I met SBF. What a douche.

Sometime in 2019, I met SBF in Hong Kong at a small invite-only crypto dinner. It was when Alameda was young and FTX did not exist yet. This happened sometime after the 2018 crypto crash when I was running the family office of a prominent HK group.


SBF approached me and proposed that our family office (and that I gather up other family offices) to lend money to Alameda Research so that they could trade with it at a 15% interest rate. The loan would be unsecured, and would have been used for highly risky leveraged crypto trades. We would share none of the upside - just get 15% annualized, with no collateral or security.


That deal seemed outlandishly out-of-market, and I couldn't figure out why a highly intelligent and sophisticated person would even propose it. It was kind of like "let me borrow your Ferrari and drive it wildly around town at 90 MPH, but I will pay you $15/day in car rental fee". It just didn't make sense why he would even propose it. I thought he was either naïve about finance or, more likely, was a predatory guy trying to take advantage of family offices, which he might feel are less sophisticated than himself, and offer them low returns while putting their capital at massive risk.


As it happens, a few months later SBF launched FTX. Some of my former colleagues (from a different crypto exchange) joined him as advisors and early employees of FTX. I had also previously worked at an exchange but because of my previous interaction with SBF and my suspicions that he was not an honest guy, I did not ask for a referral and missed joining the early FTX team. I even remembered having an online debate with one of their early advisors who said that I simply misunderstood SBF and that he was one of the most generous and philanthropic guys out there, trying to change the world for the better. One of my friends became inordinately wealthy on FTT tokens and other incentives. A couple of other folks I knew made significant early investments into FTX equity and token rounds.


I regretted not speaking to SBF again after our interaction. After all,. I missed out on the FTX exchange-building opportunity which sprouted in my own backyard. Nonetheless the original deal was still ludicrous that I couldn't bring myself to trust this guy. I guess now in hindsight I may have dodged a bullet.

 

You go on about how he's offering a very unsafe, and not to mention capped, proposition, but then say you regret passing on it? Wrapping up with "Nonetheless the original deal was still ludicrous that I couldn't understand why he thought anyone would accept such terms."?

So which one is it?

But yes, he obviously is a grade A douche regardless.

The poster formerly known as theAudiophile. Just turned up to 11, like the stereo.
 
theAudiophile

You go on about how he's offering a very unsafe, and not to mention capped, proposition, but then say you regret passing on it? Wrapping up with "Nonetheless the original deal was still ludicrous that I couldn't understand why he thought anyone would accept such terms."?

So which one is it?

Yeah I was confused by this as well.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 

Sorry, that's my crappy storytelling. I edited to clarify. Later SBF launched FTX in HK and a number of folks I am close to joined him as early advisors, employees and investors. I missed out on that rocket ship because his original debt offer seemed predatory. Obviously in hindsight I dodged a bullet.

But I was depressed I had missed the opportunity to join my friends at FTX - especially when they became very wealthy as a result.

 

I'm friends with a hedge fund manager in DC and she met Madoff and Madoff pitched to her and a group of other investors. They all invested with him except her. They all laughed at her when she voiced her suspicions. She thought the returns were questionable and didn't reflect market conditions. She had the last laugh. 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 
i.can.make.it

Anyone who's a billionaire but claims to be ultra humble and only drives a toyota etc are likely to be horrible people, I can't put my finger on it but i've noticed it before 

Honest question: does that mean you'd say Icahn fits in that mold? Famous for being a billionaire but driving the same Jeep for forever. Buffett? I can totally sense where you're coming from though.

Speaking of, legit, no Notrious B.IG. jinx, a kitted out LX450 or other FZJ80 LandCruiser though? "The one vehicle to rule them all!"

The poster formerly known as theAudiophile. Just turned up to 11, like the stereo.
 

Icahn does not really fit the bill, neither does Buffet because they're old and there's no real way to vet how they lived their lives, I'm talking about the younger generation specifically people with that SBF style of "i sleep on the floor in my office" "i never take vacation" "i never wear new clothes" "I give money to charities that are owned by rich people with no clear cause, just vague words like Climate Change or Racial Equity" but I am a billionaire or multi millionaire, it always rubs me the wrong way

 

I think it's not so much about continuing to live a humble, non-flashy lifestyle - it's the constant self-promotion of that choice.

Buffett doesn't actively brag about driving a Camry or eating McD's for breakfast every morning like it makes him better than people who own Ferraris and eat every meal at Nobu; he is just honest about his lifestyle choices when asked without trying to make it a flex.

