Mr. Bankman-Fried pretending to be a genius reveals too much stupidity | coindesk JAPAN | Coindesk Japan

I have a question that has been haunting me about Mr. Sam Bankman-Fried and his crew. what were they aiming for?

Given the staggering scale of their wrongdoing, how did Mr. Bankman-Fried and his accomplices think they would escape the pursuit of wrongdoing while preserving their own freedom and dignity? Huh?

New charges against Bankman-Fried added last week support speculation that he was trying to snuggle up to American politicians to avoid responsibility for his actions. Such a strategy would not have escaped scrutiny, but now that it has become clear that what he has presented to the media has been superficial, most of his goals and strategies has turned out to be similar.

This lays out a troubling but important crux of the crypto wunderkind, who rose to hero status in 2021 and fell into disrepute in 2022. Bankman-Fried acted like a genius, and the media praised him as such. The same goes for Terra scammer Do Kwon and Three Arrows Capital’s Su Chu, who said “Bitcoin will just keep going up forever.” The same applies to Mr. Su Zhu.

But they were just acting and pretending to be geniuses. Using profiles, connections, and theatrical self-expression, he created what could be described as “a silly person’s take on what a smart person feels like.” And that helped raise a lot of money.

But it is now clear that Bankman-Fried and his associates were not simply out of luck. They were astonishingly stupid.

number of serious allegations

An indictment by the U.S. Department of Justice last week added very serious new charges, including investment fraud, bank fraud, online fraud and election fraud, to Bankman-Fried’s already extensive list of crimes. Bankman-Fried could face an additional 40 years in prison for the new charges, according to people familiar with the matter, who spoke to CNBC.

The complaint against Mr. Bankman-Fried details various public misrepresentations made by Mr. Bankman-Fried about FTX’s risk management and custody operations, and accuses him of two types of fraud: investment fraud and online fraud. It supports the allegations.

Mr. Bankman-Fried certainly seems to have committed the fraud because he believed that there was no point in doing it half-heartedly. Despite stealthily stealing FTX customer assets to use for FTX, the U.S. Senate said, “As a general policy, FTX separates its customer assets from its own assets across its platforms.” was testifying. Its uses include contributions to one-third of the members of parliament.

The new complaint also alleges that Bankman-Fried made false statements about the nature of FTX’s business and the purpose of the fiat accounts it opened at regulated banks in the United States. This is a charge that would normally be directed against Mexican drug cartels or international terrorist groups, not tech startups.

Illegal donations in the tens of millions of dollars

The most serious of the new charges is Bankman-Fried’s “sent to Democratic and Republican lawmakers in someone else’s name to obscure the actual source of the funds and to circumvent federal election law.” A campaign to influence politics illegally, including flooding the political system with tens of millions of dollars in illegal donations.

It may seem confusing, but this is a big problem. American politicians, prosecutors, and judges naturally do not like attempts to illegally undermine American democracy. The complaint details the donation of FTX funds (actually FTX user funds) to political campaigns under the guise of contributions from individuals, including two FTX executives.

The complaint also details, more like a footnote, an astonishingly shameless accounting fraud deriving from the political donation fraud. A message filed in evidence suggests that an FTX executive falsified the date of the sale of approximately $80 million in crypto assets to cover up the use of a personal bank account used for the fraudulent donation. .

According to public political donation records reported by CNBC, the executive is likely Nishad Singh, the former engineering director of FTX.

where delusion ends

There are two ways Bankman-Fried’s long-term strategy can be deduced from all this. The first is that he thought he had no choice but to win and that the money he stole would magically regenerate through his own machinations. Such stupidity would have stemmed from Mr. Bankman-Fried’s hopeless elite delusion.

Another hypothesis that his mind was a little more solid is that Mr. Bankman-Fried simply thought he could bribe politicians and avoid crime by making enough illegal donations. . This is more basic and embarrassing stupidity.

No matter how skeptical you are about the US judicial system, relying on political connections to get legal protection is a pretty poor strategy. Enron CEO Kenneth Lay was a personal friend of President George W. Bush. Elizabeth Holmes, the former CEO of Theranos, a medical startup accused of fraud, had former Secretary of State Kissinger on her board. Yet both have been convicted.

I remember Bankman-Fried’s remark, “I never read a book.” Did he know about the bankruptcy of Enron when he was about ten years old? Did he ever hear the word “accounting” in the first place?

Confessions of a Close Aide

The stupidity of Mr. Bankman-Fried’s non-reading, hilarious, mentally constructed scheme was apparent to some insiders. A recent Financial Times article and the new complaint allege that former Alameda Research CEO Caroline Ellison seemed relieved that everything had collapsed.

“This day, which has weighed heavily on me for so long, has become more and more unsettling,” Ellison said in a message to Bankman-Fried on or before November 6. was written in “Now that the day is real, it feels good that it’s all over in one way or another,” he said.

So even if Bankman-Fried was delusional in ignorance, those around him knew in real time that fraud was taking place. Ellison apparently didn’t think he could escape the gruesome ending.

Bankman-Fried’s ignorance of the inevitable consequences of his actions reinforces the need to thoroughly examine the potential for drug abuse among FTX’s management. come. As you can see below, Ellison apparently admitted to using drugs on Twitter.

nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experience is

—Caroline (@carolinecapital) April 5, 2021

“Nothing is more effective than regular use of amphetamines for making us realize how stupid many of our normal, drug-free human experiences are.”

In contrast to Ellison’s analysis, studies have found that regular amphetamine use impairs cognition and judgment. One study found that amphetamine addicts, like heroin addicts, “performed significantly . . . poorly on tests of pattern recognition memory.” Pattern recognition should be an important skill in investment firms.

Being on drugs may make you feel smarter. Like the illusion that it’s safe to drive after drinking beer.

But whatever the reason, just because you believe you’re a genius doesn’t make you a genius.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: lev radin / Shutterstock.com
｜Original: Sam Bankman-Fried Cosplayed as a Genius. The Facts Reveal His Incredible Stupidity