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I Accidentally Got SBF To Admit to Fraud
So...SBF is simply a moron. I've been trying to resist that conclusion, but now I'm asking myself why I bothered.
In the link above Youtuber Coffeezilla drops into a call with SBF (a second time! Why is he still taking calls??) and proceeds to basically get him to admit that funds were comingled.
Coffeezilla noted that SBF always deflects the issue by arguing that some accounts were trading on margin and so were deliberately open to being used by Alameda, unlike regular accounts. So literally all he does - and all any journalist needed to do - was just keep drilling down on whether the FTX only customers who weren't doing that could still get their funds. SBF obviously has no answer. Even worse, he basically screws himself by admitting that they had one withdrawal process which was him admitting to comingling funds.
So...the guy is just a moron. He doesn't have some grand legal plan to plead negligence or ignorance. He has a half-baked plan based on the idea that everyone is dumber than him (despite multiple counterexamples) and he falls apart the minute anyone puts any thought into his answers.
The entire video is actually a good look at how a journalist should view someone like SBF and his word games and deflections and how they should strategize to defeat them (and the end has the sort of pure joy at skewering the target that I bet all journalists feel but are too dignified to admit when picking up their Pulitzer). And this is coming from someone who thought the idea of people like Coffeezilla being "journalists" laughable.
But he has legitimately done the best job of questioning SBF out of everyone (Stefanopoulos was the close second)
Well, yeah. But the important thing to remember is that he's a smart moron. The embarrassing Sequoia fanboy squee article hit that point, too:
As an aside, anyone who coins a cutesy neologism like "mathletic" should be rolling around on the floor, clutching their ears, in agony. But what is my point here?
Because the worship of intelligence/IQ I see in these circles, including on here, usually "X is really really good at STEM/maths". I've seen comments casually tossed off about 'normies', about '95 IQ rednecks', many assumptions that Ordinary People Are Dumb, and we know it because they must all be sub-100 IQ, we know that because if they were Smart Like Us they wouldn't be rednecks or normies.
Well, guys, here's one of the Smart Like Us crew who is dumber than an ordinary person when it came to "I can make yuuuuge money out of trading magic beans".
I agree that he doesn't have some grand legal plan, but I do think he is relying on "negligence or ignorance". The entire set-up at his Bahamas tax haven base (see the Sequoia article again, man that is probably the worst thing this Adam Fisher ever wrote but it's a treasure trove of nuggets about the mindset of everyone involved, from the fanboy journalist to the investors throwing money at Bankman-Fried on the basis of one Zoom call) was juvenile - it sounds like "still living like we're in college in our second year even though we're all late twenties and heading into our thirties". Everyone seems to have had an instinctive mindset that the conventional way of doing things - even business - was somehow icky, somehow.... normie. And they weren't normies! They were supersmart EA types who were going to save the world by making tons of money and having fun doing it!
So whether or not Bankman-Fried set out from the outset with fraud in mind, the setup was so chaotic, it was conducive to it. I think there is something suspicious there, because Bankman-Fried had so much ownership and control behind the scenes, but he may genuinely have thought he was a supersmart cookie who could find a new way to make zillions after his One Weird Trick dried up.
His parents are lawyers, I wouldn't be at all surprised if he imbibed some half-baked notion that "if I say X was separate from Y, and it was Y did all the fiddling around with funds, then I'm in the clear" when it comes to his technicality about "it wasn't FTX that did it, it was Alameda". I do think he's relying on technicalities to save his skin, which just shows once again that "a little knowledge is a dangerous thing".
I really hope one of the lessons people in the rationalist and rationalist-adjacent sphere, including on here, take away from this is to lose the ugly attitude around the idolisation of 'intelligence' and the corresponding denigration of 'normies' (this constant assumption, as I've said, that ordinary people are all 90-95 IQ and not the average of 100 IQ or even up to 105!).
Can we see the math and logic he's said to have done?
I ask because I remember there being something of a dive into his League of Legends ranking based on the infamous investor call, and apparently he was not at all ranked the way a genius mathlete willing to put in the hours would be at all, and also because I myself have seen a lot of people who associate with smart, nerdy things entirely for smart, nerdy cred, and whose actual ability to engage with the crunchy, mathy, requires-focus-and-practice bits of them is completely nonexistent.
