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Transcript: Zeke Faux, Number Go Up


The transcript from this week’s, MiB: Zeke Faux, Number Go Up, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.


This is Masters in business with Barry Ritholtz on Bloomberg Radio


Barry Ritholtz: 00:00:06  This week on the podcast, what can I say? Zeke Fox’s book number go up inside crypto’s Wild Rise and staggering. Fall is just a shocking and hilarious and fun read. I read it pretty quickly in, in, in less than a week, and I thought it was just fascinating. It is a deep dive, a no holds barred Look at crypto and the many, many scams that take take place across everything from NFTs to ICOs to hacks to to Bitcoin business models. He is especially unhappy with Tether, which by the way, of all the scams in the book Tether so far seems to be holding up. It’s really the thing that pulled him into the worlds of crypto, and it’s the one that has outlasted the writing of the book. Lots of other things fell apart, including FTX. I found the book to be really entertaining and, and amusing and a little bit horrifying.

Zeke Faux: 00:01:10 Parts of it are really just terrifying. But Zeke is a, a fascinating guy. He is an award-winning investigative reporter for Business Week and Bloomberg News. He won the Loeb Award, the Civil Gavel Award. He was a national magazine award finalist. He, he’s really a, a, an interesting guy with a, a fascinating history and the story of how he unraveled all of the mayhem in the world of crypto. I is really quite fascinating, starting with a buddy who who made a little money and he just gets sucked into the netherworld of everything. From Luna to Terror, to Celsius, to Tether to NFTs and the Board Ape Yacht Club. It really is just a, a, a very entertaining book and I thought this conversation was, was absolutely fascinating. With no further ado my deep dive into crypto with Business weeks. Zeke Fox. Normally here, I would say welcome to Bloomberg, but Zeke Fox, you work at Bloomberg, so welcome to the fifth floor. Let’s talk a little bit about your career and, and what led you to write this book. A little background, we’re recording this in late October, Bitcoin touched $35,000 this week it settled somewhere around 32,000. The FTX trials are getting underway. Fun time to be covering crypto.

Zeke Faux: 00:02:38  Yes, and I mean the title of the book number go up Inside Crypto’s Wild Rise and Staggering Fall. Little bit giveaway. My, my perspective there. I think this whole thing is over and over; Done. Never. Never to rise from the ashes again.

Barry Ritholtz:  00:02:53 [Speaker Changed] So we’ll talk more about that. We’ll talk about why number go up is a business model and how crypto winter seems to come more and more frequently. But let’s start a little bit with your background. Your beat seems to be financial related crimes. How did you ever find your way to this area of interest? I don’t

Zeke Faux: 00:03:13 [Speaker Changed] Like to say that because my job depends on talking to people and getting me to tell their story. So I, I prefer to describe it as well. I write profiles of people who make a lot of money in a interesting way and I was drawn to that ’cause I’m somebody who plays by the rules. You know, I, I went to school, I got pretty good grades, I got a job. I’ve worked at Bloomberg for more than a decade now. But I really like these characters who are willing to take like crazy risks and they operate in gray areas like loan sharks, pump and dump schemers, debt collectors. Like I have spent my whole career writing about these guys who are operate on the fringes of, of Wall Street. And I love getting to know these characters and figuring out what makes them tick. ’cause there’s a lot you can do if you are willing to run the risk that like maybe the Securities and Exchange Commission will sue you or like maybe you’ll go to jail for a year, you know, but maybe you’re gonna make a lot of money first.