By contrast, for the scammer types like SBF, loudly promoting how humble and frugal they are is part of the persona they're trying to construct, as I see it.

Here's a possibly relevant piece on countersignaling by founders/execs/the wealthy that I enjoyed.

 

Almost always it seems like these performative virtue signalers only are so adamanat about their positions because they have so many more skeletons to hide.

People are are comfortable with their own morals dont feel the need and desire to always signal how morally superior they are. It's only a trait from those insecure about their values (or lack thereof) themselves who go where the wind blows with their beleifs

 
MonkeyNoise

Almost always it seems like these performative virtue signalers only are so adamanat about their positions because they have so many more skeletons to hide.

People are are comfortable with their own morals dont feel the need and desire to always signal how morally superior they are. It's only a trait from those insecure about their values (or lack thereof) themselves who go where the wind blows with their beleifs

He's right, you know?

The poster formerly known as theAudiophile. Just turned up to 11, like the stereo.
 

I listened to a recent podcast about history's great scams and con artists. One of the con artists was a guy named Victor Lustig, famous for selling the Eiffel Tower. He wrote down his Ten Commandments to conning people. It's interesting to see how SBF and Theranos maps against these.

*Be a patient listener (it is this, not fast talking, that gets a con man his coups).

*Never look bored.Wait for the other person to reveal any political opinions, then agree with them

*Let the other person reveal religious views, then have the same ones.

*Hint at sex talk, but don't follow it up unless the other person shows a strong interest.

*Never discuss illness, unless some special concern is shown.

*Never pry into a person's personal circumstances (they'll tell you all eventually).

*Never boast – just let your importance be quietly obvious.

*Never be untidy.

*Never get drunk.

 

It's a con-job, to make people lower their guard. It's telling others "I don't care about money except that I want to give it away" so that investors will think "aw this guy can't be here to cheat me, he doesn't even care about money."   It worked brilliantly for SBF. 

It's said "you can't polish a turd."   But clearly we can roll it in glitter to make it shiny. SBF is that glitter-covered-turd.

 

My understanding is that it grew out of an article by Peter Singer where the gist was: if someone is drowning next to you, you would stop whatever you're doing and immediately help them - the singular focus becomes saving their life. If they're a football field away, you would still run over; nothing really changes as the impetus to help is just as strong. And what if someone is drowning on the other side of the world? Maybe you can't run over, but you should still act as if the person was dying beside you and do whatever you can to help. And if, instead of drowning, they're starving, or dying from lack of access to medical care, then there is no real difference - you should still try to save these people as if they were dying next to you. 

So the principle is basically to focus your life on doing the greatest amount of good possible. This doesn't mean literally working for humanitarian causes, but often it's making bank in a high-earning career path and then donating as much as humanly possible to end world hunger, or save dying babies, or whatever.

Array
 

Interesting encounter.  Thanks for sharing.

I can see why 15% unsecured is low, but you described it as another level of low - so ludicrous that one would be crazy to even ask for it.  

I'm curious why so extreme.  Those were the "cash is trash" days when real yields for debt of any appreciable quality hovered around zero.  You couldn't even get 3% on IG & TIPS were well into the negative.  And any dividend stock yielding over 3% had real questions about its terminal value.

Any opportunity to make 15% would be assumed to be highly risky.  Opportunities of similar risk to FTX (I'm thinking seed stage startups) were offering 8% PIK and only 20% discount to series A.  Not great terms unless the valuation cap was super low.

None of that is meant to debate you, I would've still quickly said no.  Just would've been less than stunned.  Curious why you were.  I guess maybe you could've invested in subprime for a comparable yield, and maybe subprime less risky than FTX as perceived then? Thanks.

 

I'm expressing myself poorly. I guess I was just stunned at the high level of risk and a somewhat middling return being offered for taking such risk. At the family office we could get more than 15% by investing in real estate or Asian infrastructure, backed by underlying assets. If we were to give money to a crazy hedge fund levering up heavily and betting on crypto - then we'd be pretty far out on the risk curve and 15% is nowhere near what we'd need in terms of a fixed return. 

