👁️ FTX's "Full Recovery" Is Utter Bullshit
Crypto holders are recovering 20%, not 118%. Also Brock Pierce x Trump; Pig Butchering in First Person; and more.
Welcome to your weekly Dark Markets news roundup. The past week has been predictably thick and fast with fraud-related stories, most of them involving the incoming Trump administration. In case you missed it, don’t forget Sunday’s excerpt of Stealing the Future, focused on the depiction of 30 year old Sam Bankman-Fried as a “child.”
These weekly roundups often include a brief essay down at the bottom, but this week’s is both short and particularly important, so it’s right up top.
FTX Crypto Holders Are Only Getting 20% Back
Back in May, the FTX Estate managed by Sullivan and Cromwell announced that “Nearly all” victims of the FTX fraud could expect 118% repayment. It was obvious even at the time that this was far-fetched, and with recovery payments now beginning to roll out, just how fraudulent the claims were is becoming clear.
The core of the illusion is this: cryptocurrency holders, whose property was stolen by Sam Bankman-Fried and funneled into his mother’s Mind the Gap PAC, cult-like institutions such as the Center for Applied Rationality, and startups like Anthropic built largely on the “AI Doom” fraud, will be repaid at the petition date prices of those assets.
That is, the bankruptcy petition date of November 11, 2022.
This anchor point enables the misrepresentation of the recovery rate, in two ways. First, and more defensibly, the victims have lost out on the massive appreciation in the value of most of their assets in the two years since FTX’s bankruptcy. To take the most common example, the price of Bitcoin on the bankruptcy petition date was roughly $17,000, and its current price is a little over $97,000. This means victims whose Bitcoin was stolen by Sam Bankman-Fried will receive about 16% of what they would have had if they had held those assets to the present date (possibly plus some interest, though that might only be going to dollar holders, still unpacking all of this). Importantly, many Bitcoin holders in particular could have been expected to hold for a recovery - the market had already been totally fucked by other collapses, so if you were still long Bitcoin, you were a true believer.
Petition-date pricing is baked in to the way bankruptcy works, even though the treatment of these assets as “property” under FTX’s user agreement was interpreted by some as supporting the case for in-kind repayment.
But it’s the second deceptive element of the recovery calculation that’s truly dirty work. While November 11 is the bankruptcy petition date, FTX actually froze customer withdrawals on November 7, sending a shockwave through crypto markets that tanked the value of assets like Bitcoin.
Between November 7 and November 11 2022, cryptocurrency indexes dropped 15%.
This means that even leaving aside appreciation since 2022, FTX crypto depositors are being reimbursed at just 85% of the actual value of their holdings when the exchange collapsed. Put slightly differently - Sam Bankman-Fried’s own crimes made it cheaper for him to “repay” the people he defrauded.
This is in itself arguably just a matter of bad luck and accounting weirdness. But what’s striking is that the media has uncritically parroted the declaration of a “full recovery” or even “118% recovery,” instead of turning their fucking brains on for even the length of a paragraph. I have already particularly highlighted the gormless propagandizing of the New York Times’ David Yaffe-Bellany, a Yale legacy whose uncle is a colleague of Barbara Fried’s, and who wants to make sure everyone knows that “some of those investments [SBF made with stolen money] actually turned out to be really good.”
To state outright something that has floated between the lines here for a while, and that will be a strong thread in my forthcoming book: People like Yaffe-Bellany and Michael Lewis have been frantically, aggressively trying to "fix” the Sam Bankman-Fried story, years after the fact.
The question now is: why?
News of the Weak
Evan Wright’s Exceptionally Suspicious Suicide
Thanks to some connections made via the Zizian Affair, I’ve been seeing a lot more parapolitics on Twitter*. One of these new connections recently re-upped a story I had missed: the July 2024 “suicide” of Generation Kill writer Evan Wright. That death quickly followed Wright’s announcement that his next book would be about his experience in a Federally-funded youth “reform” program called The Seed. Wright had previously reported about CIA racketeering and murder.