Barry Ritholtz:  00:04:12 [Speaker Changed] Seems like a fair approach. Let’s talk about how you fell into crypto. It cracked me up. Your buddy Jay made a bunch of money on Dogecoin. He’s freaking Nostradamus. Tell us a a about your conversations with Jay. So

Zeke Faux: 00:04:26 [Speaker Changed] I have a group text with bunch of friends from high school. We call it Dan’s basement ’cause that’s where we used to hang out. And Jay is a smart guy, he’s a funny guy. We used to write a humor column together back in high school in Cambridge, Massachusetts. And out of the blue he starts texting us about this thing that he calls doggy coin. And he’s

Barry Ritholtz: 00:04:48 [Speaker Changed] Like, not dogecoin doggy

Zeke Faux: 00:04:50 [Speaker Changed] Coin, right? And that’s me being like the, the know-It-all, you know, financial reporter. I tell him Jay, it’s called Dogecoin and it’s dumb. It went because this is 2020, it’s the height of the pandemic. We’re all stuck at home. We’re really bored. Dogecoin, this

Barry Ritholtz:   00:05:05 [Speaker Changed] Is before Elon starts tweeting about it.

Barry Ritholtz: 00:05:06 [Speaker Changed] Yeah, it’s starting to bubble up a bit. I can see you here taking Jay side in the argument ahead of time, right? I mean he is like, hey, people are talking about it on Reddit. You know, let’s, I, I can see this going up. It’s funny people, everybody likes doggy coin get in early and I’m thinking to myself, I remember when this went sort of viral a few years earlier. I’d already, there’d already been a very funny segment on the Daily Show making fun of crypto and Dogecoin. And I’m like, it’s pointless. And he is like, I know it’s pointless. I don’t care. I just think it’s funny and I’m trying to argue it’s not funny. It won’t go up. And this goes on for like weeks and weeks and it does go up and he keeps telling us about it. I’m getting kind of jealous.

Barry Ritholtz: Zeke Faux:  00:05:48 Finally he sells out. I think he, he may have even called it right and sold before Elon Musk hosted Saturday Night Live, which that was like a, you know, by the rumor, sell the news moment for sure. And he went to Disney. He’s sending selfies from Disney with his proceeds. Yeah, he made enough on on Dogecoin to go to Disney. He texted us. I am freaking Nostradamus and I’m a little, I’m jealous that he made money and I didn’t. But more than that I also, I like being right and I think of myself as the one who knows about finance and I’ve, I’m an expert on pump and dump schemes.

00:06:23 [Speaker Changed] Any sort of scam or you know, fast talking salesman who’s gonna leave you holding the bag, right? Yeah, of course you’re gonna be skeptical. In fact, in the book you describe Bitcoin’s first commercial application was Silk Road. How, how did that work out for everybody?

00:06:41 [Speaker Changed] I mean it was pretty cool if you want, not that I did, but if you wanted to buy drugs off the internet, you could just, there was this new magic internet money just Bitcoin fire up your tour browser and you know, send some of this new, new fangled internet money to order your LSD or whatever a

00:06:59 [Speaker Changed] Actually we’re recording this October, 2023. It was literally a decade ago, October, 2013 when Silk Road got busted when the founder Ross Albright got busted. And you know it in the book, hey Bitcoin might have crashed but a month later it’s up 10 x to over a thousand dollars and that looked very suspicious.

00:07:23 [Speaker Changed] Yeah. So Silk Road was actually very important to the early years of Bitcoin. It got it on the map, it got a lot of people buying. But really what made Bitcoin popular was not so much that it was useful for anything, it was number go up. It was the price going up and people seeing headlines about somebody making money on Bitcoin. Everybody had a friend like Jay who was telling them, Hey, I made some money on crypto, maybe you should too. And it became hard to resist. And it was interesting that in these early years there wasn’t much liquidity in Bitcoin and it was easy for people to manipulate the prices. So since then it’s come out that some of the price changes that got people’s attention these early years may have been from manipulation,

00:08:12 [Speaker Changed] A substantial portion of the volume were just various interested companies trading coins back and forth with each other.

00:08:19 [Speaker Changed] Yeah, I mean there’s a coin called lco, which is like a Bitcoin knockoff and it’s since come out that a lot of the early runup in Litecoin that got people interested in Litecoin was the result of just manipulation. But in those early years, even more than today, like anything went, the securities and exchange commission was not following Bitcoin trading closely at,

00:08:42 [Speaker Changed] At all. And you mentioned number go up is the title of the book. That’s essentially the business model of Bitcoin. It it will go up because it has gone up. E explain.

