Crash!
How does it feel to have lived long enough to see all of your favorite franchises go down in flames?
Feels great.
Investor, YouTuber and crypto influencer, Ben, welcome to Business Briefing.
Thank you for having me on today.
Ben, could you give us the simplest primer on the FTX story?
- Yeah. - For those who might not be fully familiar with what's happening.
Sure. So, basically FTX was a crypto exchange.
A lot of people thought it was one of the safest crypto exchanges.
Led by Sam Bankman-Fried, thought to be a good guy in crypto,
you know, especially by regulators and politicians.
FTX was associated with a company called Alameda Research.
They were basically a venture capital arm.
Sam Bankman- Fried, known as SBF in the industry,
he's basically--
he was over both of those, FTX and Alameda.
Well, Alameda had a backdoor into FTX.
Whenever it was trading on the downside,
it was actually able to pull customer funds from FTX,
from their bank of funds,
and use them for their trading activities.
Well, what happened is,
is that the token that generally they were using kind of as their--
as their net worth, as their liquidity, FTT,
was the internal token of FTX,
and what we found out now is
they were basically just trading back and forth, wash trading it,
to up the value.
Meaning their net worth or their value at FTX was way below when it actually should have been.
CZ, the founder and, you know, CEO of Binance, the largest exchange in the world,
he got wind of this.
And he basically blew the whole thing up by dumping FTT tokens on the market.
And then that crushed the liquidity for FTX.
And then what we found is it was basically turned into a giant Ponzi scheme the entire time.
And you had Gary Gensler, the SEC head,
meeting with Sam Bankman-Fried regularly on crypto regulation.
And this really goes in a lot of deep dark rabbit holes the further you look at it.
Yeah. I mean, I'm going to interject a little bit of a contrarian take on this.
Sure.
Isn't this a little bit of an egg on the face for the SEC, for regulators,
but also, I think, for the crypto industry itself,
because I think crypto prided itself on being able to sort of self-regulate, self-police.
I mean--
Oh, I certainly don't think that's a contrarian argument.
I think, I think that's the way to look at it.
I think what we've realized in crypto is
for the benefit of all of our own pockets and our greed,
we've allowed the, you know, traditional, TradFi people to come into our market.
And the more they come into the market, the more they pump up the prices,
the more it becomes like stock market 2.0.
And you could certainly make the argument
that our entire fiat system is basically printing money out of air.
And that's what FTX was actually doing.
Alright.
John Vibes already wrote the outline for the SBF book.
- Did he really? - He really did.
- Oh, sweet! He's ready to get moving on it. - He's ready to get moving on it.
- Let's go! - I think it's pretty great.
- I mean, it's pretty-- - It would be--
- You're the authority on this. - Well, I'm meeting with Ben Mezrich this week.
You know who he is?
That's-- really rings a bell.
- Bitcoin Billionaires and Social Network. - Oh.
He wants to have a meeting with me.
He's going to be doing a book on it.
He says--
he said he doesn't think he can tell the narrative without me.
- The whole thing. - I just cannot believe
- that the guy from Ultimate Bets was involved in all this. - Yes!
- That is just like-- it's like, "What?!" - Oh, yeah. I just heard that this morning.
- "How is this--" - Ultimate Bets.
I've known this for three weeks.
- That it was the Ultimate Bets thing? - Yes.
- Oh, I knew Friedberg was like the guy. - Yeah.
How did that go under the radar for so long?
It's just because people aren't looking at this is it.
And I'm doing the course right now on BitLab Academy
- around fundamental analysis. - How did Gary Gensler miss that?
And one of those things, as part of due diligence,
is to look into the the C-suite level of any sort of project that you're looking at.
And clearly, all of us missed this.
What's amazing is that this guy was still allowed to practice law, period.
That's the problem.
He never lost his license.
How did this guy not lose his license?
Hey, you just keep digging around. He's involved in Mt. Gox too.
- Yeah. - Uh-huh.
At some point, they're going to try to kill me.
I've got to stop digging, but for right now--
That's like my jam right here.
