In The Shadow Of Mt Hollywood

In a remarkable unintentional exposé of our educational system, Forbes yesterday seems to think it broke the story of the year: Exclusive: Sam Bankman-Fried Knew Plenty About His Alameda Research Hedge Fund–And Sent Details To Forbes Just Months Ago . Bankman-Fried, in a series of high-profile media appearances this week, has begun offering his own working theory: Alameda took on far too much leverage to make risky investments on the FTX platform, and FTX failed to recognize and prevent it. A key claim: that Bankman-Fried himself didn’t really know what Alameda was up to. “I was frankly surprised by how big Alameda’s position was,” Bankman-Fried said at The New York Times’ DealBook Summit on Wednesday. “Alameda is not, like, a company that I monitor day-to-day,” he claimed to New York magazine in an article published Thursday. “It’s not a company I run. It’s not a company I have run for the last couple years. And Alameda’s finances I was not deeply aware of. I was only surface...

Here's more of the conventional FTX narrative that just doesn't fit. Remember that new CEO Ray's big complaint about FTX was that not only did they not keep payroll records, they basically didn't have an organization chart. It was just a bunch of millennials with ADHD playing video games in a luxury condo. Right? Here's FTX skeptic Marc Cohodes's take, as quoted by Alex Berenson : They were glorified interns, they had no experience, they had no exchange experience, they had no capital markets experience. . . which led me to believe this is a giant fraud. . . This is the basic media narrative and the received explanation, it was all Sam and Caroline and the others makin' whoopie in a yellow submarine. No org charts. No wonder! But wait a moment. The demise of cryptocurrency exchange FTX has brought an end to FTX Arena in Miami, or at least its name. Naming-rights deals, in which companies spend up to $500 million to put their names on sports facil...

Media accounts continue to be generous to Sam Bankman-Fried on the FTX scandal. This piece, I think, gives the overall current dimensions of the Overton window: In the weeks since Sam Bankman-Fried’s cryptocurrency empire was revealed to be a house of lies, mainstream news organizations and commentators have often failed to give their readers a straightforward assessment of exactly what happened. August institutions including the New York Times and Wall Street Journal have uncovered many key facts about the scandal, but they have also repeatedly seemed to downplay the facts in ways that soft-pedaled Bankman-Fried’s intent and culpability. The writer in the piece comes down on Sam Bankman-Fried as the architect of a fraud: At the heart of Bankman-Fried’s fraud are the deep and (literally) intimate ties between FTX, the exchange that enticed retail speculators, and Alameda Research, a hedge fund that Bankman-Fried co-founded. While an exchange ultimately makes money from transactio...

Let's look at some dots and see if we can connect them. Dot one: as we saw yesterday, there was a contentious sitdown that lasted into the early hours on November 11, during which prominent stakeholders at FTX induced Sam Bankman-Fried to resign as CEO. The only individual mentioned specifically among them was Sam's dad, Prof Bankman. White-shoe firm Paul, Weiss had somehow been induced to represent Sam, but they dropped him after a week due to "conflicts". I speculated that only Prof Bankman would be at a level to engage Paul, Weiss for this job at all. Once they dropped Sam, Prof Bankman induced a Stanford Law colleague to represent him. As far as I can see, both these moves were intended to keep Sam's legal defense under Dad's control. Meanwhile, after being pushed out as CEO, Sam has been anything but under control. Both new CEO Ray and Paul, Weiss have variously denounced his "incessant and disruptive tweeting" and "erratic and mislead...

I'll preface this with my usual caveat, I'm not an attorney, and all I really know of business is what I learned from reading people in my career in tech. However, I pointed out yesterday that although most commentators, if they mention new FTX CEO John Ray at all, seem to see him as some sort of corporate Dudley Do-Right of the Mounties who fixed Enron and will now fix FTX. Little as I know, I do know that Mr Ray is a lawyer (and a highly capable one), but lawyers work for clients and are obligated to promote their clients' interests. So who are Mr Ray's clients? This sent me to the FTX bankruptcy filing , available on line, readable, and as far as these things go, informative. Mr Ray identifies himself at the start: I am the Chief Executive Officer of the above-captioned debtors-in-possession (Collectively, the "Debtors"), having accepted this position in the early morning hours of November 11, 2022. I am administering the interests and affairs of the...

The narrative of Sam Bankman-Fried and the Alameda-FTX bankruptcies has been settling into consensus, but as I've said here all along, I'm an Aristotelian as well as a contrarian, which means in this case that I look for causes, and I'm likely not to be satisfied with conventional answers. I think the conventional version boils down to this: Bankman-Fried and his enablers were quirky geniuses who had brilliant ideas but maybe got themselves in too deep. But they were effective altruists, so maybe their hearts were in the right place. Anyhow, crooks or not, the Establishment has come to the rescue, and John H Ray, III , who solved Enron, is on the case: John H. Ray, III is the principal of Ray & Counsel, P.C. He is an experienced Harvard Law School graduate and Harvard Law Review editor with over 20 years of complex business and class action litigation, as well as appellate experience, with special expertise in securities litigation, officer and director liability, ...

At this point, there's a lot that isn't adding up in the current FTX-Bankman-Fried narrative, even among the more skeptical commentators. Let's just start with John Ray III, the new CEO of FTX who is to supervise its liquidation, whom I quoted yesterday as saying, “From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.” More succintly, he's saying the Bankman-Fried-Ellison clique who putatively ran the company couldn't organize a two-car funeral. So let's ask a very basic question. The evidence we have is that they suffered from serious cases of ADHD, which simple research shows renders its victims incapable of planning complex tasks, conducting sustained research, or even sitting still for fairly minimal periods. Sixty years ago, I went through five years of the Ivy ...