00:08:54 [Speaker Changed] So I had resisted looking into crypto, but I, I took on the assignment after this argument with Jay and one of the first places I went was Miami for Bitcoin 2021. It was one of the first big conferences of pretty much any kind since the Covid restrictions lifted. It was like 10,000 people descended on this warehouse in the Wynwood district. And I’ll go in kind of skeptical, but also Bitcoin people and crypto people are great at PR and they spread this narrative that there’s like this wave of institutional adoption that’s just around the corner. I think at any time in like the last 10 years, there’s always been this sort of sense that, oh, you’ve seen a headline about like BlackRock or JP Morgan and Fidelity. Yeah, the big guys are getting in on it. So I go to this conference thinking, alright, I’m skeptical of crypto but I’m also sort of expecting to see regular Wall Street guys there talking about financial technology in ways that I can understand instead on stage I see like the craziest guys that I’ve ever heard. People are just like scream. At that time they were down on Elon Musk, right? People are screaming about F Elon. F Elon, yeah. F Elon

00:10:07 [Speaker Changed] Max Kaiser from Russia television or I don’t know where he is today, but yeah.

00:10:12 [Speaker Changed] And one guy’s on stage and he’s talking about Bitcoin and he says the most important innovation in Bitcoin is number go up technology. And he is like number go up. Technology is a powerful piece of technology. It means when the price goes up, more people will hear about it and they’ll wanna buy it and that’ll make the price go up some more and then more people hear about it and then they’ll buy it and it’ll go up even higher. And pretty soon we’ll all be rich.

00:10:38 [Speaker Changed] So number go up. Technology sounds a lot like the greater fool theory of of speculation. Yeah.

00:10:44 [Speaker Changed] I mean it’s, it’s like the logic of a pyramid scheme, but for a couple years there it seemed to work and the crypto people like to say, wag me the W-A-G-M-I, we’re all gonna make it. We’re

00:10:57 [Speaker Changed] All gonna make

00:10:57 [Speaker Changed] It. Yep. And the idea was just buy hold it, buy some more. It’s gonna go up. As long as we don’t lose the faith and we keep promoting it to our friends, we’re all gonna be rich.

00:11:07 [Speaker Changed] The the problem with that is at a certain point you run out of people to come in and buy it. This, this is true with every pump and up scheme, every pyramid scheme, and it, it comes out in some of the court documents later that in, in some of the corporate Slack accounts, one, one of the people say they should be the director of Ponzi economics. Tell us what is Ponzi nos?

00:11:34 [Speaker Changed] This is slightly related to number go up technology. It’s a, it’s about on that level. And some of these new coins that were being started at that time would explicitly say that they were adopting Ponzi ish structures and we’re talking about like Defi apps. So these were like new crypto apps and it, what it would boil down to is that if you started doing whatever this thing was, they would pay you in a new coin and you might think, well why do I want Red Holt’s coin? And they’d say, well you need Red Holt’s coin to use the Riol app. And it’d be like, well why do I want to use the ri Holts app? And it’s like, well that’s how you earn more Riol coin.

00:12:15 [Speaker Changed] It sounds circular.

00:12:16 [Speaker Changed] Yes, it was very circular, but it seemed like every couple weeks somebody was starting one of these things and it was really taking off. And there there was one that was got very popular called Step In and it’s like a health app on your phone. And to use the app, you have to buy a virtual shoe for some reason. Only one shoe. I don’t know why that you need a pair of shoes. Yeah, only one. You just buy one shoe called should be called

00:12:44 [Speaker Changed] Hopping. Yeah.

00:12:48 [Speaker Changed] So if you bought the shoe and it cost like a thousand bucks equivalent, then you could earn Green Satoshi tokens. So these, once you’d spent your a thousand bucks on the shoe, you’d better keep walking every day or you’re just throwing away your chance to earn these valuable green Satoshi tokens. So

00:13:04 [Speaker Changed] It sounds like almost a legitimate business plan. We are gonna give you a financial incentive to exercise and it’ll all take place in crypto on the blockchain. And so not only are you gonna get healthy, you’re also gonna get rich. What could go wrong, right?