Good.
Nice music.
He's predicted what was going to happen days before.
On October 29, he tweeted,
"If you don't close your FTX account today and get your funds off that exchange ASAP,
I'm sorry but you are the definition of low IQ and deserve what's going to happen to you."
And two weeks later, after everything unraveled,
FTX CEO Sam Bankman-Fried told his clients he was "really sorry we ended up here."
Let's bring in BitBoy Crypto founder, Ben Armstrong.
Ben, what information led you to conclude what was happening ahead of time?
Yeah. So it's just very interesting the way things unfolded.
I was just kind of in the right place at the right time is how things shook out.
Basically, I have a bill we're trying to get approved in Congress.
We're still trying to get some funding for it so we can make it public.
And we reached out to FTX for funding
because we thought maybe their ideals aligned with ours.
And basically, through a long series of events, it went through SBF to Tim Harrison
to Wetjen, the former CFTC guy that was their policy head,
and they actually tried to steal one of our political backers
and actually communicated that they were trying to do a federal BitLicense.
So, like, that's kind of weird.
Federal BitLicense, the worst legislation ever in the history of crypto,
totally benefits centralized exchanges, gets rid of decentralization,
gets rid of peer-to-peer, you know, peer-to-peer transactions
because you wouldn't have a license,
which a license costs hundreds of thousands of dollars to get, of course.
And so I started thinking, "Man, there's got to be something to this."
Well, lo and behold, about four weeks after I came out with what they were doing,
suddenly he comes out with his manifesto, SBF, leading to the idea of licensure.
And suddenly people started listening.
"Oh, my gosh, we think Ben actually knows what he's talking about."
And all of his enemies,
all the enemies that SBF has had over the last, you know, two years,
started sending me messages.
And we just started learning more and more and more
that they had been doing on the backside to completely destroy projects like ICP,
projects like Reef Finance,
projects like NuGenesis,
projects like Aptos,
projects like Casper.
These were all projects that FTX and Alameda specifically set out to destroy
by making them promises to list on the exchange
and then shorting them to zero by, like Michael Saylor was talking about,
counterfeiting coins on the exchange to control the supply.
So once we started digging into this and realizing what was going on in the backend,
we tried to warn everybody.
Millions of dollars left FTX.
Thousands of accounts were closed because of the message we were putting out.
And that tweet looks a little callous now knowing everything that's happened.
And we, certainly, our heart goes out to people that lost money,
and certainly people don't deserve to lose money.
But anybody who heard the message that we were putting out and ignored it,
you know, like, unfortunately, I just say hate to tell you
I wish you would have listened.
Am I the only one that needs to worry about getting killed?
Or is everybody here?
Oh, yeah, yeah, yeah. Actually, I am Irish, they said.
I mean, it was sitting right in front of our eyes, right under our noses the entire time.
And that's why a lot of us have a lot of egg on our face in the crypto world
just for buying into what Sam Bankman-Fried presented himself as.
You know, he always tried to present himself as kind of like,
"Can you figure? Is he good? Is he bad?"
It was hard for us to ever really know.
Until now.
And you look back--
if you look back at several of the projects that launched on FTX,
ICP, Casper, Aptos,
you look at all these projects,
and you realize there were so many signs that this stuff was going on.
There were so many projects that Sam Bankman-Fried destroyed
by shorting them to zero and creating a counterfeit supply on the exchange.
It was a scam from the very, very, very beginning.
And we're really just kind of getting down the rabbit hole.
I mean, you know, once--
right now, what we're focused on,
we're focused on, like, cracking the egg here on what actually happened with the scam itself
and then, of course, you start moving into the Ukraine situation and the politics
and the fact that, look, it doesn't matter if you're Republican or Democrat.
What matters is, is that Sam Bankman-Fried was literally using your customer funds
to support both sides, obviously heavily tilted Democrat there,
but he would support Republicans with Democrats' money,
supported Democrats with the Republicans' money.
And that right there is an absolute scam and a fraud within itself.
That should change some, you know, election donation contribution laws.