👁️ Bed Bath & Qanon: The Grim Psychology of Stock Cults
Meme stock communities look a lot like doomsday extremists - including their manipulative leaders. Plus: OpenAI flips the (theoretical) "profit" switch; the Bitclout grift.
Hello, and welcome to the weekly Dark Markets news roundup. If you missed it, this weekend I posted a crude preview of the central argument of my Sam Bankman-Fried book: That a worldview based on mistaking numbers for reality leads to disaster. And that that worldview is now very widespread among Silicon Valley elites.
Today, we’re looking at a different kind of financial delusion: ignoring reality entirely, at the behest of charismatic, manipulative leaders. After that, I have a video game recommendation … but first, the latest news in financial crime and shenanigans.
News in Brief
SEC Settles with Justin Sun- and FTX-linked TrueUSD over Falsified Reserves.
According to the settlement, TrueUSD’s backing was not held in dollars, but “invested in a speculative and risky offshore investment fund to earn additional returns for the defendants.” This is par for the course if TrueUSD is, as has been alleged, clandestinely owned by Justin Sun.
However, things actually get weirder: future FTX General Counsel Can Sun was reportedly involved in negotiations between Tron and TrueUSD, and FTX later became a major issuer of TrueUSD. This story also reminded me of another truly wild detail - that Can Sun had worked with Dan Friedberg at Fenwick & West before joining FTX. Can Sun in his testimony at SBF’s trial struck me as a decent enough guy, but this is making it look like he has been involved with questionable characters for quite a while.
OpenAI Springs the Altruism Trap.
Remember how Sam Bankman-Fried pretended to care about ethics as a useful way to rip people off? Now we’re getting Round 2, with Sam Altman in the Altruist’s seat, in the form of OpenAI’s plan to transition from a very weird nonprofit-esque structure, to a plain old startup with Altman getting a reported 7% of the equity. Altman has denied that specific figure, but the general discussion was acknowledged.
OpenAI, remember, was founded with the ostensible goal of developing “safe AI,” according to the (already deluded) ideas of supposed “Longtermists” who were somehow worried more about the AI Apocalypse than climate change. OpenAI’s abandonment of that conceit shows exactly how seriously you should take it.
Chokepoint 2.0: Regulators Killed Silverbank.
A new report by investor Nic Carter looks at bankruptcy documents for Silvergate Bank, and finds evidence that the bank folded not thanks to underlying financial instability, but thanks to political pressure and panicky rhetoric from figures including Elizabeth Warren (D-MA). This is more evidence for the existence of a clandestine “Chokepoint 2.0” effort, spearheaded by the SEC, to illegally intimidate banks out of serving cryptocurrency customers.
TDBank Nears Guilty Plea in Fentanyl-related Laundering.
The Canadian lender was reportedly caught laundering money from Chinese fentanyl-trafficking organizations in New York and New Jersey. The world’s third-oldest profession.
Diamondhands in the Rough.
My former Fortune colleague Jeff Roberts has a great new profile of Nader Al-naji, the founder of Bitclout who was recently charged with embezzlement by the SEC. (Hot tip: While most Fortune content is paywalled, it often shows up on the clearweb via Yahoo, as above). Al-naji was an ambitious Princetonian, which normally wouldn’t involve getting tangled up in such obviously fraudulent bullshit as Bitclout, which allowed you to gamble on influencer tokens for … reasons? Al-naji previously worked on Basis, an algorithmic stablecoin/ financial perpetual motion machine that Al-naji was smart enough to abandon, but whose model was later adopted by Luna. You might remember how that went.
THE CULT OF THE DEAD STOCK
I cannot give a strong enough recommendation to “The Cult of the Dead Stock,” a darkly enlightening documentary about the Bed, Bath and Beyond meme stock frenzy by YouTuber James Jani.
As a whole, it may be the single most insightful thing I’ve ever seen for understanding both the psychology of scam victims, and the role of shameless, low-rent grifters in exploiting them. The documentary, which includes great interviews on all sides, shows a group of people quite explicitly waiting for salvation from a hero who doesn’t know they exist, and reading social-media tea leaves with the exact same desperate, fantastical frenzy with which Qanon “bakers” concocted baroque theories based on brain-dead 4chan sludge.
The story of BBBY is truly maddening in its stupidity. The short version is that Chewy founder and now Gamestop CEO Ryan Cohen bought some BBBY stock in March 2022. A group of investors believed that Cohen planned to take over BBBY and turn it into an Amazon competitor. Given Cohen’s track record at the time of bidding up Gamestop and then taking it over its board, there’s some basic logic to their faith.
But like all great cults, they didn’t really get going until their prediction failed. Cohen sold all of his stock within a matter of weeks. But after that, the BBBY community increasingly convinced itself that Cohen hadn’t really sold, that BBBY would still be transformed into an Amazon killer, and that they would all be rich. The “clues” they leaned heavily on included the colors of socks in a children’s book Cohen had written, and one Twitter post he made featuring a smiley face … but which BBBY believers interpreted as a “moon,” indicating Cohen was secretly still somehow long the stock. This interpretation of signs and portents was referred to, perversely, as “Due Diligence,” or “DD,” an almost exact analogue for Qanon “baking.”
It’s now a widely understood trope of Doomsday cults, detailed in the book When Prophecy Fails, that when a life-or-death prediction doesn’t come true, many followers’ beliefs somehow get stronger. In this case, this faith extended to holding the stock even as conditions at BBBY worsened, holding the stock all the way to BBBY’s bankruptcy, watching it disappear from their trading accounts - and remaining convinced that their stock would be replaced with stock of Cohen’s supposed Amazon-killer, which these conspiracy bakers had concluded would be called Teddy.
This is all fascinating in itself, speaking to the capacity for even seemingly fairly intelligent people (including a doctor and a neuroscientist) to ignore basic reality. But the biggest takeaway, and the most revealing, is that this delusion wasn’t self-generating. At the center of it all sat a YouTube influencer going by PPSeeds. PPSeeds appears to have used these sad and delusional people to line his own pockets while cynically feeding their delusions - including goading them to hold the dying stock all the way to zero. According to Jani’s detective work, PPSeeds has also promoted equally ridiculous crypto assets like Safemoon and Luna. (I recently helped one of my client firms make exactly this point about the harm done by paid influencers.)
Also in this picture, and perhaps most revealing of all, is a guy named Bill Pulte, the grandson of a postwar homebuilding mogul William Pulte. Bill Pulte quite clearly seems to have identified the BBBY community as a bunch of suckers that he could pull into his own fight over his grandfather’s company, Pulte Group … which kicked Bill out after his grandfather’s death. While it’s not clear exactly how this angle played out, Pulte certainly appeared to be trying to recruit BBBYlievers into his own quixotic campaign.
Play: Dread Delusion
I have gone through periods of my life of playing Too Many Videogames, but these days I pretty much pick up Elden Ring once or twice a week and that’s it. I just don’t have that much time to let myself get immersed in a fantasy world, which is generally the main reason I play video games.
But I took a chance over the weekend and picked up Dread Delusion, a recent simplified but extremely evocative RPG that mixes up gameplay elements of Morrowind and Legend of Zelda with a bit of a Minecrafty visual style. The main appeal is that this is a very contained but dense world, with mildly interesting but not brutal combat, making it easy to run around and complete quests very quickly - and those quests are part of a genuinely compelling story and world. Great for gamers without much time that want to recapture the wonder you used to get from starting games you might not have ever finished. This one, though, feels very finishable.