00:13:20 [Speaker Changed] I mean honestly, a lot of these pitches, if you just heard ’em for a couple minutes, they sounded pretty good, not bad,

00:13:26 [Speaker Changed] Right?

00:13:26 [Speaker Changed] Yeah. But the reality was, was people were, there were like teams of bots playing step in and as it just boiled down to a pyramid and they were trying to bring, everyone who did step in was dependent on new people wanting to do step in and wanting to buy these shoes because otherwise there was no use for these green Satoshi tokens. And inevitably every other scheme like this, the price crashed and shoe prices are way down. Yeah, right. By

00:13:55 [Speaker Changed] The way, I, I found the book to be infuriating and hilarious, very informative, very fun, but also serious. Lots of really serious things were in it. And despite that, some of the pros just really was laugh out loud. What I, what I wanna do is read a couple of quotes to you and, and get your reaction as to what’s going on here and, and just, just give us a little color, starting with quote, I couldn’t believe that everyday people sent millions of perfectly good US dollars to the Inspector Gadget, creators Bahamian Bank in exchange for digital tokens conjured by the Mighty Ducks guy and run by executives who were targets of a US criminal investigation. Explain,

00:14:43 [Speaker Changed] We’re talking about Tether. There’s a lot to unpack there. And it was the first crypto company that I really set out to investigate in the like regular financial world. If you’re investigating a hedge fund, a FinTech company, basically a lot of times even the investigation that like brings down the company, the reporter just points out one red flag. Like they’ll be like, Hey Enron, maybe what’s with this off balance sheet stuff, maybe it’s a bit fishy. And like that’s what brings down Enron right now. Tether, this is a company that was like the Central Bank of crypto and when I started looking into it, it’s, it’s a stable coin. So they say that every tether token is worth $1 and

00:15:23 [Speaker Changed] There’s a dollar in reserve somewhere.

00:15:25 [Speaker Changed] Yeah. They’re keeping a dollar in the bank for you. You can always trade your token in for a real dollar. So when I started looking into it, they had 50 billion tether tokens. It gotten huge and that meant they were supposed to have $50 billion in the bank somewhere. How,

00:15:40 [Speaker Changed] How hard is it to show those audited returns? The, it’s not even return on investment, here’s our $50 billion.

00:15:47 [Speaker Changed] Right? So they, they weren’t saying where Red Flag number one, red flag number two, one of the coin’s inventors was Brock Pierce who is a child actor from the Mighty Ducks.

00:16:00 [Speaker Changed] Emilio Estevez’s Younger Self.

00:16:02 [Speaker Changed] Yes. And he, he’s in the flashback, he misses this crucial penalty shot that haunts coach Gordon Bombay later in life. This guy had had this crazy career in the.com bubble in World of Warcraft item trading. And then he’d thought up this, this tether coin. Now he’d passed on ownership to a new team and I found that the defacto boss of Tether was a former plastic surgeon from Milan who had this crazy online diary where he posted about his admiration, it seemed for Bernie Madoff.

00:16:42 [Speaker Changed] And how does Inspector Gadget get into this?

00:16:44 [Speaker Changed] Oh yeah, we need to bring in all my favorite media. So I’m looking for this $50 billion, that’s like what gets me into crypto. I’m like, I’m the guy who’s gonna see if they have this 50 billion, I’m gonna track it down. And when I go look, the only bank that I can find that will say we have any of this money is Deltech Bank in The Bahamas. And its chairman is Jean Opin and he’s a French guy who got rich by creating Inspector Gadget. Like

