Sam Bankman-Fried Fraud for Newbies
Level 1 - NGMI
Welcome Avatar! Everyone in the paid substack knows that Sam Bankman-Fried is a fraud so you can easily skip this short post. That said, the media narrative is somehow convincing people it was a “mistake”. Therefore this post will explain how FTX/Alameda imploded and why it was outright theft. Don’t be fooled by the media parade/onslaught that it was “a mistake”. It wasn’t.
Sam Bankman-Fried Background: Before going into the outright theft we have to start with the background. Sam graduated from MIT a bachelor's degree in physics and a minor in math. Both of his parents are Law professors at Stanford University.
This means that there is: 1) no argument this guy can’t separate two bank accounts, 2) no argument that his parents didn’t understand rules/regulations and 3) no argument that he is a “young dumb guy”. All of those are erased since he was paraded as a genius for 3-4 years.
FTX and Alameda Research
This is a real basic post. Therefore there are TWO businesses. They were *separate* entities (supposed to be separate).
FTX (Crypto Exchange): A crypto exchange. Exactly like Coinbase. You go onto FTX and wire in currency (US dollars, Euros etc.). After this you get to take those funds and buy and sell crypto currencies (BTC, SOL Etc.)
Alameda Research (Hedge Fund): This is a hedge fund. A *separate company*. Investors give Alameda Research money to try and buy and sell crypto currencies for a profit. You give them $100,000 they buy and sell and ideally make more money over time. If you lose money you lose money. Just like any regular hedge fund.
FTX and Alameda Research Timeline Explained
If you want the easiest way to explain the fraud to your friends here it is:
Step 1: Alameda starts losing money (the hedge fund). FTX is fine since they collect fees just like Coinbase would on every transaction.
Step 2: Alameda fails and loses investor money. They think they will recover and over time they do not.
Step 3: To try and stop Alameda Research from failing and declaring bankruptcy, they take money from *users* of FTX. They move it to Alameda Research. Classic gambling mentality of doubling down again and again to make it all back. This time massive fraud.
Step 4: Their investments fail and now everyone loses their money! Now he goes on national television and gets paid speaking spots to claim it was a “honest mistake”. Which of course it was not from this simple diagram.
Now the Final Part
None of this makes sense. Why? Everyone knows that if you have the order books to an exchange you can collect money via “front running”. Having a hedge fund attached to an exchange would be similar to going to the back of the book in math class to get the answer.
Explained for Newbies: Any stock or coin has “buy and sell” orders. 100 people want to buy at say $10 and 100 people want to sell at say $10.1. This information drives the price up and down on a daily basis. If everyone wants to sell price goes down, if everyone wants to buy then price goes up. Simple.
How Can You Lose Money? You pretty much can’t. The only reason for losing money is outright fraud/corruption. This is what we later found out to be true as SBF purchased penthouses in the bahamas while talking about “effective altruism” with a $100 bill.
It Gets Worse: Some of the homes purchased were under his parents name. No way to say they didn’t know “what was up”. They are Stanford lawyers. Both of them.
Conclusion (Opinion): Based on these facts we’re betting it was outright money laundering. That said, if you *don’t* believe our opinion that is fine! If you believe he lost money running a hedge fund while having the order books, that ‘s *fine*.
Why is this okay? We can all agree what he did factually (in the image) was outright fraud. That part is not debatable. If an exchange doesn’t have your money it means they were lending it out/doing other things with it. There is no way they were allowed to send all the funds to a separate hedge fund to gamble.
Please do not let mainstream media get away with this. There was no “mistake” it was outright fraud. This wasn’t a “math wiz” making bad bets. It was visible and clear theft. He should be in jail for life.
Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are *opinions* written by an anonymous group of Ex-Wall Street Tech Bankers and software engineers who moved into affiliate marketing and e-commerce. We’re an advisor for Synapse Protocol and on the JPEG team.
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If you look through Twitter convos on the topic, you can already see the gaslighting at full throttle: “but he didn’t do anything illegal! / he admitted he is sorry, let it go already / its the cryptobros fault, not his, for putting their money in a non-regulated entity!!”.
You know the best part. That he will never be prosecuted. Why? Because he’s one of them. As his parents are. One of the group that Kanye has been mulling over for some time. And everyone is starting to notice. You can look the other way if you want, but truth is truth.
It's no longer about the lies they can get you to believe; it's the lies they can force you to accept.