Sam Bankman-Fried is shaping up nicely as the perfect sacrifice for the sins of crypto.
Today I am going to write about Sam Bankman-Fried, because it is such a pleasure to write about Sam Bankman-Fried. Sam Bankman-Fried is perfect, because Sam Bankman-Fried is woke, conceited, out-of-touch, entitled, arrogant, childish and hypocritical. Sam Bankman-Fried, bless him, pleaded not guilty to a string of crimes despite a mountain of evidence. It really would have been a let down if we didn’t get to live out the collapse of crypto exchange FTX in court. Sam Bankman-Fried is the necessary offering for the sins of crypto.
I’m going to stop writing his name out in full shortly, but before I do, there’s the name itself: the first son of Stanford University professors Barbara Fried and Joseph Bankman couldn’t be just Sam Bankman. It would have been harder to condemn him without the ever-present reminder of idealism right there in every article and court document. In the Anglophone world, the adoption of double-barrelled names is a feature of both the aristocracy and woke elite. It may be a short-term solution to the problem of family identity, but for the time being, it lacks popular approval.
This is the sort of thing that might have been discussed around the Bankman-Fried table back when Sam and his younger brother Gabe grew up through the 90s and early 2000s. They lived in a luxurious house on the Stanford campus in Palo Alto. The Wikipedia article on SBF says he was actually born on campus, a fact I am unable to verify. If he was, it’s appropriate. This is a child from the high temple of correctness, which as it happens, is also awash with money. Sam was sent to the Crystal Springs Uplands School, which in 2023 costs more than $60k per year in tuition fees.
To give you some idea of the vibe of the Bankman-Fried household, consider this excerpt from a scholarly book Barbara published in 2020:
“When Sam was about fourteen, he emerged from his bedroom one evening and said to me, seemingly out of the blue, “What kind of person dismisses an argument they disagree with by labelling it ‘the Repugnant Conclusion’?” … In the years since, both Sam and Gabe have become take-no-prisoners utilitarians … in countless discussions around the kitchen table, literally and figuratively, about the subject of this book, they have taught me at least as much as I have taught them. More importantly, they have shown me by example the nobility of the ethical principle at the heart of utilitarianism: a commitment to the wellbeing of all people, and to counting each person—alive now or in the future, halfway around the world or next door, known or unknown to us—as one.”
For the record, the Repugnant Conclusion is a philosophical quandary around the economics of well-being. The “conclusion” is that it should be ethically preferable to have a large population of miserable people than a small number of happy people. Most people don’t agree, hence the repugnance. It sounds as though SBF may not have found it so. In becoming a “take-no-prisoners” utilitarian, he had embraced a morality that could add and subtract wellbeing on a spreadsheet.
SBF grew up, studied physics and mathematics at MIT, and went to work on Wall Street. Moving back to Berkeley, he became involved with the Effective Altruism movement. From that moment, he has claimed in interviews, he formed a plan to make money in order to give it away. This is the most “effective” way of doing good in the world: use the power of capitalism to maximise charity. It’s a classic “ends justify the means” argument in an unfamiliar form.
In 2017, SBF founded Alameda Research, made millions exploiting price differences in Bitcoin on different markets, and two years later started up crypto exchange FTX. As an exchange, FTX became the custodian of other peoples’ money. The essence of the fraud allegations against SBF are that he improperly used that money to plug an $8 billion hole in Alameda’s balance sheet, with his own crypto token as collateral. Once you get into a downward spiral in that kind of setup, there’s no going back. When CoinDesk published an article exposing the problem in November 2022, people rushed to get their money out of FTX and it was all over.
Since then, many interesting details have emerged: how FTX and Alameda reportedly had no accounting department, and kept records of customer money on a few haphazard Excel spreadsheets; how the FTX crew lived together in the Bahamas in luxury, splashing cash while avoiding US regulation and taxation; how SBF and the CEO of Alameda, Caroline Ellison, had an on-again, off-again romance later exposed in Ellison’s diaries.
Now SBF is sitting is sitting in a Brooklyn jail awaiting trial, apparently demonstrating many reviled traits:
Childishness
It is appropriate SBF was confined to his parent’s house as a condition of bail. He is 31, but seems barely adult in his behavior. Investors have spoken of him playing League Of Legends during work video conferences, and the living arrangements in the Bahamas were more frat-house than Wall Street.
Moral certainty can also be a juvenile characteristic.
Conceit
SBF’s bail was revoked after he repeatedly violated its conditions, contacting journalists, using the internet and eventually leaking Ellison’s diaries. Not anticipating these consequences seems strange, until you consider SBF as a spoiled child. There is also the matter of how he allegedly treated the vast amount of money under his care with disdain.
Lack of awareness
Since violating his bail conditions and going to jail (see the picture of the Metropolitan Detention Center in Brooklyn below), SBF has through his lawyers complained about the lack of vegan dining options, and access to his depression and ADHD medication.
My knowledge of popular opinion on veganism stems from my years as an editor on big news sites. People love to hate a vegan. There is something about the moral stance of veganism – too pure for butter – that drives the mainstream wild. If you are responsible for losing billions of dollars, and are about to be tried in public before a jury, just shut up about the food.
I don’t think the medication thing helps either. People may have more sympathy for mental health issues these days, but many will see SBF’s medication as further evidence of a “snowflake” character.
Hypocrisy
It has emerged that SBF and his band of Effective Altruists considered buying the island nation of Nauru as a bolt-hole in case of a world conflict or lethal pandemic. This is not altruistic, noble or even sensible. It is vile and idiotic. Recall SBF’s mother’s words about “counting each person as one”? Even before being tested in the fire of actual experience, apparently SBF had given up on that ideal.
Arrogance
Why do most of us have an instinctive distrust of ends justifying means?
Because most of us have observed, both in person and from history, that those who justify wrongdoing in the name of the greater good are dangerous. This is the truth that George Orwell set down in his books, never more clearly than in Animal Farm. In that novel a farmyard revolution goes bad as the pigs elevate themselves into an elite who know better than the other animals, committing all the crimes of the human farmers and worse.
The means corrupted the pigs – or they were corrupt in the first place – and the ends never arrived. It is arrogant to believe your goals trump the rules.
According to court documents, SBF paid himself $2.2 billion. The records of his altruism are not clear, but the charitable arm of FTX claimed to have given out just $190m. Many of the intended recipients of this funding say they did not receive the money. Others have been asked to return money to FTX creditors.
SBF personifies everything wrong and contemptible about crypto, and that is why his case is relevant for readers of this newsletter. It has been argued that the FTX collapse does not undermine blockchain tech at all. That’s true in a narrow sense. Abusing the trust of creditors, making shonky loans, administrative incompetence: all these things have happened in traditional finance. Some people in the industry say the answer is not less blockchain, but more, because FTX was a centralized exchange where customers were required to trust the system.
That argument misses the point of SBF’s trial in the public mind. Legally this may be about wire fraud and other antiquated crimes. Perceptually it’s about the kind of disdain for everyday concerns that saw FTX lose the equivalent of the savings of 1.5 million average people overnight*.
If SBF goes down, which looks highly likely, we are placing the effigy of old crypto on the bonfire. You might have expected me to turn this essay around and argue the case for mercy. As a person, SBF does warrant our sympathy, and I would have welcomed an opportunity to oppose the vengeful public mood. But as a symbol, he makes the perfect human sacrifice.
* The equivalent size of the $8 billion hole based on median US savings.
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