Sam Bankman-Fried, FTX and crypto: Trust is everything

Ironically, the FTX meltdown is the best illustration yet of why the world needs bitcoin.

https://reason.com/video/2022/11/28/s...

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Economies are built on trust.

Will the bank keep your money safe and accessible? Will the seller mail you those vintage action figures? Will eBay make you whole if the package never arrives?

Trust is everything. And it depends on reputation.

Sam Bankman-Fried—a.k.a. SBF, the founder and CEO of the now-defunct crypto exchange FTX—earned trust by winning the approval of elite institutions. Then he allegedly siphoned about $10 billion of customer deposits into a hedge fund run by his purported ex-girlfriend who then squandered it on risky bets that didn't pay off.

Sequoia Capital, Silicon Valley's premier venture capital fund, trusted SBF enough to invest over $200 million. Crypto lender BlockFi trusted him enough that it's now facing bankruptcy. And, of course, retail investors trusted him to keep their money safe. They're unlikely to see any of it ever again.

Unlike blue-chip financial institutions that gain trust by being too big to fail—meaning taxpayers will provide a backstop—SBF did it in part by winning the affection of the progressive elite in a way that set him apart from the usual libertarian crypto bros.

The World Economic Forum hosted him as a speaker in Davos, Switzerland, listing FTX as a corporate partner. Journalists fawned over him, including Fortune magazine, which asked if he was "the next Warren Buffett" in a cover story that evoked another infamous profile.

Securities and Exchange Commission (SEC) Chief Gary Gensler is accused by one congressman of helping the company to create a "regulatory monopoly." As the second-largest donor to Democratic politicians in the lead-up to the 2022 midterms, SBF branded himself a new kind of capitalist, a different sort of billionaire.

Produced by Zach Weissmueller; editing and graphics by Regan Taylor; additional graphics by Tomasz Kaye.
Licence
Creative Commons Attribution licence (reuse allowed)