I just want to say how happy I am you're back. When TLDR disappeared I was quite sad, and then Reply All magically showed up in my feed. And naturally I was sad, plus other more confusing emotions, about the end of that show. For a few months I would google you to see if you'd turned up somewhere else but didn't get anywhere. And then the show dropped in the Reply All feed (thank you to all the people who made that happen) and there you were!! What's more, you'd done a whole show about Fentanyl!! Back when I first started listening (to you) I was a lawyer in financial services but I've spent the past 7 years building technology to prevent overdose death and here you were, trying to figure out the world I've spent the last 7 years trying to figure out and co-design solutions for.
On my phone I would say that the color is neither purple nor pink but instead one of those hex combos that shows up only when you are doing web development and nowhere else in the world.
But then I own a shirt that I think is grayish purple that the rest of my family thinks is brown, so take my word for what it’s worth.
Well I wasn’t expecting the Killer Robots angle, but in Sam Bankman-Fried’s defence, the news has been non-stop crazy since 2016. So - who knows. I really enjoyed catching up on the story. Crypto Island was a big favourite of mine last year.
I don't know the best way to contact you, but I have a question you might be able to get to the bottom of: all of the ads in ad-supported free mobile games are for other ad-supported free mobile games. If all they're doing is showing ads for each other, how do any of them make money? It's like the single electron theory but for dollars, in theory they could just be passing the same dollar back and forth through various ad networks.
Thanks for another great episode PJ! This is probably a stupid yet genuine question: in the episode it talks about Sam being asked a question “if you were a bank and took money home at the end of the day, even if you were intending to return it worth more, wouldn’t that be theft?” -- isn’t that pretty much exactly what banks actually do when they invest customer money (and why we get interest from bank accounts)? And hence why there are issues if there is a run of people trying to withdraw money from the banks all at once? Yet we don’t consider that theft. So if that is the comparison for what FTX/Alameda were doing, it’s a bit confusing how one is considered theft but not the other. Is the main difference just that banks are insured and up front about this practice?
Well the reason is that banks are banks and FTX was not a bank. When you put money in a bank you are agreeing to those terms. FTX lied about what it was doing. Also banks are heavily regulated and there's centuries of precedent, licensing regimes, etc for how they operate. It's pretty hard to open a bank. FTX was again not a bank and never tried to become one.
This was really well done as always. I don’t know how to submit a question but here is mine…. Why are politicians getting older and older not meaning they are human and aging but why dont we see young politicians able to stay long enough to be viable candidates? I always hear “oh well they wouldn’t be able to get the votes.” I get the electoral college (as much as any normal person can) but like what happens to people like Cory Booker that they don’t throw their name back in the ring. So sad.
Love that you're back, have listened to everything you've made in the past (and every Reply All episode 3-4 times over).
Interesting episode about SBF, but I was a little taken aback by how you seem to conflate SBF's crimes and insane approach to generating money to donate and the EA topics he chose to donate to.
As someone who covers the internet and technology extensively, I would have expected a bit more thoughtfulness around the topic of AI safety especially. Putting it away as "killer robots" was disappointing to me, as any amount of research on the topic of AI safety will lead you to some pretty serious people expressing pretty serious concerns.
I think a similar thing around the "300k investment into research on what the human utility formula is" which got laughed away as being a terrible idea. Economists for decades have spent time and effort and resources researching that very question, so why it's all of a sudden an idiotic pursuit because some wacko gives stolen money to it doesn't make sense to me.
400k to make infographics about rationalism and effective altruism. If that would have been 400k to Amnesty International to recruit new donors, it probably would have gone unmentioned.
The Effective Altruism movement is close to my heart, even though I find some of its more out there concepts to be distracting from what at its core is people trying to be as effective as they can in helping living beings prosper, and it's painful to see the effect SBF has had on this burgeoning movement.
I fell to the crypot frenzy 2 years ago and I've lost a few thousad dollars. Not life threatening but it definetively hurts. I am saving the episode for a time of relaxation and no distractions. THANKS A LOT,. AS ALWAYS!
I'm a reporter who's covered SBF extensively — I've even reviewed exclusive documents from Sam himself my former employer obtained this past summer that outline, in his words, exactly what he thinks happened.
Your piece oversimplifies one essential piece of the story regarding the "secret piece of the code in the database" regarding Alameda's borrowing — at least, that's what I'm confident Sam would say.