00:17:17 [Speaker Changed] Really like the cartoon that kids were

00:17:20 [Speaker Changed] Watching. The original. Yes. And he’s not just like the finance guy behind it, like he’s the creator. Like I don’t think he drew the cartoons, but like he came up with the idea he was on the team. This is what made him rich is that he created an Inspector Gadget and then this whole cartoon company around it. And he is honestly, he’s like a character from James Bond movie. He bought a castle with the Inspector Gadget money. Right. And he also bought a mansion in The Bahamas, a pink colonial mansion on the beach that you can actually see in a James Bond movie. In the movie. It’s the villain’s house. He, he flew his own jet, he piloted it. Very charming guy. And so he, he says, I am holding some of tethers money and I say, okay, I’ll see you tomorrow in The Bahamas. So I fly down there, we get to his office and when I walk in, he pulls this book off the shelf, I think it’s called Misplaced Trust and it’s about like financial schemes. And he starts like sort of flipping through it and says the strange things people do for money. And I’m just like, John, are you, are you playing a character in this, in like a new episode of Inspector Gadget right now? Like what is going on?

00:18:26 [Speaker Changed] It was all foreshadowing.

00:18:27 [Speaker Changed] Oh yeah. But the weird thing about Tether was that there are all these red flags and we didn’t even mention they’d been sued for fraud by the New York Attorney General who had shown that they’d lied about the reserves in the past. That even John would say, I didn’t know where all the money was. I could only account for a portion of it. So there are all these red flags enough that in the traditional finance world, investors would be scared off. But in the crypto world people kept trusting Tether and the coins still traded for a dollar. And like I wrote there, people just kept sending in their real money to get these tokens and every day it’s the most traded crypto coin.

00:19:02 [Speaker Changed] Let, let’s go to the next quote that cracked me up. You actually referenced a tweet quote, imagine if keeping your car idling 24 7 produced, solved Sudokus you could trade for heroin. Oh, explained.

00:19:17 [Speaker Changed] Love this tweet. It’s a great explanation of Bitcoin, which in the Bitcoin mining process,

00:19:24 [Speaker Changed] Very power hungry.

00:19:26 [Speaker Changed] Yes. I mean, by some estimates Bitcoin mining uses more energy than the whole country of Argentina and it’s just like warehouses of these computers running around the clock. And I was surprised to learn that there’s not really, they’re not really doing anything that’s crucial to the Bitcoin network. They’re just playing sort of this guessing game that makes it difficult for anyone to hack Bitcoin and steal all the Bitcoins. But it just uses this insane amount of energy. Huh.

00:19:55 [Speaker Changed] Here’s one of my favorites. Quote. All my apes gone. Tell us a little bit about your experience purchasing a mutant ape. NFTI

00:20:05 [Speaker Changed] Got a lot of criticism from crypto guys as I was researching this book and they would say, how are you writing about crypto if you don’t have any crypto? And I would tell them, well listen, first of all, as a reporter, I’m not supposed to invest in anything.

00:20:20 [Speaker Changed] I was told to ask you how much money have you made shorting Bitcoin? And the answer is,

00:20:25 [Speaker Changed] Yeah, nothing. No, you’re

00:20:26 [Speaker Changed] Not allowed, you’re not allowed to be long short that, right?

00:20:29 [Speaker Changed] Yeah. And the bit the crypto people would say, actually even that policy introduces some bias because you’re invested in standard stock market funds and so you’re sort of against crypto and how you don’t know, you don’t know about this, you gotta try it out. And so eventually they kind of of got to me and I was like, you know what? I tried out stepping, I got a shoe

00:20:50 [Speaker Changed] A thousand dollars.

00:20:51 [Speaker Changed] It had, it was in the middle of collapse by the time I bought a shoe, but that, that didn’t do much for me. So

00:20:56 [Speaker Changed] Your poor wife, so you spend a a couple hundred bucks on a shoe, you spend $20,000 on a mutant ape that fortunately you sold for almost all your money back.

00:21:07 [Speaker Changed] Yeah. I decided to try it out and I was like, I’m going straight for the top. I want to join the Bored Ape Yacht Club. Right. That’s the crypto thing that the celebrities are doing.

00:21:16 [Speaker Changed] But those are hundreds of thousands of dollars. Yeah,

00:21:18 [Speaker Changed] This is like a cartoon of a monkey is a very ugly cartoon. They were going for like 500 grand. Right. And they were having a party in New York called Ape Fest. You had to have one to go. And I found out you could still get in if you got a Mutant Ape, which is still part, it’s like a, the ugly cousin of the Bored Ape

00:21:37 [Speaker Changed] And a much more reasonable $20,000.

