They burned down Crypto. Now They Want A Comeback

On Wednesday, Vox published a bombshell interview with the former CEO of crypto exchange FTX Sam Bankman-Fried, where the 30-year-old crypto trader revealed that he was, in fact, co-mingling customer funds with his hedge fund, Alameda. Research. ​​​​This would be a problem in itself, as it would violate the FTX terms of service as well as likely fall under wire or securities laws.

The Bankman-Fried crime, which “wasn’t much borrowed [customer deposits] out” but became something “messier,” “more organic” and “reasonable” than that, after a run on his exchange that left up to a million FTX users without access to their funds. Billions of dollars worth of crypto is missing – and the “messy accounting” at FTX and Alameda is still being sorted out.

This article is excerpted from The Node, CoinDesk’s daily roundup of the most important stories in blockchain and crypto news. You can subscribe to get the full newsletter here.

It is now trying to raise $8 billion in funding to secure customers. What that will look like is anyone’s guess, (Bankman-Fried did not respond to a request for comment). But the sum is much greater than the company, when valued at $32 billion and now going through Chapter 11 bankruptcy, which has ever been raised. SBF has also resigned as Chief Executive.

That Bankman-Fried thinks he can pull off a fortune reversal shows a deep disconnect with reality. He has lied several times in public, to customers and investors – his trust has been burned, and he will probably face criminal charges. And while he thinks he was once “one of the greatest fundraisers in the world”, his success was built on an abusive and misguided mindset.

See also: How Sam Bankman-Fried’s ‘Effective’ Altruism Blowed Up FTX | Opinion

FTX counted several white glove funds as investors, including Sequoia Capital, Lightspeed Ventures and Coinbase’s angle fund. Apparently no one did any due diligence – even Sequoia did after learning that the SBF was playing League of Legends during the meeting. That level of scrutiny will never happen again.

Of course there are exceptions, Kevin O’Leary, the famous investor and paid spokesperson of FTX, said that he would be happy to bet on SBF again. And that’s the scary thing: even though Bankman-Fried is probably done, he has peers who are trying to do the same thing – recover their reputation, maybe raise money and restart the “hero’s arc” – and maybe directly.

That said, Terra creator Do Kwon and Three Arrows Capital co-founders Su Zhu and Kylie Davies have been making the media circuit recently, being tapped as experts to comment on Bankman-Fried’s rise and fall. Zhu and Davies, who nuked billions of dollars, are even reportedly on the market to raise a new crypto-investment fund.

All three are fugitives from the law, accused of not cooperating with the authorities and are in non-extradition countries. It seems the trio came to the conclusion that the unsustainable LUNA bubble had been popped by Bankman-Fried which eventually involved Three Arrows.

But already there are signs that this attempt to make themselves the victim is thin. Zhu unfairly called out former FTX employee turned whistleblower Zane Tackett for conspiring against 3AC, getting important data wrong. He also promoted a conspiracy that the Democratic Party is conspiring with Bankman-Fried (who was a mega-donor) to avoid justice.

See also: ‘Down Infinite’: Ham-Fisted Do Kwon’s Attempt to Rehabilitate | Opinion

Terra’s disgraced co-founder made a surprise appearance on the popular Up Only podcast last week, where Do joked about how he was the wrong person to take “crisis management” advice from.

Do was seen next to convicted felon Martin Shkreli, who noted that Bankman-Fried and Do will likely go to prison, though they wouldn’t worry too much because it’s not that bad. Shkreli, aka Pharma Bro, a name he earned after raising the price of life-saving medicine, could be the template for the reorganization, after he got out of prison a full “crypto bro”.

​​​​​​It would have been one thing if Do, Davies, Zhu or Bankman-Fried had served their time after being convicted. And, to be sure, they all deserve a fair trial. But until then, they really should leave.

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