According to Sam's side of the story, FTX used Alameda Research as a payment processor in the early days because it was incredibly hard then (as it is now) to get banks to work with you if you're a crypto company. There's one particularly incriminating yet hilarious quote where he explains he named his firm Alameda Research because if you tell a banker you're from Crypto Arbitrage National they'll say "...I don’t want to bother with that right now; it’s almost lunchtime. . . . But everyone wants to serve a research institute.” (SBF in 2021)
When Alameda was used as a payment processor for FTX, it accepted customer funds, and marked its liability in an internal database called "fiat@". That liability eventually grew to $8 billion dollars. That's $8 billion that Alameda had in its accounts that it owed to FTX. But who cares about $8 billion dollars when you have $75 billion? (As SBF claims Alameda did at the end of 2021.) And so everyone just forgot about this internal account, according to Sam.
According to Sam, both in these private documents and in public, his real mistake was losing focus on his company, playing politics and celebrity while Caroline and Sam Trabucco at Alameda failed to hedge and lost all the money the hedge fund had gained in the bull run. (I have personal thoughts on those gains: most of it was just lucky betting in the right direction, though some of it was definitely market manipulation. I don't think after the Japan arb Alameda had any smart or sophisticated moves that couldn't be explained by the first two.)
Then, sometime during mid-2022 when shit starts getting real bad post-Terra collapse, Sam finds out about the $8B shortfall — which he claims Caroline always knew about — and can't plug it before the liquidity crisis in November. In Sam's telling, Caroline losing Alameda's money endangered Alameda, but Caroline not telling Sam about 'fiat@' in turn endangered FTX. And so, everything collapsed.
This is a really convenient story for Sam, so why am I repeating it? Well, understanding this story has definitely changed my view of what exactly Sam is guilty of. When I spend the money in my bank account, I'm budgeting according to the little digital numbers my Chase app is showing me. Sam claims he was doing the same, but because FTX was such a shitshow internally, those little numbers were wrong.
There were definitely crimes committed over the course of building FTX, but the charges against Binance are showing that it's quite hard to build a global crypto exchange without committing a few things the SEC considers crimes.
There were also terrible, terrible decisions that... I'm not sure are crimes? Or at least, that I'm not sure should be punished by locking someone in a cage away from society. Leaving your sometimes-girlfriend in charge of 75 billion dollars — a job which she knows she's not cut out for after just a year at Jane Street — is a terrible decision, and maybe even a negligent one, but he owned 90% of Alameda outright and Gary Wang owned the other 10%. It was his money. And using QuickBooks... look, Sam had a cavalier attitude about this stuff. "We sometimes find $50m of assets lying around that we lost track of; such is life."
So while SBF may be the mustache-twirling villain your podcast makes him out to be — and to be clear, I think that's absolutely one element to this story — I think this is much more a story about the hubris of crypto. Everything is worth billions on paper; nothing is actually real. How real is the harm, though? I guess that's what I'm still trying to figure out.
> According to Sam's side of the story, FTX used Alameda Research as a payment processor in the early days because it was incredibly hard then (as it is now) to get banks to work with you if you're a crypto company.
> When Alameda was used as a payment processor for FTX, it accepted customer funds, and marked its liability in an internal database called "fiat@". That liability eventually grew to $8 billion dollars. That's $8 billion that Alameda had in its accounts that it owed to FTX.
Even accepting sam's actual story (which is a lie), and even if he never stole 8 billion dollars (which he did), his story is still that he committed fraud. You can't just use your other company to get around banking rules! That's extremely illegal! He can't even come up with a lie that would make him redeemable
Hi Amanda -- this came up in a previous newsletter actually. It's an issue that other people have mentioned. We're working on it, but it's going to take awhile to change.
Basically, in the beginning of a show, there's a lot of what are called SPAN ads, which are not show-specific or read by a host. These SPAN ads are the ones that sound more like traditional radio ads. Over time, the ads should shift to more typical podcast ads (host-read).
For now, I know it's frustrating and I'm sorry it's not better yet, but it is an issue we are aware of. We may, in the future, offer an ad-free version of the show, but that will not happen this year.
In the meantime, this is an imperfect solution but: we do post our episodes on YouTube. Right now, I believe those YouTube episodes do not yet have ads. Soon, they will have ads, but the ads there may not bother you as much.
Thanks for being patient, sorry that things are not yet ideal.
I just want to say how happy I am you're back. When TLDR disappeared I was quite sad, and then Reply All magically showed up in my feed. And naturally I was sad, plus other more confusing emotions, about the end of that show. For a few months I would google you to see if you'd turned up somewhere else but didn't get anywhere. And then the show dropped in the Reply All feed (thank you to all the people who made that happen) and there you were!! What's more, you'd done a whole show about Fentanyl!! Back when I first started listening (to you) I was a lawyer in financial services but I've spent the past 7 years building technology to prevent overdose death and here you were, trying to figure out the world I've spent the last 7 years trying to figure out and co-design solutions for.
