👁️ Do SBF's Parents Get to Keep the Money?

Joe and Barbara have settled with the FTX estate. Also: Abundance is Just Effective Altruism; Bitboy arrest; Mario Nawfal; EOS; D.C. influence; 11x; and more.

Welcome to your weekly Dark Markets news roundup. It is an *absolute doozy,* so let’s just get right into it.

How Much Did They Get to Keep?

The FTX Estate has settled its clawback suit against Joe Bankman and Barbara Fried. My immediate fear was that they were simply getting to keep the $10 million that their son embezzled and gifted to them. The estate initially filed its clawback suit just a few days before Sam’s criminal trial - timing that may be significant. The suit contained staggering allegations and details about Joe and Barbara’s enthusiastic spending of FTX money and direct involvement in the crime.

I spoke very briefly to a lawyer about this, and the reality seems less clear. The suit appears to have been resolved through a private settlement, which likely involved returning whatever money Joe and Barbara had not already spent. The catch there is that the money was reportedly used to fund SBF’s legal defense, which was certainly not cheap. It now seems likely they’ll never have to repay that stolen money.

ICYMI: Sam Bankman-Fried, Crypto Trading, and the Trap of Magic Circles

Of course, there is much speculation about the exact reason or mechanics behind the settlement. The pseudonymous Twitter acount FTX Historian has speculated that the suits against both the parents and Daniel Friedberg were primarily intimidation tactics to silence their criticism of the bankruptcy team at Sullivan & Cromwell, and specifically to keep them from testifying at the criminal trial. I wouldn’t be terribly shocked by that, or more broadly by the idea that this was a matter of gamesmanship well beyond an attempt to recoup funds.

At the same time, though, Judge Kaplan prohibited “blaming the lawyers” as a legal tactic for Sam’s defense, and it’s very plausible that fighting the Bankman/Fried parents, who have access to effectively infinite, free, top-tier legal help, would simply have been more trouble than it was worth.

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Support My Tornado Cash Trial Coverage for The Rage

Starting in mid-April, I’ll be covering the criminal trial of Tornado Cash developer Roman Storm for The Rage, an emerging cypherpunk-first news outlet. I had a blast covering the month-long SBF trial for Protos, and I’ll be reuniting with my CoinDesk colleague Sage for this one.

But Storm’s trial is in many ways more serious and high-stakes: it stands to set precedents for the legal risk of software developers by pushing the definition of “conspiracy” to simply mean “when someone uses your product.”

If you’re able to support our work, please consider a donation to The Rage below.

BitBoy Arrested!!!

Yesterday’s mugshot of BitBoy/Ben Armstrong

Crypto has some great characters, most of them simultaneously grim and silly turbo-freaks like Craig “Faketoshi” Wright, Brock “Island Boy” Pierce, Roger “Notax” Ver, and of course SBF. But Ben “Bitboy” Armstrong is the crypto grifter for the rest of us: a hustler with no ideology, no grand deception, and seemingly no inscrutable evil lurking in his soul: just a lunchpail willingness to take payments to conduct pump-and-dumps on what used to be a huge social media and YouTube following.

For more than a year since being kicked out of his own company, Armstrong has been on the kind of crashout we can all imagine for ourselves if we lost everything (except for probably several million dollars, an insane sports car, and seemingly, a drug habit). He announced in October of 2023 that he had divorced his wife and taken up with a fellow crypto influencer (nightmare fuel).

He’s also been harassing former business partners and consuming copious amounts of drugs … and now he’s been arrested, with intake documents listing him only as a “fugitive from justice.” There are rumors this was in connection with harassing a judge, but that’s inconclusive. More as this develops.

“Abundance” is Just Repackaged Effective Altruism for Right-Wing Democrats

You’ve almost certainly seen discussion of The Abundance Agenda, a new book/theme/meme intended to revitalize the Democratic Party (ahem), put forth by Vox cofounder Ezra Klein and Derek Thompson. It seems like typical neoliberal think-tank pablum, and more politically-oriented critics than myself have already spent time unpacking it (here’s Malcolm Harris for The Baffler).