00:21:40 [Speaker Changed] Yes. So when I asked my wife and she very nicely said, yes, they were actually going for 40 when I asked her. Right. And

00:21:48 [Speaker Changed] Good news, honey, it’s collapsing and it’ll only cost us 20. Yeah.

00:21:51 [Speaker Changed] I, I was happy that it had had collapsed, but I was also like, wait, so if it went from 40 to 20 and like two weeks is is it gonna go to 10? And I was like, please do not go to 10. But even more than it going to 10, my fear was this all my apes gone thing because it actually, I learned a lot from buying the bored ape. ’cause if a lot of people who, even if you are sort of into crypto, maybe you have some Bitcoin, you have some Ethereum, you probably just do it on Coinbase or Robinhood or whatever. You’re actually like using the blockchain, right? Like

00:22:25 [Speaker Changed] But to get get the NFTs, you have to go through the blockchain and it’s a horrific arduous process.

00:22:32 [Speaker Changed] Yes. I mean I’d heard it would be bad, you know, my expectations were low, but then I went to go do it and I was like, oh my God. Like no one normal will do this. I’ll get like, just, it boils down to your money lives. Like, you know where you put the URL in your web browser, you might type in Google and then maybe you have like a little red stop sign if you have ad block. Now maybe next to it, how would you like to add a picture of a fox head? And that’s where your money’s gonna be.

00:22:58 [Speaker Changed] Your chrome on a Chrome extension.

00:22:59 [Speaker Changed] Yes. And like before you install it, they make you watch this video and it says, welcome to the wonderful world of crypto. Now please engrave your 12 word password on a piece of metal and bury it in your backyard. And, which I did not do, but I just, the process of getting my $20,000 into this fox head so that I could waste it on this new ape was so horrible that I was just like, this is a huge obstacle. The crypto ever taking off. No one normal is gonna do this unless they think they’re gonna get rich

00:23:31 [Speaker Changed] And and tell us who said, all my apes gone.

00:23:35 [Speaker Changed] So once you got the apes, you gotta watch out ’cause they’re gonna get hacked. They might get stolen. And there was a art dealer who actually got hacked and $2 million of NFTs was stolen from him. Right. And he tweeted Mid hack, all my apes gone. The saddest tweet in all of, in all of crypto, the

00:23:54 [Speaker Changed] Saddest tweet in all of crypto. So, so let’s talk a little bit about Axe. Infinity is a massive multiplayer online game. And this quote is just bonkers Crypto Bros. And Silicon Valley VCs gave Filipinos false hope by promoting an unstable bubble based on a Pokemon knockoff as the quote future of work unquote making matters worth. North Korean hackers broke into the crypto exchange affiliated with the game made off with $600 million worth of stable coins. And Ether the heist helped Kim Jean un pay for test launches of ballistic missiles. Instead of providing a new way for poor people to earn cash, Axio Infinity funneled their savings to a dictator’s weapons program. I mean that is just a beautiful paragraph. I’m so, first off, I love the pros, but second, what a horrible story.

00:24:58 [Speaker Changed] Yes. And like I’m not making that up. Like the US government has said, north Korea’s nuclear program is partly funded from hacking this Pokemon knockoff game. And this was Game Axe, the crypto guys, when it was going well, they love to talk about it. This was their number one example of web three. You had to buy a team of monsters. It was a game you played on your phone. You had to buy the monsters before you could play. And then you, when you battled, you earned smooth love potions. And it had the same circular logic where you needed the potions to get more monsters. Why do you want monsters? Well, to get the potions, why do you want the potions to get monsters and back, back and forth? But it was going great for a while and it more than a million people in the Philippines started playing. I went there to check it out. I mean, even my driver had taken out a loan for something like a thousand bucks to buy a team of monsters. And it had lost it for these people who took out loans to get in on it. It had been a real setback in their life. You know, this was no joke to them. It’s not like just their pocket money s

00:26:06 [Speaker Changed] Serious, serious damage. Here’s could be my favorite Sam Bankman freed quote quote. It’s like the narrative would be sexier if it was like, holy shit. This is the world’s biggest Ponzi scheme. Right?

