Daily Bread for 12.2.22: (Hey, Whitewater) Here’s How to Bringing Order to Chattering Chaos

Good morning.

Friday in Whitewater will see a mix of clouds and sunshine with a high of 49. Sunrise is 7:07 AM and sunset 4:21 PM for 9h 13m 47s of daytime. The moon is a waxing gibbous with with 71.1% of its visible disk illuminated.

Whitewater’s Holiday Parade takes place in the downtown with activities beginning at 4 PM and the parade, itself, beginning at 6 PM

On this day in 1954, the United States Senate votes 65 to 22 to censure Joseph McCarthy for “conduct that tends to bring the Senate into dishonor and disrepute.” 

In places large and small, one often hears grandiose claims about why something good might happen, or excuses about why something bad has happened. Such is the case with Sam Bankman-Fried, whose FTX crypto exchange has collapsed, with billions unaccounted. Against the advice of his lawyers, Bankman-Fried keeps talking and talking and talking, with excuse after excuse after excuse.

And look, and look, and look — it’s all too easy to be sucked into some smooth-taking hocus pocus about how it wasn’t someone’s fault, was gonna be great if only everyone else believed, etc. 

How advantageous it is to read Matt Levine’s reasoned assessment of these excuses about the FTX collapse. In his newsletter from 12.1.22, Levine brings order to Bankman-Fried’s mendacious chaos:

It is good, for journalists, to ask Sam Bankman-Fried where all the money went, but he is not going to tell you. The possibilities are:

  1. He knows where the money went, and he has huge incentives to lie about it, or

  2. He doesn’t know where the money went, as he sort of keeps saying, and he will just pass along his confusion to you.

There is not some third possibility where you can sit Bankman-Fried down and he will be like “here is a detailed timeline of all the innocent mistakes we made and how much customer money each one vaporized.” If he had those details available to him, he would not have vaporized the money. Or he would have, but the mistakes were not innocent, and he will not describe them accurately. Either way, you will not get a satisfying explanation, from him.

The person who will tell you where the money went at Bankman-Fried’s crypto exchange, FTX, and its affiliated trading firm, Alameda Research, is John Ray, six months from now. Ray is the current chief executive officer of FTX, appointed moments before it filed for bankruptcy, and the former bankruptcy wrangler of disasters like Enron. He harrumphed into bankruptcy court last month to be like “this is the biggest mess I’ve ever seen, and I’ve seen Enron,” and if I were him I’d say that constantly to my kids. Ray’s well-paid and frankly very interesting job is to sort it out, and I assume eventually he will. That sorting apparently involves, like, Googling news articles to see what venture capital investments FTX made, because FTX did not itself keep a list of its own investments. That is what we are dealing with here.  

But Ray is methodically piecing together the accounts, not giving interviews, and keeping his complaints to court filings. Meanwhile Bankman-Fried is at loose ends in his Bahamas penthouse and seems to be spending his time calling up journalists and compulsively confessing to … whatever it is he thinks he is confessing to? “I didn’t ever try to commit fraud on anyone,” he told Andrew Ross Sorkin yesterday, but, otherwise.

Levine accurately sees that there are no third possibilities for Bankman-Fried and FTX. Not at all.

(Indeed, in a podcast with Bankman-Fried months ago before the FTX collapse, Levine’s questions to Bankman-Fried made plain that Bankman-Fried’s thinking was akin to someone running a Ponzi scheme. See Odd Lots Podcast and Sam Bankman-Fried Described Yield Farming and Left Matt Levine Stunned.)

There are dodgy schemes far removed from the world of crypto exchanges. Against the chattering confidence men in towns big and small, these packs of media relations types, public relations men, development men, and other smooth-talkers, there are (as Levine shows) analyses that bring reason to bear against unreasonable claims. 

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