 

Funny, I actually did write up my poor experience w/ SBF 3 years ago and published it in on a crypto channel I'm a part of in Telegram, right as SBF was launching FTX.  I told people I thought he was shady / predatory. As I said, a number of my real-life friends advised FTX or invested in it and they were in the channel as well. I can't tell you how many times they said SBF is a genius, or that I just didn't understand what a good, charitable person he is. I didn't understand the noble way he was working to change the world. He's a vegan, he's for poverty alleviation, for healthcare, etc.  After FTX took off like a rocket I felt like a colossal fool. After all, a major tech company being born right in my backyard in HK, with my friends investing in it and advising it?  I had friends posting selfies with SBF in late night work sessions.  What was there possibly for me to write about?  That is until a month ago and then my prior - and very brief - story about SBF seemed relevant to share. 

 

So initially you felt like a fool, and I guess after FTX went nuclear. But describe the path of how you felt through the whole process. For basically 2.5/3 years were you kicking yourself, or did you see it as the correct decision because you thought he was shady and that it would take time to be proven? Also, how did you feel once it came out it was a fraud? 

 

Just because everyone was thinking he was a genius, it doesn't mean you couldn't write:

''I met this guy, seemed like a fraud''.

There are a couple of people who did before it all blew up. You could have also warned your friends.

Never discuss with idiots, first they drag you at their level, then they beat you with experience.
 
Most Helpful
  1. I did write that I thought he was shady because he offered what I saw as predatory prices. I put that out on telegram and discussed this on the telegram channel with one of his advisors at FTX. That channel has several hundred people in it. I specifically did mention it to his advisors and two of his investors both in the channel and offline.
  1. There’s a big difference between someone offering you what you consider a mispriced deal (15% annual interest for lending money to high-risk crypto trading) and being an outright fraud. I said to others I felt he was being predatory / his deal didn’t make sense. I said it was deeply off putting. But that’s not the same as calling him a fraud because I had no reason to suspect he was a fraud. Being aggressive in your deal-making is different than being a fraud.
  1. Remember I only spent 5 minutes with him at a dinner and it was before FTX was even conceived of. I had no insights into what he was doing at FTX not any reason to suspect inappropriate behavior.
  1. I am not saying I knew he was a fraud. I knew he was mispricing risk / taking advantage of others. I thought it was douchy behavior. I did not know outright fraud was being committed. I am just sharing this story out of interest and gossip. I am NOT claiming I had any special insights into the dude nor that I spotted any fraud.
 

The dude is a fucking dud. He is either wildly incompetent or extremely devious. Both are easy to spot, and you did. Congrats. I've never held a single product offered by him or related to him in any way (Solana, FTT, Serum, etc.). While I missed on massive gains, I also didnt lose anything with FTX or Luna...

Being able to sniff out charlatans is a missing art. You did well. Congrats!!

 

So what is the probability Joe that SBF will do jail time?

“Bahamas USA extradition” is trending on Google so I am not the only one wondering.

Is his media blitz smart? Clearly he is trying to get the message out that he is incompetent rather than intentionally fraudulent. Will it work? “'Tell me the difference between stupid and illegal and I'll have my wife's brother arrested”

 

I don't think he's gonna be epsteined. Too many people looking for blood on this, and will want a long prison sentence. They are going to Madoff him - multiple consecutive life sentences. Will watch closely.  I think this trial will be quite complicated as SBF will make the case for negligence and incompetence, and it will be on the prosecution to prove fraud.

 

You hit the nail on the head. He’s playing the incompetence/amnesia card which a lot of mobsters used to do. Old trick.

He’s said enough things publicly that any halfway decent prosecution will be able to pin him down on something.

Wrinkle comes from a legal dream team that could be assembled in the event certain interest groups need him around as a future useful idiot.

 

Seems DOJ slow-rolled SBF, using sealed indictments and not showing their hand until authorities in both US and Bahamas were ready to pounce in a coordinated effort.

US Attorney SDNY

@SDNYnews

USA Damian Williams: Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. Government, based on a sealed indictment filed by the SDNY. We expect to move to unseal the indictment in the morning and will have more to say at that time.

 

BTW this is supposedly the newly occupied makeshift FTX Hong Kong cleanup crew's office. These are the remnant folks who didn't leave to Bahamas when the exchange relocated. They are in my Wework in central.There's a crypto market maker in the center who said he saw the guys unloading stuff with FTX logo boxes. I also saw the guys and they had on FTX fleeces.The next day the glass wall was frosted and these guys are working round the clock behind a locked door.

 

Disagree most strongly. My take, having met him pre-FTX, is that he knew EXACTLY what he was doing. My 5 minutes with SBF in 2018 showed me that he was sharp, focused, and a predator. This is real life, we're adults, and we're responsible for our own actions. This 'babe lost in the woods' narrative he's spinning is fooling nearly no one. 

 

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