Anyway... very, very happy!!
It's purple
Thank you.
Absolutely agree. I'd even go so far as to call it lavender.
On my phone I would say that the color is neither purple nor pink but instead one of those hex combos that shows up only when you are doing web development and nowhere else in the world.
But then I own a shirt that I think is grayish purple that the rest of my family thinks is brown, so take my word for what it’s worth.
Well I wasn’t expecting the Killer Robots angle, but in Sam Bankman-Fried’s defence, the news has been non-stop crazy since 2016. So - who knows. I really enjoyed catching up on the story. Crypto Island was a big favourite of mine last year.
I don't know the best way to contact you, but I have a question you might be able to get to the bottom of: all of the ads in ad-supported free mobile games are for other ad-supported free mobile games. If all they're doing is showing ads for each other, how do any of them make money? It's like the single electron theory but for dollars, in theory they could just be passing the same dollar back and forth through various ad networks.
Thanks for another great episode PJ! This is probably a stupid yet genuine question: in the episode it talks about Sam being asked a question “if you were a bank and took money home at the end of the day, even if you were intending to return it worth more, wouldn’t that be theft?” -- isn’t that pretty much exactly what banks actually do when they invest customer money (and why we get interest from bank accounts)? And hence why there are issues if there is a run of people trying to withdraw money from the banks all at once? Yet we don’t consider that theft. So if that is the comparison for what FTX/Alameda were doing, it’s a bit confusing how one is considered theft but not the other. Is the main difference just that banks are insured and up front about this practice?
Well the reason is that banks are banks and FTX was not a bank. When you put money in a bank you are agreeing to those terms. FTX lied about what it was doing. Also banks are heavily regulated and there's centuries of precedent, licensing regimes, etc for how they operate. It's pretty hard to open a bank. FTX was again not a bank and never tried to become one.
Now that the 8 billion is not gone any more, you should consider a follow-up! More surprising than the original.
This was really well done as always. I don’t know how to submit a question but here is mine…. Why are politicians getting older and older not meaning they are human and aging but why dont we see young politicians able to stay long enough to be viable candidates? I always hear “oh well they wouldn’t be able to get the votes.” I get the electoral college (as much as any normal person can) but like what happens to people like Cory Booker that they don’t throw their name back in the ring. So sad.
I know nothing about crypto and I both understood and enjoyed this, so you did a good job!
Hey PJ and team!
Love that you're back, have listened to everything you've made in the past (and every Reply All episode 3-4 times over).
Interesting episode about SBF, but I was a little taken aback by how you seem to conflate SBF's crimes and insane approach to generating money to donate and the EA topics he chose to donate to.
As someone who covers the internet and technology extensively, I would have expected a bit more thoughtfulness around the topic of AI safety especially. Putting it away as "killer robots" was disappointing to me, as any amount of research on the topic of AI safety will lead you to some pretty serious people expressing pretty serious concerns.
I think a similar thing around the "300k investment into research on what the human utility formula is" which got laughed away as being a terrible idea. Economists for decades have spent time and effort and resources researching that very question, so why it's all of a sudden an idiotic pursuit because some wacko gives stolen money to it doesn't make sense to me.
400k to make infographics about rationalism and effective altruism. If that would have been 400k to Amnesty International to recruit new donors, it probably would have gone unmentioned.
The Effective Altruism movement is close to my heart, even though I find some of its more out there concepts to be distracting from what at its core is people trying to be as effective as they can in helping living beings prosper, and it's painful to see the effect SBF has had on this burgeoning movement.
I fell to the crypot frenzy 2 years ago and I've lost a few thousad dollars. Not life threatening but it definetively hurts. I am saving the episode for a time of relaxation and no distractions. THANKS A LOT,. AS ALWAYS!
You've made me interested in a topic I'm not interested in. That's true journalism.
I'm a reporter who's covered SBF extensively — I've even reviewed exclusive documents from Sam himself my former employer obtained this past summer that outline, in his words, exactly what he thinks happened.
Your piece oversimplifies one essential piece of the story regarding the "secret piece of the code in the database" regarding Alameda's borrowing — at least, that's what I'm confident Sam would say.
