👁️ FTX Victims Will Only Get One-Third of What SBF Stole
Also Elon's Pay Package, Citibank Fraud, and Star Trek slams Effective Altruism
Welcome to the weekly Dark Markets weird-finance news roundup for February 6. It has been a BIG week, so strap in. First, a little housekeeping.
I’ve started an account on Farcaster and will be exploring exactly what the first seemingly legitimate decentralized social media project is all about.
ICYMI: I posted a new draft portion of my SBF book in progress. “A Sam Shaped Hole” is my first stab at understanding why so many people needed Sam Bankman-Fried to be real.
I’ve also published the first audio version of one of my articles. Enjoy Sins of the Mother: How the $8B FTX Scam Flowed from Barbara Fried’s Anti-Humanist Ethics, read in my own mostly dulcet tones. This is my first attempt to get back to what we did on Crypto Crooks. It’s not perfect, but we’re getting there. Hope you enjoy it.
***
KEEP READING: Elon Musk’s Pay Package Struck Down; FTX Creditors to Get Market-Bottom Payback; NYAG Goes After Citibank for Fraud; Fake Satoshi’s Last Days?; SEC scrambles out of Debtbox case; FTX Hackers Found; Did Blast Copy Optimism Code? and … Deep Space 9 Had Thoughts on Effective Altruism
Soundtrack: Young Lean - Ghosttown
“I don’t give a fuck about noone except Lean.”
FTX Depositors To Be Repaid At Market-Bottom Rates SBF Himself Caused
This one hurts.
The FTX bankruptcy team led by John Ray III will pay back depositors at asset prices as of November 11, 2022 - specifically, at $16,871 Bitcoin - almost literally the market bottom.
A few unfortunate headlines have characterized this as “repayment in full,” but while that might be technically true in the context of a bankruptcy court, this is not repayment in full in substance.
Bitcoin has recovered from the overall wave of 2022 scams, of which FTX was the biggest, to reach a price today of almost $43,000. That’s nearly three times the November 11 price. Factor in more than a year of opportunity cost, and it seems fair to say depositors will get back as little as one-third the value of what Sam Bankman-Fried stole from them.
More infuriating still, that November 11 date was not just the day FTX declared bankruptcy - it was ten days after Coindesk’s Ian Allison pulled the first thread of Sam Bankman-Fried’s fraud, triggering a roughly 20% selloff in the days just before FTX’s bankruptcy. In short, Sam conned them coming and going.
But most enraging of all is that this misleading “repayment in full” is certain to become ammunition for the bizarre cadre of Sam Bankman-Fried defenders and his unapologetic Effective Altruist backers. They will, as two Ivy League lawyers attempted to just last month, point to the judgment and say “See, no crime was even committed!”
With Bankman-Fried’s sentencing just weeks away, that deception represents a real threat to the dispensation of justice. So if you see something from these misinformation terrorists, say something.
For more context, you can listen to my recent conversation with Sunil Kavuri, an FTX victim leading class-action recovery efforts, and involved in the push for at-par redemption for creditors.
Elon Musk’s $55 Billion Pay Package Struck Down
Every great fortune is built on a great crime - but for a truly HUGE fortune, you may need several great crimes. Elon Musk is an apartheid heir and habitual liar whose puffery about AI is killing people. But he’s also a corporate conspiracist who used a board he controlled to steal money from his shareholders!
Truly, an icon.
Sotheby’s Defeats Russian Oligarch in Art Fraud Case
Truly a bit of an odd one. A Russian multi-billionaire sued Sotheby’s, not because he bought fake paintings, but because he paid “inflated prices” - apparently including for a painting he immediately turned around and sold for a huge profit?
Anyway, he lost, because … it’s an auction? And you agreed to the price? Caveat Emptor etc.?
But the real takeaway here, at least according to Felix Salmon at Slate Money, may be that, perhaps influenced by the case, Sotheby’s has reformed its fee structure as part of a bid for market share against Christie’s.
NYAG Goes After Citibank for Abetting Fraud
Laetitia James claims that Citibank has failed in its duty to protect customers from fraud and hacks. That includes insufficient protections against account takeovers, and evading legal mandates to make the victims of such hacks whole.
In a puzzling statement to CNN, Citi claimed that “Banks are not required to make clients whole when those clients follow criminals’ instructions and banks can see no indication the clients are being deceived.” I genuinely can’t puzzle out what that means - why would customers knowingly give a scammer account access? So, points to Citi spokespeople for effective word-salad that’s also victim-blaming, I guess.
Half a Billion of FTX Depositor Funds are in Kazakhstan
The Wall Street Journal details how Rashit Makhat, a Kazakh entrepreneur and former Jiujitsu champion, received $500 million for his stake in Genesis Digital Mining just months before FTX collapsed. That money came largely from customer deposits. Unsurprisingly, the price tag was based on a wild overvaluation by FTX, which saw the company as worth more than $5 billion.
