Unpacking the FTX Fraud with Lyn Alden

 
 

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“We appear to have actual fraud, various types of fraud, essentially a Ponzi scheme, and that’s different from even just a normal casino… you can have a crypto casino, and it just makes money from fees, and most traders get rekt; but this is like a casino built on top of a Ponzi.”
— Lyn Alden

SHOW DESCRIPTION

Lyn Alden is a macroeconomist and investment strategist. In this interview we discuss rampant fraud that led to the FTX bankruptcy, the implications for other businesses and legal precedent, and Lyn’s current outlook on markets.

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FTX’s empire at the beginning of this year was valued at $32 billion. The whole facade has become a bankrupt mess in a little over a week. Every hour of the past 7 days has seen a new claim of malfeasance that exceeds the depravity of the last. This crescendo has seemingly peaked today as SBF posted cryptic tweets suggesting he’s struggling to comprehend what has happened.

Sam Bankman-Fried was lauded as a financial genius and social revolutionary leading the ‘effective altruism’ movement. He was on the front cover of Forbes in October 2021. A glowing Bloomberg profile in April this year recounted his interactions with prominent politicians, investors and celebrities. He openly discussed having his attention drawn to dealing with existential issues affecting humanity. SBF had former Presidents and Prime Ministers in his palm.

However, Bankman-Fried was a Svengali and a fraud. Some Bitcoin maxi’s tried to sound the alarm, but too many people ignored the warning signs and believed the hype. In just 3 short years the 30-year-old managed to beguile not just the industry but also traditional finance. He got a $100 investment from a Canadian pension fund, which one would assume would lead the world in discharging fiduciary duties.

In the aftermath, it all seems so obvious. FTX was essentially run by dysfunctional kids. So, how did this happen? It’s still very early, and revelations keep dropping as we speak. The truth behind what occurred will take years to piece together. Nevertheless, there are some important lessons that the Bitcoin community rapidly needs to discern and absorb. A political response is inevitable, and many will try to ensnare Bitcoin in this mess.

TIMESTAMPS

00:02:58: Introductions
00:04:42: FTX - a casino built on top of a Ponzi scheme
00:06:37: The Alameda connection, and the full organisational chart
00:14:50: The events leading to the FTX bankruptcy
00:25:20: Investors' lack of due diligence
00:29:54: Jurisdictional regulation, and the liquidity issue
00:33:30: SBF's political lobbying
00:36:02: Implications for Bitcoin
00:40:39: Securities laws, and SEC setting precedent
00:45:57: Bitcoin mining bankruptcies
00:53:36: Macro outlook, and disinflation in an inflationary trend
00:59:18: Energy issues, and environmental policies
01:05:27: Deglobalisation
01:08:25: Final comments

 

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SHOW NOTES

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Mentioned in the interview:

Other Relevant WBD Podcasts:

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