According to Sam's side of the story, FTX used Alameda Research as a payment processor in the early days because it was incredibly hard then (as it is now) to get banks to work with you if you're a crypto company. There's one particularly incriminating yet hilarious quote where he explains he named his firm Alameda Research because if you tell a banker you're from Crypto Arbitrage National they'll say "...I don’t want to bother with that right now; it’s almost lunchtime. . . . But everyone wants to serve a research institute.” (SBF in 2021)
When Alameda was used as a payment processor for FTX, it accepted customer funds, and marked its liability in an internal database called "fiat@". That liability eventually grew to $8 billion dollars. That's $8 billion that Alameda had in its accounts that it owed to FTX. But who cares about $8 billion dollars when you have $75 billion? (As SBF claims Alameda did at the end of 2021.) And so everyone just forgot about this internal account, according to Sam.
According to Sam, both in these private documents and in public, his real mistake was losing focus on his company, playing politics and celebrity while Caroline and Sam Trabucco at Alameda failed to hedge and lost all the money the hedge fund had gained in the bull run. (I have personal thoughts on those gains: most of it was just lucky betting in the right direction, though some of it was definitely market manipulation. I don't think after the Japan arb Alameda had any smart or sophisticated moves that couldn't be explained by the first two.)
Then, sometime during mid-2022 when shit starts getting real bad post-Terra collapse, Sam finds out about the $8B shortfall — which he claims Caroline always knew about — and can't plug it before the liquidity crisis in November. In Sam's telling, Caroline losing Alameda's money endangered Alameda, but Caroline not telling Sam about 'fiat@' in turn endangered FTX. And so, everything collapsed.
This is a really convenient story for Sam, so why am I repeating it? Well, understanding this story has definitely changed my view of what exactly Sam is guilty of. When I spend the money in my bank account, I'm budgeting according to the little digital numbers my Chase app is showing me. Sam claims he was doing the same, but because FTX was such a shitshow internally, those little numbers were wrong.
There were definitely crimes committed over the course of building FTX, but the charges against Binance are showing that it's quite hard to build a global crypto exchange without committing a few things the SEC considers crimes.
There were also terrible, terrible decisions that... I'm not sure are crimes? Or at least, that I'm not sure should be punished by locking someone in a cage away from society. Leaving your sometimes-girlfriend in charge of 75 billion dollars — a job which she knows she's not cut out for after just a year at Jane Street — is a terrible decision, and maybe even a negligent one, but he owned 90% of Alameda outright and Gary Wang owned the other 10%. It was his money. And using QuickBooks... look, Sam had a cavalier attitude about this stuff. "We sometimes find $50m of assets lying around that we lost track of; such is life."
So while SBF may be the mustache-twirling villain your podcast makes him out to be — and to be clear, I think that's absolutely one element to this story — I think this is much more a story about the hubris of crypto. Everything is worth billions on paper; nothing is actually real. How real is the harm, though? I guess that's what I'm still trying to figure out.
(Here's the story I wrote explaining fiat@! Note: I now work at The Block, a different crypto outlet. https://www.coinage.media/s2/sbfs-defense-ftxs-collapse-began-with-caroline-ellison)
wow for a reporter you seem very credulous.
> According to Sam's side of the story, FTX used Alameda Research as a payment processor in the early days because it was incredibly hard then (as it is now) to get banks to work with you if you're a crypto company.
> When Alameda was used as a payment processor for FTX, it accepted customer funds, and marked its liability in an internal database called "fiat@". That liability eventually grew to $8 billion dollars. That's $8 billion that Alameda had in its accounts that it owed to FTX.
Even accepting sam's actual story (which is a lie), and even if he never stole 8 billion dollars (which he did), his story is still that he committed fraud. You can't just use your other company to get around banking rules! That's extremely illegal! He can't even come up with a lie that would make him redeemable
I don't disagree 🙃
Are the Zoom "board meetings" recorded and posted? (Presumably in a private place for subscribers)
I'd love to attend, but I have a work conflict. Even if I can't participate, I'd love to watch it.
Hi Amanda -- this came up in a previous newsletter actually. It's an issue that other people have mentioned. We're working on it, but it's going to take awhile to change.
Basically, in the beginning of a show, there's a lot of what are called SPAN ads, which are not show-specific or read by a host. These SPAN ads are the ones that sound more like traditional radio ads. Over time, the ads should shift to more typical podcast ads (host-read).
For now, I know it's frustrating and I'm sorry it's not better yet, but it is an issue we are aware of. We may, in the future, offer an ad-free version of the show, but that will not happen this year.
In the meantime, this is an imperfect solution but: we do post our episodes on YouTube. Right now, I believe those YouTube episodes do not yet have ads. Soon, they will have ads, but the ads there may not bother you as much.
Thanks for being patient, sorry that things are not yet ideal.