00:26:19 [Speaker Changed] Yeah. So I spent a lot of time with Sam Bateman free in reporting this book. ’cause it was clear he was a major player in crypto. And it was actually very fun when I went to go write the book, FTX had collapsed. And some of his quotes like that one took on some new meaning. And I’m like, was this guy just toying with me while he was giving this interview?

00:26:40 [Speaker Changed] That’s hilarious. And then on the FTX bankruptcy, this could be my favorite quote in the whole book, the Shocking reversal was the biggest news crypto had ever seen. It was as if Satoshi Nakamoto identity was finally revealed. And it was Janet Yellen, the central banker, hated by Bitcoiners. That’s just a hilarious sentence. I mean, thanks. It it it’s so great. Everybody thought FTX was the most legitimate entity in all crypto turns out not so much.

00:27:13 [Speaker Changed] Yeah. And I will admit, I also thought I was skeptical of crypto, but I thought, I thought, Hey, FTX is a casino for cryptocurrencies. They’re encouraging people to gamble there. People will probably lose their money. I did not suspect that Sam Bankman Free was stealing all the money out of the back of the casino. So,

00:27:32 [Speaker Changed] So let’s talk about some of the things that happened after FTX collapsed. Here’s a quote. The past two years have felt like this perpetual gaslighting of anyone who expresses caution. Now it’s all unraveling very quickly. That’s from Twitter. Someone called Bitfinex. Tell us a little bit about him and and what his role was.

00:27:56 [Speaker Changed] So Bitfinex has been tweeting about his skepticism of crypto and especially Tether for years and years now. A

00:28:05 [Speaker Changed] Long, long, like seven, eight years Yeah. Since it was formed. Yeah.

00:28:09 [Speaker Changed] Dozens of times a day. And he seemed to have some pretty, like sometimes he’d tweet photos or things that seemed like he was an insider. And I arranged to meet him and what I realized when I met him was, oh no, this is like a dude who lives in his mom’s basement, but,

00:28:29 [Speaker Changed] But turns out to be pretty insightful as to what’s going on.

00:28:33 [Speaker Changed] You know, his, like me. We both started out looking at Tether and it’s turned out that Tether has held up pretty well. Has actually only grown since I started investigating it. It’s up to 84 billion now.

00:28:44 [Speaker Changed] It, it’s, it really is crazy. Let, let me run through a few, a few more quotes that just cracked me up. First, did Peter Thiel really call Warren Buffet a sociopathic grandpa for, for doubting Bitcoin?

00:28:58 [Speaker Changed] Yes. That was at Bitcoin 2022 in Miami. We’d, he played the like Max Kaiser role of the guy who yelled the craziest stuff on stage. Right. But

00:29:06 [Speaker Changed] But at the same time you revealed that he was secretly dumping all his crypto. Yeah. Or not so secretly ’cause could track all this on the

00:29:15 [Speaker Changed] Blockchain. Yeah. His, his fund had had sold crypto and it only came out after that speech. Right.

00:29:21 [Speaker Changed] A little misleading. There. There were a couple of other people that you referenced that I, I two in particular, I just have to ask about. First Michael Sailor at MicroStrategy. My memory of MicroStrategy when I was on a trading desk was somebody had released what was a false, a fake press release when MicroStrategy was like, I don’t know, a buck 50, some crazy price. And it plummets on this news. It’s halted. And then the company comes out and says, this isn’t a real news release. Somebody who’s a former employee and it reopens and it climbs like two thirds of the way back. But a crazy, crazy history. Michael Sailor recently, CEO of the company becomes a Bitcoin maximalist and says quote, I just hope I don’t get up one day and have to look at myself in the mirror and say, you had $15 billion and you blew it all. There’s the guy who flushed $15 billion down the toilet soon after he loses 13 and a half billion dollars. What was that about?

