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I think the practical business/technical goals are almost irrelevant. It's not that SBF had a brilliant business model in mind. It's that he fit the "look" of a founder that those VCs expected. He was one of them, with the right pedigree and right connections. It's affinity fraud [1].

[1] https://en.wikipedia.org/wiki/Affinity_fraud

Crazy thing is that the people who bring about massive change or revolutionary new ideas don't often fit the mould.

At this point, your 'quirky technologist' definitely IS the mold.

He was a quirky cryptobro league player. There are millions of them.

If you look at recent Nobel Prize winners in sciences, many are not weirdos, just smart and without relying on nonsensical gimmicks. Jennifer Doudna, Emmanuelle Charpentier, others, all examples of just smart and persistent and focused.

Feels very cargo culty. SBF superficially matched peoples idea of a revolutionary genius without any of the actual substance.

Unfortunately the people in power do not care for revolutionary change. They want change that makes them money, not change that fundamentally restructures society. Change that fundamentally restructures society does not need permission from anyone. When the tech is here it will speak for itself, in spite of any of the major resource allocators being blind to those who bring it -- because a part of that change is those resource allocators being made irrelevant. They have held back the human race with their ego, blindness, and total lack of vision.

They will spend $200m+ on a clown like this but ignore countless people with real innovations.

Fraud scales better it seems.

To be fair, FTX had decent traction and Alameda had been successful in the past. I think it's easy to say "pass" on SBF now that we know he's a crook, but there are genuine legitimate exchanges out there that are worth plenty. Coinbase, in the middle of a bear, has a market cap of $20B (it was valued at more than $80B in early 2021).

SBF was just a thief and a gambler, and an incompetent one, at that. I still think Sequoia does have some responsibility here, but I suppose my point is only that hindsight is always 20/20.

>To be fair, FTX had decent traction and Alameda had been successful in the past.

No, they weren't successful. When you leverage up and make (paper) money and later those same investments are wiped out and destroy the comany, you don't get to say you were "successful".

Early Alameda strategy was BTC arbitrage in Asian markets (which is very above-board). They were definitely successful. Once that well dried up (arbitrage is usually an "early bird gets the worm" game), they started gambling on shitcoins, which is where the troubles began.

I've heard their success was a lie and they couldn't have possibly made the money they claimed to have made.

They were definitely not successful. Anyone looking at BTC prices between NA and Korea saw the arbitrage opportunity. The fact that it sat there so obviously for so long was a testament to how impossible it was to profit from it. In fact, the whole reason for the pivot to an exchange from a pure arbitrage play was due to their lack of success.

The BTC arbitrage in Asian markets was absolutely NOT very above board. He lied to get Japanese bank accounts opened and to keep them open. Transferring the BTC into Korea was against the law there. He just figured out how to do it for quite a while without getting caught.

Yes, it made money. Yes, he claimed it was legit, but it wasn't--it was money laundering illegal gains. It just sounds so much better when you call it "arbitrage".

This was all covered in the case.

Do you have a link handy for where I can read that part?

This is such a wrong take.

In 2020, FTX was known to offer collateral on huge loans vis FTT, their stabelcoin. Parties backed off bc of this.

The interplay b/t Alameda and FTX was known and parties wouldn’t trade or do broker agreements bc of it.

within crypto, the growth of FTX, although concerning, was frequently discussed as likely inorganic.

The VC and SEC buy-in to FTX was uniquely inept.

I agree

-Dresses like a slob

-Went to MIT

-Is from the Valley

-Has ties to Stanford

-Upper class background

Their VC brains didn’t stand a chance of sniffing this out.

The real victims here are all the heroic MIT geniuses with unkempt hair who won't get their shot now.

Why won't they get their shot now? I doubt VCs will change their MO over this.

If Adam Neumann can get another shot, the unkempt MIT geniuses will be fine.

Truly devastating. Those poor geniuses will need to buy a comb xD

So long as they have rich parents, a dick, and white skin they'll have plenty of opportunities

And probably an insane network from the parents' side.

> Dresses like a slob

The anti-Adam Neumann. Brilliant strategy.