I'd absolutely believe that Sam got top marks entirely based on his family and social connections and the fact that a prep school is about making him look good for a college environment that has completely desisted from actual educational discernment. It's absolutely the case that smart people can believe very dumb things, especially when those dumb beliefs are serving as vital shields for their self-image, and that high-IQ memorize-loads-of-facts-and-do-novel-work-with-them types can end up carefully compartmentalizing against the heresies of their day and circle, and get badly bitten when their failure to think in that one context happens to arise.
But until I see Sam's math SAT scores or evaluate some complex code he's written, I'm personally going to hold off on claiming that he's smart.
Jane Street does not hire traders or interns who cannot pass notoriously tricky technical interviews with math problems and brainteasers. Period. This is well known in the industry.
I feel like the fact that Jane Street paid Sam a very nice salary to manage crypto trades for them is pretty strong evidence against their own smarts.
But, less facetiously, I'd like to lay out my default assumption here, based on what I've seen of SBF's work and statements so far; he is not IQ <90, and he has ruthlessly exploited the high-trust presumption of society, and because of that, I trust not a single word or explanation that comes from his mouth, nor those of people who would plausibly gain by his own gains. Given his willingness to spend money on regulators and punish dissenters, the general halo effect, and the fact that I know well how easily the job interview process gets twisted in general, I am not willing to assign Jane St. the same impartial evaluation trust that I would a math SAT scantron machine, or a compiler attempting to compile code he wrote.
Again, I don't think that he is an idiot. But I do think that he has absolutely adopted the appearance of smart nerdy things consciously, as part of a presented image, and that I need to consider everything about him from an adversarial position.
The crypto trades came much later, in 2018, and with his own money. Jane Street was 2014.
Fair; I am operating entirely off of a few article summaries which specifically mentioned that he traded crypto at Jane Street, and if there is evidence that Jane Street wasn't trading crypto at the time, I certainly don't have either any specialist knowledge of Jane Street or notable faith in the article summaries.
The point remains, however; if my (hypothetical) investment manager was bragging to me about how much money he made with Bernie Madoff, I would seek another investment manager, even if said investment manager decried buying into the Ponzi scheme specifically and even if Bernie had other legitimate investments. It doesn't matter if they came out ahead (plus, I, being a suspicious bastard, would figure that a smart investment manager would make damn sure to conceal the fact that they lost money by not doing basic due diligence on Bernie's fund if they did lose money in it); no matter the outcome, my own trust in someone who put money down on Bernie would go inexorably down.
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But he didn't steal from them, did he? They were smart enough to know how much leash they could give a man like that to safely make use of his talents without him getting ideas. Which is probably the most important part of managing finance guys.
Did he? I honestly don't know. Has anyone done a post-fall post-mortem deep dive on SBF's time in Jane Street?
If I go by the Sequoia article, the timeline goes something like this:
(1) Bankman-Fried is doing his physics/maths degree at MIT
(2) Meets Will MacAskill, who was recruiting for earn-to-give, via people in his fraternity
(3) MacAskill steers him towards an internship in Jane Street
(4) He seems to have done okay there (but as you say, we have no idea what really went on). Meets Ellison there. Article fanboys hard over him, so take the following with a grain of salt:
(5) Quits, for whatever reason (article says it's all in the service of his devotion to utilitarianism yadda yadda but again, we don't know if he was asked to leave/let go/decided to quit for unknown reasons)
(6) Goes back home to the Bay Area, gets a job - courtesy of MacAskill - as director of business development at the Centre for Effective Altruism
(7) Ellison is sent on a recruiting trip to California by Jane Street, decides to look up Bankman-Fried
(8) Turns out he set up this thing called Alameda Research with a grubstake of $50,000 (could be his own money, his parents' money, who knows) to exploit the 'kimchi premium' and is coining it
(9) But he could be making much, much more! So he goes looking for $50 million loan and gets a good chunk of that via EA contacts
(10) He puts together an admittedly ramshackle operation to exploit this hard
(11) Ellison quits Jane Street and signs up
(12) MONEY! MONEY! MONEY!
(13) But of course, all good things come to an end, and so the next step is "Hmmm, maybe I should open a crypto trading exchange, there is probably easy money to be made there, too"
(14) Founds FTX and the rest we all know
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That would interesting, but JS is very secretive too. Employees are incentivized to stay quiet .
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