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Just a pure sociopath who knew that he would be bankrupting vulnerable people every step along the way.
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I just haven't read very deeply about his case.
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But the point is, I have no idea who Sam Bankman-Fried was, or is, really.
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And this morning, I went back and listened to the interview I did with him.
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And even with the benefit of hindsight, I don't detect anything about him that strikes me as insincere.
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I don't have any retrospective, spidey sense that makes that conversation appear suddenly in a new light.
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I've had people much closer to me than Sam Bankman-Fried, who I've never met and only spoken to twice, once being on that podcast.
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I've had people much closer to me, people I've worked with, and people who are actual friends, behave in very strange ways that have totally surprised me.
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And some of these people have large public platforms, and have done things in recent years that I consider quite harmful.
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I've commented about some of them, and I've held my tongue about others.
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And frankly, I'm still uncertain about the ethics here.
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What sort of loyalty does one owe a friend, or a former friend, when that person is creating great harm out in the world?
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Especially when you yourself have a public platform from which to comment on that harm, and are even being asked to comment.
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I mean, is it appropriate to treat them differently than one would treat a stranger who is creating the same sort of harm?
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You can probably guess some of the names here.
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But COVID alone has caused several of my friends, and former friends, to say and do some spectacularly stupid things.
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And I haven't known what to do about that.
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However, my point is that I've been very surprised by much of this behavior.
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However, in the case of Sam Bankman-Fried, I had no prior exposure to him.
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That podcast conversation was the first time I ever spoke to him.
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He was simply someone who had been ripped from the pages of Forbes magazine,
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and promoted by the most prominent people in the effective altruist community.
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And I had no reason to suspect that he was doing anything shady behind closed doors.
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And it appears that many of the executives at FTX didn't know what he was doing.
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And the venture capitalists, like Sequoia, and Lightspeed, and SoftBank, and Tiger Global, and BlackRock,
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who gave him $2 billion, clearly didn't know what he was doing.
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And again, when I listen to my interview with him now,
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I don't detect anything that should have been a red flag to me.
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Of course, none of this diminishes the harm that Bankman-Fried has caused.
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As far as I can tell, the accounting is still pretty murky,
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so it's not clear where the money actually went.
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But, as I said, he appears to have lost something like $16 billion of customer funds.
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And it's quite possible that some people who listen to my podcast with him
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could have been so impressed by him and his story
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I would certainly be unhappy to learn that that had happened.
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And I would deeply regret any role that my podcast played there.
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But again, I just listened to the conversation this morning,
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and I still don't hear anything that should have caused me to worry
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that Sam Bankman-Fried or FTX was not what they seemed.
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Now, beyond the immediate financial harm he caused,
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Bankman-Fried has done great harm to the reputation of effective altruism.
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The revelation that the biggest donor in the EA universe was not what he seemed
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has produced bomb bursts of cynicism throughout tech and journalism.
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All of them quite understandable, but also quite unwarranted.
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First, let me be clear about my own relationship to effective altruism.
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I've said this before, but I view EA as very much a work in progress,
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and I have never been identified with the movement or the community,
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and I've only interacted with a few people in it,
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the movement has always seemed somewhat cultic and too online for me to fully endorse.
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Some of its precepts seem a little dogmatic to me.
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What I've taken from effective altruism has really been quite simple
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The first is that some ways of helping to reduce suffering
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will be ten or even a hundred times more effective
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And in fact, some ways of trying to solve a problem
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In fact, many charities are governed by perverse incentives.
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which more or less follows directly from the first,
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that are sexy and subjectively rewarding to support,
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and those that reduce suffering and death most effectively.
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and we tend not to be moved at all by statistics.
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So if you tell me that one little girl fell down a well,
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well, I'm going to do more or less whatever it takes,
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especially if that girl lives just a few blocks away from my home.
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But if you tell me that 10,000 little girls
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but it's not going to sweep aside all my other priorities for the day.
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I might just go get some frozen yogurt in an hour.
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that is working in Tanzania to save these little girls,
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as my helping my neighbors save one little girl.
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from supporting causes I'm emotionally connected to.
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to give a certain amount of money away every year.