Bitcoin "FTX"

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Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud by Ben McKenzie, Jacob Silverman

algorithmic trading, asset allocation, bank run, barriers to entry, Ben McKenzie, Bernie Madoff, Big Tech, bitcoin, Bitcoin "FTX", blockchain, capital controls, citizen journalism, cognitive dissonance, collateralized debt obligation, COVID-19, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, cryptocurrency, data science, distributed ledger, Dogecoin, Donald Trump, effective altruism, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, experimental economics, financial deregulation, financial engineering, financial innovation, Flash crash, Glass-Steagall Act, high net worth, housing crisis, information asymmetry, initial coin offering, Jacob Silverman, Jane Street, low interest rates, Lyft, margin call, meme stock, money market fund, money: store of value / unit of account / medium of exchange, Network effects, offshore financial centre, operational security, payday loans, Peter Thiel, Ponzi scheme, Potemkin village, prediction markets, proprietary trading, pushing on a string, QR code, quantitative easing, race to the bottom, ransomware, regulatory arbitrage, reserve currency, risk tolerance, Robert Shiller, Robinhood: mobile stock trading app, Ross Ulbricht, Sam Bankman-Fried, Satoshi Nakamoto, Saturday Night Live, short selling, short squeeze, Silicon Valley, Skype, smart contracts, Steve Bannon, systems thinking, TikTok, too big to fail, transaction costs, tulip mania, uber lyft, underbanked, vertical integration, zero-sum game

Sam said he “had a bad month,” and the audience, composed of corporate types whose employers paid the $2,500 admission for them to attend, laughed at the con man who allegedly stole millions of regular Americans’ money. On a Twitter Spaces appearance, with podcaster Ran Neuner, Sam seemed to admit that some of the trades on FTX were fake. Neuner surmised, “You were just letting us buy notional tokens that actually didn’t really exist. . . . That makes sense as to why there were no more Bitcoin to withdraw . . . because those Bitcoin didn’t really exist.” Sam concurred, “I believe that what you are saying is, in fact, part of what happened.” If that were true, Sam was running a bucket shop using customer funds. (Bucket shops are fake exchanges, which thrived during the late nineteenth and early twentieth centuries before being outlawed in the 1920s.)

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CHAPTER 4: COMMUNITY 50 Tom Brady received 1.1 million common shares: Jeremy Hill, “Brady, Gisele, Patriots’ Bob Kraft Among FTX Shareholders Facing Wipeout,” Bloomberg, January 10, 2023. 52 42% of men: Michelle Faverio and Navid Massarat, “46% of Americans who have invested in cryptocurrency say it’s done worse than expected,” Pew Research Center, August 2022. 53 “In theory, the difference seems to be”: Amanda Montell, Cultish: The Language of Fanaticism (Harper Wave, 2021), pp. 160–161. 54 Bitcoin ownership is highly concentrated: Igor Makarov and Antoinette Schoar, “Blockchain Analysis of the Bitcoin Market,” National Bureau of Economic Research, 2021. 54 A few win, most lose: John M.

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But all day, from Twitter to CNBC to the guy running a nearby postal store, I heard how wrong I was. Economic fundamentals didn’t matter. The proof was in the charts: Number go up. The financial press was practically in lockstep about the inevitable crypto-fied future of money. Politicians, their pockets brimming with donations from industry moguls like Sam Bankman-Fried of FTX, were preaching the Bitcoin gospel. They were also openly contemplating passing industry-written legislation to further legalize these rigged casinos. Celebrities were pocketing big endorsements, and millions of everyday consumers were ready to roll the dice, because why not? It had been sold to them as practically risk free, and maybe a weirdly named digital token or a cigarette-smoking ape JPEG was worth something now.

Nobody's Fool: Why We Get Taken in and What We Can Do About It by Daniel Simons, Christopher Chabris