This history has become bizarrely relevant to my book on FTX, via my digging into the extreme edges of Rationalism, including the Zizians, Leverage, and the Vassarites. While it’s all conjecture at this point, a great deal of what these people got up to resembles the programming techniques tested by MKUltra, and later continued in these teen reform programs. Remember that at least some of Eleizer Yudkowsky’s initial funding came via Peter Theil, who among other connections is now a major backer of Palantir, a defense contractor.
*I know that with Elon going full Nazi, a lot of people are hesitant to stay on the platform. I am at least for the moment rationalizing it to myself as maintaining a bastion of internal resistance.
Trump’s Hell-Bound “Heretic” Practices the Fraud She Preaches
As a finance writer, I’m particularly interested in the history and danger of the so-called “Prosperity Gospel” that increasingly dominates the American Evangelical wing of Christianity. In essence, it is a total inversion of the substance of Christian ethics, perverting Christ’s teachings of humility and generosity into what amounts to “Fuck you, I got mine.” It’s very American and even more Trumpy, and now one of its leading proponents, Paula White will head the Trump administration’s faith outreach efforts.
But that is not remotely all: White is a truly accomplished financial fraudster. (With thanks to a tipster on Twitter.) Through her so-called “ministry,” she sells idolatrous fetishes meant to make followers rich, which of course won’t work (but do mean she’s damned to burn in Hell for all eternity). And get this - she allegedly gained illicit access to the bank accounts of classic rock band Journey. White is based in Florida, where all the other Best People come from.
Brock Pierce Invited to Trump Inauguration
One of our old friends is back in the news. Brock Pierce is a longtime crypto grifter and cofounder of Tether, who has been linked to both Jeffrey Epstien and Bryan Singer. Pierce was accused of participating in the sexual abuse of a cast member of Singer’s first X-Men film. He was reportedly invited to the Trump inauguration by Steve Bannon.
CertiK Audited Cambodian Slavers
Security researcher and longtime Etherean Taylor Monahan has spotted an incredible bit of work by the crypto “auditing firm” CertiK, which provided an (admittedly, low-scoring) security audit for Huione, an online black market alleged to involve human trafficking and pig-butchering (read on for another pig-butchering story).
A CertiK representative has claimed that the audit was commissioned deceptively by a third-party front, preventing them from connecting the audited code to the criminal enterprise. However, check out this caveat Tay found in the CertiK report, and ask whether you’d put your name on it:
AG Pam Bondi Closes Russian Oligarch asset-seizure unit
Trump’s AG Pam Bondi (who in the spirit of generosity and in contrast to most of these poison-chuggers, looks incredible for 59) has shuttered the Department of Justice unit, the Kleptocracy Asset Recovery Initiative, focused on tracing and seizing the assets of Russian oligarchs and other global strongmen.
A First-Person Account of “Pig Butchering”
Strong recommend for this firsthand account of “pig butchering” at Unchained by my former CoinDesk colleague Nelson Wang. Nelson is incredibly brave in his transparency here, discussing why he was at a moment of vulnerability for a romance swindle, and walking through the slow escalation of an uncannily convincing simulation of messaging with an alluring stranger. The simulation included a spectacular array of online profile details, and a carefully mimicked schedule that the simulated stranger stuck to assiduously. Nelson also has a rundown of advice for avoiding these scams, including, first and foremost, never responding to messages from a stranger online. Ever.
A related plug: Another ex-CoinDesker, the excellent analyst George Kaloudis, recently published a short story in Matchbook Lit, a grim bit of magical realism about the repression of the Greek Orthodox Church.
Physical Media is Back
Thanks to my background in media theory, I was always skeptical of streaming, especially for music and film (TV was always “streaming”!). For 25 years I’ve hung on to huge amounts of physical media, to the point that I have a small, not-exactly-cheap storage unit here in Brooklyn that’s largely a book, CD, tape, DVD, and vinyl archive. Embedded has a conversation with Allison NB, a Gen Z (Millenial?) advocate for physical media. Among the reasons she rightly cites for pivoting back to physical, one of the reasons I never gave up my stuff myself, is that art can disappear from streaming without warning, for obscure business or even political reasons, but if you own a physical copy, it’s yours effectively forever.