“As at the end of any mania,” The Economist declared in a recent article, “the question now is whether crypto can ever be useful for anything other than scams and speculation.” Most of the platforms covering the abrupt collapse of prominent crypto exchange FTX and its young former CEO Sam Bankman-Fried have come out with similar laments: “The founder of FTX was the paragon of crypto, then the cautionary tale,” reads the sub-header to the Wall Street Journal’s guide to the crash.
This flavor of condescension is new for a crypto crisis. Unlike Bitconnect or the failure of the Terra stablecoin, FTX’s collapse inspires more pity than scorn: After almost a month of investigation, it has indeed begun to appear as if the fall of FTX was the result of nothing more than naivete. The crypto-geist seems to pluck people like Sam Bankman-Fried (SBF, colloquially) at random and catapult them to incredible fortunes overnight, creating a class of executives who are mostly good-natured, and without the patience to do things like keep accounts—expending their energies in other areas, according to press accounts.
Most of the executive staff of FTX and Alameda, the VC firm whose losses FTX was forced to cover during the recent crash, reportedly lived polyamorously in a $40 million penthouse in the Bahamas. The CEO of Alameda, Caroline Ellison, was romantically involved with Bankman-Fried in a relationship whose sexual dynamics she catalogued extensively in semi-anonymous Tumblr posts. When pressed by New York Times journalist Andrew Ross Sorkin during a live interview, Bankman-Fried stared at his hands and quietly described his ignorance for upwards of an hour, prompting billionaire investor Bill Ackman to tweet, “Call me crazy, but I think @sbf is telling the truth.”
Two billion dollars are still missing from FTX’s balance sheet—most of which seems to have somehow slipped through the cracks. John Ray III, the attorney who oversaw the bankruptcy proceedings of Enron and Nortel and the current CEO of FTX, wrote that he had “never seen such a complete failure of corporate control,” noting in a court filing that FTX supervisors confirmed many of their internal transactions with emojis or texts set to auto-delete.
Was it a lack of discipline, by both his own moral sense and the American regulatory apparatus, that allowed Bankman-Fried to lose track of billions of dollars? The pudgy son of Stanford professors, Bankman-Fried used many of his millions to support Effective Altruism, or EA, the trendy utilitarianism preached by popular author and Oxford professor William MacAskill. EA teaches its disciples to “earn to give”—that is, to earn as much as possible for themselves in order to eventually give it all away.
But in an interview with Vox’s Kelsey Piper (which he has since claimed was off the record), Bankman-Fried ranted about the liberal Western morality which was then just beginning to turn against him. “I feel bad for those who get fucked by this dumb game we woke westerners play where we say all the right shibboleths and so everyone likes us,” he wrote. “A month ago CZ [Changpeng Zhao, owner of rival crypto exchange Binance, whose sudden liquidation of huge amounts of FTX-issued tokens triggered the fatal liquidity crisis] was a walking example of ‘don’t do unethical shit or your money is worthless.’ Now he’s a hero. Is it because he’s virtuous? Or because he had the biggest balance sheet?”
It is easy to blame the phenomenon of SBF on a brave new world that has severed its ties from physical reality and exists somewhere in the collective imagination of a cartel of hackers and their computers who have liberated themselves from ethical responsibilities to other human beings. It is easy to suggest, as the New Yorker has, that it is the job of the US Securities and Exchange Commission and other nationally sanctioned exercises of collective imagination to retether this cloud-world to the real one.
Bankman-Fried is a perfect martyr for the realist cause. In a now infamous interview with Bloomberg’s Matt Levine, Bankman-Fried describes “a company that builds a box… and dress[es] it up to look like a life-changing, world-altering protocol.” The box goes viral and ends up with $20 million inside. Sounding tired, he goes on past the bewildered objections of Levine and his co-host. “This is a valuable box, as demonstrated by all the money that people have apparently decided should be in the box… they go and pour another $300 million in the box and then it goes to infinity. And then everyone makes money.”
The implosion of the so-called “polycule” of lovers in their Bahamian mansion, who made billions rearranging other people’s billions by text message, is a case-in-point for those who see nothing in crypto but an opportunity to relearn the truisms it has taken traditional finance centuries to discover and cement into law. “The Crypto Story,” the 40,000 word mega-essay penned by Matt Levine for Bloomberg, takes this approach. He takes off from the real world, of houses and cornfields, and floats up to the sky to contemplate the blockchain: “an object of aesthetic contemplation… unsullied by the real world.” At the beginning, as a disclaimer, he tells us, “There won’t be a single exciting person in this whole story. My goal is to explain crypto.”
But the story of crypto is the story of its people, and the spirit which picks them up and puts them in the Bahamas without anything near proper training or experience or sufficiently developed moral convictions to handle the responsibilities that were abruptly thrust upon them. As Matt Levine tries uselessly to explain in the interview, the $20 million in Sam Bankman-Fried’s black box can’t just appear there, from “first principles.” And as Sam Bankman-Fried tries uselessly to reply, the box just does in fact have $20 million in it, “empirically.” Deep down, both are in the dark about the same thing: What’s in the box?
The empty helplessness of Sam Bankman-Fried during the sudden destruction of his company inspires an empathetic response from people who feel similarly confused by the violent caprices of cryptoworld. But there are people for whom the inside of the box is in fact legible. As with experts in any field, this lets them understand that what seems mystical—like the atomic bomb, or the orbits of the planets—is just as integrated into the real world as you or me or a chair. They can work for years on software upgrades, give them away for free, and retire on their profits from GameStop and AMC. And these people—artists, writers, developers—mention the passing of big, centralized companies like FTX in passing or not at all.