> -Dresses like a slob

https://www.instagram.com/p/CzCos0dxuJG/?img_index=2

Sketch Artist turned him into Tyler Durden....

Very much fake. https://www.theguardian.com/business/2023/oct/31/sam-bankman...

> It's not that SBF had a brilliant business model in mind

They had the largest crypto exchange right? That's a competitive market. Seems like something was going right.

I expect growth of a crypto exchange is a lot easier when you can steal client deposits to fuel additional growth.

You have it backwards. The deposits were used to fuel a separate trading business. All exchanges use customer deposits to grow their business.

No. That is incorrect. A brokerage / exchange may not use customer assets for their own benefit. They are not a bank -- they are custodians. If they are doing that, they are committing a crime.

https://www.law.cornell.edu/cfr/text/17/240.15c3-3

I believe Binance was bigger than FTX. That being said, it’s hard to tell how big any of these organizations really are because they do not release audited financial statements.

Let's not forget the league of legends incident. https://www.businessinsider.com/ftx-sam-bankman-fried-league...

Oh wow! It was in that same meeting!

You gotta remember, what's being sold in this kind of pitch is not a business model. They're looking for unicorns. What's being sold is the maximum possible size of the market you can extract value from.

I'm no VC, but I feel like if I am and you're telling me that _all_ consumer transactions of any kind are going to flow through a portal _you_ own, it doesn't get much bigger than that. The odds of success don't have to be that high, and in principle you just factor the possibility that the founder's full of crap into those odds; you don't have the time to understand every possible market and every person pitching you in the depth necessary to make that determination, right?

>[if] you're telling me that _all_ consumer transactions of any kind are going to flow through a portal _you_ own

>The odds of success don’t have to be that high

The odds of success are as good as nonexistent and I also don’t have to be a VC to understand that.

There is this weird thing in venture investing:

the line between "crazy, brilliant founders who will build world changing companies" and "crazy, lunatic founders who will lie and cheat and be awful" is very hard to distinguish, especially at the series seed/series A level.

It can lead to false positives and false negatives all the time.

FTX didn't have a CFO. They didn't have a legitimate board of directors.

No VC in their right mind should ever pour billions into a finance company that doesn't have a CFO or risk management team, doesn't have properly audited financial statements, doesn't have board oversight, etc. Especially so in a risky industry like crypto where scams and fraud are well known to be rampant.

This is the main criticism I have of the people who invested in FTX. Even if you thought SBF was a world-changing entrepreneur 2 years ago, the structure of his company should have disqualified it from investment.

This, to me, is just a myth that is pushed by investors that don't know what they are doing, and media outlets who want to talk about spicy people. There's no strategic reason to put your eggs in the basket of crazy people. We only hear about the crazy people because they are newsworthy.

VCs don't care about the distinction, because VCs don't need a real, successful company, they need a story to sell at IPO

Buy a bag from a hypeman. Sell the bag just in time before the house of cards falls

The taken down profile for anyone who wants to see just how wild they were about SBF: https://web.archive.org/web/20221027181005/https://www.sequo...

That's what happens when you raise a red flag on top of large building, and paint the building red afterwards just to be sure everyone notices it.

I loved that piece, and the fact that it was removed soon after.

I don't know. To the extent that Musk had a plan at all with his $44B Twitter purchase, a big part of his idea seems to be that he wants X to be the next banking app/Venmo.

Venmo is valuated at something like 40 billion dollars, and a huge amount of its use is people making $10 payments to each other.

I'd hate to live in a world where I conducted all my business on FTX, but you can see why it might be appealing to investors.

Musk is copying wechat.

* dreaming of

> How was this compelling to people who control serious money?

Access to money, and intelligence, are not positively correlated. Jury is out on whether there is no correlation, or if there is negative correlation. Given the braindead antics of the wealthy over the past 10 years, I'm leaning towards the latter.

Anybody remember that rich dude who built a submarine against every single convention and over the screaming shouting objections of literally every other person alive who's built submarines, who then tried to go to the Titanic and killed himself and four other people?

How about Musk who bought a successful if mid-tier social media site for 44 billion dollars and has cratered it to being worth barely 4?