But I was struck by the prominence the book gives to cultured meat. It was a jolting reminder that both Klein and Thompson identify as Effective Altruists. Cultured meat is just one of the (pro-capital, pro-tech) “solutions” that EAs love, and I anticipate finding a lot of other EA ideas snuck into this supposed Democratic agenda.

11x AI Sales Automation is a (Literal) Fraud

TechCrunch reports that a startup backed by Andreessen-Horowitz (A16z), focused on using AI to write cold sales emails, has been dramatically inflating its user numbers. This is because, well, its product doesn’t work. Early customers that fed into early sales numbers exercised “break clauses” in contracts after disappointing results (the churn rate was 70-80%), but 11x would continue counting their full-term contracts as recurring revenue. Now 11x has also been caught making false claims that Zoominfo and Airtable are clients.

Good Reads: PoorGuard on Innovation

A quick logroll for a friend: crypto lawyer PoorGuard has a new, in-depth piece on Innovation and the Operational Environment. It is very much tailored for big bossy-bosses who run large organizations and face challenges like technical obsolescence and business-model disruption. It’s very grown-up! Recommended.

Mario Nawfal, Rug Merchant

Mario Nawfal has put in serious work as a vaguely credible influencer entangled with crypto - he (used to?) host Spaces with machinic regularity, even I got roped into one once as he searched for fresh blood. But there was always something super sketchy abou the guy, and a new report from Protos provides a great rundown of his allegedly extensive involvement in rugpulls, as well as allegations of media manipulation, a pay-for-play “incubator,” and other malfeasance.

More like Mario Awful

EOS Pivots to Banking or Something

EOS is easily the funniest project in crypto, if by funny you mean shamelessly cynical shovelware. In 2017-2018, the Dan Larimer-associated chain conducted the largest “initial coin offering” (ICO) ever, raising more than $4 billion dollars. Or at least, it looked like that, though there were allegations even at the time that Block.One, the company linked to EOS, had “looped” funds to make it look like there were more donations than actually came in.

Anyway, the really important part came after, when Block.One basically took all the EOS money and then did almost nothing to develop EOS (except heavily market pay-to-play nodes to disadvantaged communities in Detroit and elsewhere). The ICO money went into a variety of similarly inept side-projects - including a now-failed voice chat app and Bullish, the exchange the nobody uses but which now owns Coinbase. EOS had the firepower and name recognition to thrive, but instead it languished, dropping from a top-10 project into the basement of forgotten, dead chains.

Read More: CoinDesk is Dead. Here’s Who to Blame.

Eventually, Block.One explicitly abandoned the EOS project, removing all ambiguity from what one industry insider described as “a deceitful ICO, whether that was planned from the beginning or not,” and another bluntly called “an absolute fraud.” Now EOS, guided by a lingering community, is rebranding to “Vaulta” and focusing on “web3 banking.” That doesn’t mean actual banking banking, but on-chain custody through various vendors who will probably benefit from this more than anyone else.

How Crypto Bought Washington (A Little Too Hard)

I’ve been trying to be more vocal about the specific, unconventional perspective from which I write this newsletter: That crypto is real, and not inherently a scam … but is also definitely very useful for the same kind of tech-investment fraud that practically defines our era.

And just as Elon Musk has leveraged false promises of autonomous driving into recklessly unchecked power, Current Affairs details how the crypto industry has leveraged its massive, (and meaningfully scam-derived) profits into political clout. I support the industry’s right to represent itself, but I think it’s clear that the ironically short-termist strategy of courting Donald Trump was not merely ethically bankrupt but tactically insane. We’re seeing outright authoritarianism in America, and crypto will now be tied for all time to this - the exact opposite of what it stands for.