“Fake Satoshi” Craig Wright Gets his COPA Pushed In
Craig Wright, who has claimed for close to a decade that he is Bitcoin creator Satoshi Nakamoto, is facing what could be his final showdown starting this week in London. The Crypto Open Patents Alliance’s (COPA) suit against Wright seeks a declaration that he is not Satoshi Nakamoto, after he has spent four years harassing crypto ecosystem players with malicious and mendacious lawsuits. (As Ari Paul observes, Wright seems to have a serious psychiatric or personality disorder driving him to this public self-destruction.)
Proceedings began Monday, with a seeming focus on the many, many forgeries Wright has produced over years worth of trials. He has never yet won a substantial victory in any of them. Wright is so thoroughly screwed that Fortune Magazine, which I know from my many years there is a very risk-averse institution, is now referring to him openly as “fake Satoshi.”
WIRED has maybe the best concise rundown of the COPA case, and they point out Wright could face prison time for contempt of court. A Twitter user going by @bitnorbert has a running report going on the trial. It’s also a good time to check in on CoinGeek, aka The Taco Bell Blog, to see what pathetic conternarratives their fake writers are desperately churning out.
SEC Drops DEBT Box Case It Lied About
The Securities and Exchange Commission has asked that its securities fraud case against crypto startup DEBT Box be dropped without prejudice, meaning charges could be re-filed later.
Last November, the SEC was caught telling some truly heinous lies about DEBT Box - specifically, that it was closing U.S. bank accounts to move money overseas. This was not true, but it was enough to get a temporary restraining order that froze the company’s accounts and caused “complete disruption” for 300,000 users in 130 countries.
To be clear, DEBT Box absolutely looks like a pyramid scheme. It invites users to buy “node licenses” to earn mining rewards on … I guess it’s a chain? Unclear. But paid mining licenses are a massive red flag.
But alleged criminals have rights too. America! What a country! Maybe Gary Gensler and the SEC would be more at home in, say, the CCCP’s China, where you can just disappear people for doing things you don’t like, no evidence required.
The SEC argues it doesn’t deserve any meaningful sanction for its patent deception, which it characterizes as merely an error. But this is just one instance in a much larger pattern of Gary Gensler’s SEC lying to judges and propping up fake companies to advance its misguided anti-crypto agenda.
FTX Hackers Identified
When FTX was allegedly “hacked” for $400 million immediately after it filed for bankruptcy, the naturally widespread suspicion was that it was an “inside job.” But now federal law enforcement (not the SEC - the good ones) have charged three people with operating a SIM-swapping ring that eventually compromised an FTX employee’s phone, enabling the hack.
First and foremost, on its face, this is yet more evidence that despite the bloviating of dementia patients like Michael Lewis, FTX was a horrifically run business. How do you have that much money accessible through a SIM swap? Come the fuck on, man.
But also - how sure are we, even now, that this wasn’t some sort of inside job?
Did Blast Copy Optimism Code? Does it Matter?
Blast, the Paradigm-backed ETH L2 with native yield, seems to have used code from the Optimism L2, then altered that code’s MIT open-source license. The first part is okay, the second part probably isn’t. My former colleague Dan Kuhn at Coindesk breaks down the stakes and implications.
Study Finds MOBA skill Predicts Intelligence (And SBF Sucked)
Twitter user Zan Hassan highlighted a 2017 study that found that “performance in the popular MOBA ‘League of Legends’ correlates with fluid intelligence as measured under controlled laboratory conditions.”
On a totally unrelated note, Sam Bankman-Fried was Bronze III in ranked LoL, which the FT describes as “pretty low.” The FT does also offer some really intriguing context from SBF’s own comments about LoL, to the effect that he didn’t really play to win, and knew he wasn’t that good.
But still. LoL. LMAO, even.
Deep Space Nine has a Take on Effective Altruists: They’re Bad
When I was growing up, my Dad was a huge Star Trek fan, and I could pretty much take or leave it. But I’ve been working my way back through Deep Space 9, and it is, in a word, brilliant. Want to know how brilliant? The show predicted Effective Altruism - and warned us about its terrors.
This comes in Season 6, Episode 9, “Statistical Probabilities.” At this point in the show, the Federation are at the beginning of their war with the Dominion. A group of genetically-enhanced supergeniuses are given the chance to advise the Federation on strategy … and they conclude that the best way to save the most lives is to betray the Federation and force its immediate surrender.
Effective Altruism wasn’t even a thing in 1997, when the episode aired. But the writers knew a fundamental truth: supposed allies who think they know everything are more dangerous than our worst enemies.