Abraham Wald, Airbnb, artificial general intelligence, Bernie Madoff, bitcoin, Bitcoin "FTX", blockchain, Boston Dynamics, butterfly effect, call centre, Carmen Reinhart, Cass Sunstein, ChatGPT, Checklist Manifesto, choice architecture, computer vision, contact tracing, coronavirus, COVID-19, cryptocurrency, DALL-E, data science, disinformation, Donald Trump, Elon Musk, en.wikipedia.org, fake news, false flag, financial thriller, forensic accounting, framing effect, George Akerlof, global pandemic, index fund, information asymmetry, information security, Internet Archive, Jeffrey Epstein, Jim Simons, John von Neumann, Keith Raniere, Kenneth Rogoff, London Whale, lone genius, longitudinal study, loss aversion, Mark Zuckerberg, meta-analysis, moral panic, multilevel marketing, Nelson Mandela, pattern recognition, Pershing Square Capital Management, pets.com, placebo effect, Ponzi scheme, power law, publication bias, randomized controlled trial, replication crisis, risk tolerance, Robert Shiller, Ronald Reagan, Rubik’s Cube, Sam Bankman-Fried, Satoshi Nakamoto, Saturday Night Live, Sharpe ratio, short selling, side hustle, Silicon Valley, Silicon Valley startup, Skype, smart transportation, sovereign wealth fund, statistical model, stem cell, Steve Jobs, sunk-cost fallacy, survivorship bias, systematic bias, TED Talk, transcontinental railway, WikiLeaks, Y2K

But when these sorts of minor deceptions become business as usual—when millions of people are exposed to made-up quotations, distorted history, or fictitious scientific results—our collective trust in what should be nonfiction declines, and that adversely impacts our ability to reach rational conclusions.20 Even schemes that do take our money can be surprisingly banal at their core. FTX was a popular trading platform for cryptocurrencies like Bitcoin, and it was backed by top-tier venture capitalists and attracted users with celebrity endorsements and Super Bowl ads. Its customer agreement said, “Title to your Digital Assets shall at all times remain with you.” But when FTX filed for bankruptcy in November 2022, it was discovered that it had been sending customer deposits to a sister company called Alameda Research, which used them to fund its own trading and investment activities—that is, FTX was simply making promises and doing the opposite.21 Examples like these show that knowing when we should pause to check and what we should check for are not obvious.

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In 2013, in a statement on his website, Dobelli acknowledged using direct quotations from our book without citation or attribution [https://www.dobelli.com/book-corrections/]. 21. The FTX terms of service are described here: B. Dale and F. Salmon, “FTX’s Terms-of-Service Forbid Trading with Customer Funds,” Axios, November 13, 2022 [https://www.axios.com/2022/11/12/ftx-terms-service-trading-customer-funds]. The events of FTX’s implosion are summarized here: A. Osipovich et al., “They Lived Together, Worked Together and Lost Billions Together: Inside Sam Bankman-Fried’s Doomed FTX Empire,” Wall Street Journal, November 19, 2022 [https://www.wsj.com/articles/sam-bankman-fried-ftx-alameda-bankruptcy-collapse-11668824201]. 22. Ironies abound in the study of deception.

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A month later, he disappeared.1 Kumbhani was the founder of BitConnect, an organization that offered a way for people to participate in the market for cryptocurrencies, or “crypto”—digital assets whose values are not tied to any particular government’s policies or actions. Bitcoin, the original and most famous cryptocurrency, was invented in 2008 by one or more people using the pseudonym “Satoshi Nakamoto.” Bitcoin has a finite supply, and its value is connected to that scarcity. In that way, it is less like a regular currency than like gold or oil; you can “mine” more Bitcoin, metaphorically, by spending computational resources (literally, computer processing time and the energy required to power it) to solve complicated mathematical problems. The ingenious code behind Bitcoin ensures that no more than about twenty-one million bitcoins can ever be mined, so in a way, it is an even more stable commodity than gold.2 Like gold and traditional currencies, Bitcoin can be bought and sold online with no mining or technical skills required, and its value can rise or fall greatly from day to day.

Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis by Scott Patterson

"World Economic Forum" Davos, 2021 United States Capitol attack, 4chan, Alan Greenspan, Albert Einstein, asset allocation, backtesting, Bear Stearns, beat the dealer, behavioural economics, Benoit Mandelbrot, Bernie Madoff, Bernie Sanders, bitcoin, Bitcoin "FTX", Black Lives Matter, Black Monday: stock market crash in 1987, Black Swan, Black Swan Protection Protocol, Black-Scholes formula, blockchain, Bob Litterman, Boris Johnson, Brownian motion, butterfly effect, carbon footprint, carbon tax, Carl Icahn, centre right, clean tech, clean water, collapse of Lehman Brothers, Colonization of Mars, commodity super cycle, complexity theory, contact tracing, coronavirus, correlation does not imply causation, COVID-19, Credit Default Swap, cryptocurrency, Daniel Kahneman / Amos Tversky, decarbonisation, disinformation, diversification, Donald Trump, Doomsday Clock, Edward Lloyd's coffeehouse, effective altruism, Elliott wave, Elon Musk, energy transition, Eugene Fama: efficient market hypothesis, Extinction Rebellion, fear index, financial engineering, fixed income, Flash crash, Gail Bradbrook, George Floyd, global pandemic, global supply chain, Gordon Gekko, Greenspan put, Greta Thunberg, hindsight bias, index fund, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), Jeff Bezos, Jeffrey Epstein, Joan Didion, John von Neumann, junk bonds, Just-in-time delivery, lockdown, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, Mark Spitznagel, Mark Zuckerberg, market fundamentalism, mass immigration, megacity, Mikhail Gorbachev, Mohammed Bouazizi, money market fund, moral hazard, Murray Gell-Mann, Nick Bostrom, off-the-grid, panic early, Pershing Square Capital Management, Peter Singer: altruism, Ponzi scheme, power law, precautionary principle, prediction markets, proprietary trading, public intellectual, QAnon, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Nader, Ralph Nelson Elliott, random walk, Renaissance Technologies, rewilding, Richard Thaler, risk/return, road to serfdom, Ronald Reagan, Ronald Reagan: Tear down this wall, Rory Sutherland, Rupert Read, Sam Bankman-Fried, Silicon Valley, six sigma, smart contracts, social distancing, sovereign wealth fund, statistical arbitrage, statistical model, stem cell, Stephen Hawking, Steve Jobs, Steven Pinker, Stewart Brand, systematic trading, tail risk, technoutopianism, The Chicago School, The Great Moderation, the scientific method, too big to fail, transaction costs, University of East Anglia, value at risk, Vanguard fund, We are as Gods, Whole Earth Catalog

CHAPTER 23: THE GREAT DILEMMA OF RISK Spitznagel’s argument captivated Peter Coy Peter Coy, “The Risk-Return Trade-Off Is Phony,” New York Times, November 15, 2021, https://www.nytimes.com/2021/11/15/opinion/risk-investing-market-hedge.html. CHAPTER 24: DOORSTEP TO DOOM Bitcoin rallied in 2021, hitting an all-time high Elaine Yu and Caitlin Ostroff, “Bitcoin’s Price Climbs Above $20,000 After Sharp Crypto Selloff,” Wall Street Journal, June 19, 2022, https://www.wsj.com/articles/bitcoins-price-falls-below-20-000-11655542641. As bitcoin plunged, one crypto billionaire Alexander Osipovich, “The 30-Year-Old Spending $1 Billion to Save Crypto,” Wall Street Journal, August 23, 2022, https://www.wsj.com/articles/crypto-bitcoin-ftx-bankman-fried-11661206532. Since saving the human race is the one and only priority Christine Emba, “Why ‘Longtermism’ Isn’t Ethically Sound,” Washington Post, September 5, 2022, https://www.washingtonpost.com/opinions/2022/09/05/longtermism-philanthropy-altruism-risks/.

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But in 2022, as the Fed began to crank rates higher, it and other cryptocurrencies collapsed, wiping roughly $2 trillion from the broader crypto market. As bitcoin plunged, one crypto billionaire was marshaling his forces—and his billions—to salvage it. Sam Bankman-Fried, the thirty-year-old titan of a sprawling crypto empire, started snapping up struggling crypto exchanges from Canada to Japan. Seeking to boost popular interest in crypto, the mercurial CEO of cryptocurrency exchange FTX Trading appeared in magazine ads alongside supermodel Gisele Bündchen and shelled out millions for a pro-crypto commercial featuring Larry David during the 2022 Super Bowl. Bankman-Fried, who’d become known for his unruly shock of curly hair and aversion to business suits, was an adherent of an increasingly influential semi-apocalyptic worldview known as longtermism—a movement that shared elements of Taleb’s precautionary principle.

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Before colonizing Mars, make sure the Earth works.” Bankman-Fried, for his part, went a long way toward making Taleb’s case that cryptocurrencies are a cash-incinerating house of cards when his exchange, FTX, imploded in late 2022. Unnerved by rumors of a liquidity crunch at the exchange, its customers rushed to pull their cash out. Within days, FTX’s funds spiraled from billions of dollars in the bank to essentially zero (or, in fact, negative billions of dollars). One day FTX was estimated to be worth $32 billion. The following day it was worth virtually nothing. It was a harsh lesson for young Bankman-Fried in the chaotic, often violent nature of financial markets dominated by Black Swans and Dragon Kings.