How about Zuck who renamed his entire damn company in a bid to pivot to the metaverse just in time for that entire house of cards to come crashing down?

This whole exchange made me think that there must have been a family or friend connection back to Sequoia.

As a humble poor, if I were running the show over at Sequoia I would have these people out on their asses, but again, I also don't have buckets of money clouding my judgement.

Sequoia likely made plenty of money by underwriting their in-house e-coin FTT, hyping up SBF across the media, and then dumping FTT on retail investors afterwards.

Do you have any proof they did that? That is a very serious accusation to make.

No proof, because absolutely nothing was audited. That's the whole point of crypto, avoiding securities regulations.

Regardless, what I'm describing is exactly what an investment bank does for a legit public company. They purchase shares from the issuing company to guarantee a certain amount of capital for the company, and then sell it on the secondary market, which in most cases would be to other invstment groups or directly on the NYSE. The difference is that those companies issue S-1s disclosing their performance and numbers, allowing secondary market investors to make an informed buying decision.

https://corporatefinanceinstitute.com/resources/career-map/s...

This just goes to show all the critiques of this kind of investing were very true. FTX and Theranos are examples of how this can all go very wrong.

I've gotten in a number arguments with people who don't understand white collar crime, think these guys are "smart", and are so surprised by how basic their scheme is, and how they thought they'd get away with it.

These people aren't smart, any more than your local gang banger, or small time fraudster... the stories are remarkably similar.

There's lots of white collar criminals that have cloaked their schemes as part of "altruism". This isn't even new.

> How was this compelling to people who control serious money?

Holders of serious money often put them into decidedly unserious things. Somebody once put together $44bn cash financing for Twitter dot com.

VCs often have no idea what they are actually doing and you would be surprised to learn how much just goes on vibes.

What else should investors do in the time of ZIRP? This looked like a potentially crazy return, right? That's point of investing like this, right? Pour money into a "winner" and ride the crypto-future-promise-delusion-wave...

It's pretty wild how unhinged they became about pretty much rambling...

> If someone running a crypto futures exchange said they wanted people to buy bananas and groceries on their platform that’s be a signal to pass, right?

Not if you're so silly as to think you can replace the currency people use, plus control completely its medium of exchange, plus be able to trade against those same exchange's participants. It boils down to people trying to rebrand casinos as markets.

Wow wow wow. He's talking about inserting a business in the normal person's payment path. It's certainly ambitious and could be profitable if you could get on that trajectory. The question would be whether there is a credible path from crypto futures exchange to that, technical, financial or marketing-wise - but that's a different question.

> Like, he’s rambling about how you should buy bananas with Bitcoin. How was this compelling to people who control serious money?

Everyone and their dog was looking for an actually credible, mass-market compatible usage scenario for Bitcoin beyond buying drugs on Silk Road.

coinbro brain. 'everyone' couldn't give a shit about bitcoin, statistically speaking.

Yeah but back in the Bitcoin crazy time it wasn't that unrealistic for "serious money". Mastercard, Visa and AmEx move trillions of dollars a year, capturing even a slice of that marketshare means being in possession of a money printer, which explains the (often absurd) investments into anything crypto.

I think that idea in particular is quite good actually ^_^

I mean, I'm not imagining that they have groceries listings on the app, but that the app allows you to transfer money directly to someone from your crypto wallet. Like a venmo payment but with crypto.

> but that the app allows you to transfer money directly to someone from your crypto wallet. Like a venmo payment but with crypto.

The thing is that's not a novel concept, just about every crypto wallet app can already do this. And the achilles heel of all of these apps is the gas fees that are out of their control. The only way to conceptually get around gas fees is to keep everyones money centralized and sidestep the trading of crypto all together, but in the process you defeat the entire purpose of crypto.

Sequoia had some stuff up on their website absolutely fellating this guy before it all went to hell. It was so cringe.

I think it's a good reminder that large investors are human and don't possess any special knowledge or magical foresight. Consequently, everything they say about the future of technology and society should be taken with a large grain of salt - not treated like god's honest truth.