FTX's bankruptcy - a character study?
I was reading a lot on the recent bankruptcy of crypto-currency trading firm FTX.
Turns out, it is a case-study in how lack of character and lack of straigthness by one person can turn out into a nightmare for countless people.
FTX was (apparently) one of the leading crypto currency exhanges in the world.
Its young founder, Sam Bankman-Fried, was able to raise in a few years (company being founded in 2019) hundreds of millions of dollars in external financing, get lots of customers who entrusted their hard-earned money to his company, and billions of dollars in deposits.
He also had a very public and publicized facade of:
- being a "prodigy-guy";
- being an "effective altruist", ie focused on building wealth not for himself but to give to others;
- being dismissive of luxury (sleeping at the office, often in t-shirt and sandals, etc.);
- being a vegan.
In reality, based on stories and newspaper articles that are now coming around, the following is a probably more accurate depiction of what was going on:
- having chosen the most-recent, least-regulated fad (crypto-currencies) as "area of work";
- focused on operating in a jurisdiction where less regulations were in place, and often complaining of "regulators";
- living in a luxury mansion in the Bahamas valued millions of dollars, including pools, plaster walls resembling Italian marble, and a restaurant open exclusively for the founder and his associates;
- using displays of remorse for inconsistent smaller things to distract from big ones (ie when the company went bankrupt, he publicly apologized for not being able to foresee the "liquidity crunch", where the reality was that the company was insolvent);
- focused, up to the after the bankruptcy, on getting more money from investors and other people, supposedly as a way to "get things right" and "remedy mistakes".
He was also very wary of not letting his real character slip (too much) to the public. He often disclosed (a portion of) his real thinking when he did not realize what he was writing or saying would be published (example here).
Contrast this to the weird stuff that some of the people close to him, including his one-time girlfriend, said publicly (here and here). This is a very common pattern in situations like this:
- the one who doesn't publicly disclose his real thinking is usually very aware of what he's thinking/doing, and of the fact that it's bad;
- but, since people close to him get the brunt of his real nature, without realizing what they're going through - and all the while being made to believe it's normal - they often start to adopt the same warped thinking; and, since they think it's normal, they do disclose it publicly, not realizing it is going to produce big personal damage.
In any case, this ended with one of the worst bankruptcies in world history: and here is an article that explains, in the words of the court-appointed liquidator of the FTX bankruptcy, the extent of what was going on. Main takeaways:
- no records of crypto customer deposits exist;
- no records or documentation of who worked at the company exist;
- no accounting department existed at the company;
- the company’s $ 5.5 billion of crypto assets had an actual market value of $ 659 thousand;
- the founder “often communicated by using applications that were set to auto-delete after a short period of time, and encouraged employees to do the same”;
- group payment requests went “through an online chat platform where a disparate group of supervisors approved disbursements by responding with personalised emojis”.
All in all, a very cautionary tale. And, total confirmation of the importance to screen people for power moves and nasty behavior, and keep those who use them at a very secure distance. Including when all others are not seeing anything wrong.
And of the fact that, of course, success doesn't usually come overnight.
Very interesting...Yeah, definitely a big-time crook. Really professional (not leaving traces, etc.). Some people are really good at this.
He was also very wary of not letting his real character slip (too much) to the public. He often disclosed (a portion of) his real thinking when he did not realize what he was writing or saying would be published (example here).
This is very important in this time and age. Many people are now savvy with (social media). They know how to craft an image. I fell for the image Elon Musk displayed for instance (how he laid off the icelandic disabled guy is quite enlightening, even though I don't know the whole story. The tone, the way he did it, etc: nasty). So yeah in today's age what you see is definitely not what you get.
I read his messages. He seems very cynical, I think he's a good example of someone who went too far on the machiavellian side and self-justification: "everyone is playing a game and so am I, so nothing matters else than my interest since everyone else is doing it as well".
“Each individual decision seemed fine and I didn’t realise how big their sum was until the end,” Bankman-Fried told Piper. “Sometimes life creeps up on you.”
And not taking responsibility either. I cannot judge his character but I don't agree with his mindset.
All in all, a very cautionary tale. And, total confirmation of the importance to screen people for power moves and nasty behavior, and keep those who use them at a very secure distance. Including when all others are not seeing anything wrong.
100%. I think the part in bold is very important. We tend to make our own opinions of people based on people's opinions whom we trust. However, sometimes even the people we trust can be manipulated. So it's good to take into account their opinions AND make our own.
Thanks for sharing!