00:30:31 [Speaker Changed] Sailor said that to the New Yorker and a amazing profile about his.com riches, he’s the biggest loser of the.com bubble. But MicroStrategy plugs along and they

00:30:44 [Speaker Changed] Had some real technology, some software, right,

00:30:46 [Speaker Changed] Right. It was like a real company that was making a decent amount of money. And in recent years, he’s changed the company to be all about Bitcoin. He sunk all the profits into Bitcoin, he’s levered up and borrowed money and bought Bitcoin. So now if you wanna invest in MicroStrategy stock, it’s just a bet on Bitcoin. And he’s also become like the craziest bitcoin maximalist out there who, these are the guys who are like the, the priests of the Bitcoin church. And he says things like Bitcoin is a flock of cyber, hornets stinging the financial system to death. It honestly, the real quote is crazier than that, but it’s people like him that are really it, they actually are key to bringing in new people into this Bitcoin world. And it’s actually why I, hes, I would hesitate to bet against Bitcoin because it’s become this cult and the people who love it just love it so, so, so much.

00:31:37 [Speaker Changed] Right. It’s definitely has cult-like aspects. You also take a swing at the mooch at Anthony Scaramucci, Scaramucci 58 looking hand and Botox smooth wearing a well-fitted suit. His pompadour, freshly dyed jet black. Now I know the Mooch, he’s a good guy. Good enough guy Botox and, and hair dye is is that true?

00:32:00 [Speaker Changed] So the book was thoroughly fact checked and not only did the mooch confirm that, I believe that that was, if I remember correctly, he announced this at this event. Oh, he did? Yes. Oh my dear. He was like, check out my hair. I got a new, I know

00:32:15 [Speaker Changed] Who he likes to say this is a Bri shoot. These are ferragamos on my feet. Like he, he definitely drops brand names on a regular, we were

00:32:22 [Speaker Changed] At Crypto Bahamas, the big conference to celebrate the success of Sam Bachman Freed. He had just made this partnership with FTX and the Mooch loves a press conference. Sure. So he’d called, there were a lot of reporters there at the conference and he had this sort sort of press conference at the beginning, but it seemed like, I mean the only thing he wanted to talk his, he just kept talking about how good he looked and how bad Sam Bankman freed looked. I read that was like the point of the press conference.

00:32:47 [Speaker Changed] I forgot where I read that before the book. But all he talked about is that maybe that’s where the Bri suit came up. Yeah.

00:32:53 [Speaker Changed] I mean that was sort of Sam Bachman’s freed thing. It was, his thing is, I don’t dress up for anybody. Congress. He would, he put on a suit, although he didn’t tie his shoes famously, but at this conference, the Mooch look, I mean he looked great. Bankman Freed was wearing, you know, khaki shorts and a T-shirt. His har all messed up even when he was on stage with Bill Clinton, Tony Blair, Tom Brady, Brady. Unbelievable. Yeah,

00:33:18 [Speaker Changed] Unbelievable. Oh, by the way, there’s a famous photo. You have it in the book of Sand Bankman Freed and Gisele. And you look at it and you go, these aren’t representatives of the same species. These are two completely different life forms.

00:33:32 [Speaker Changed] I I love that photo because it must’ve been taken backstage before they went out to speak at this conference. And Sam just looks like a deer in the headlights. Like the Flash has caught him off guard and Giselle like, you’re never gonna catch her off guard. She looks great in all situations.

00:33:46 [Speaker Changed] She’s a professional, she’s absolutely

00:33:48 [Speaker Changed] Professional. But they, they posed for an ad campaign together that ran in like classy magazines like The New Yorker. He

00:33:55 [Speaker Changed] Didn’t look much better in those ads either. Right. It’s the same sort of disheveled. I, I mean I guess that was part of the whole MIT genius rap. I

00:34:04 [Speaker Changed] Will say this, it kind of worked on me. It was like, I’m authentic, I don’t care. I’m being myself. I’m not gonna pretend. Right. He didn’t come off like this slick salesman. He was like, I’m just the guy who, you know, spends all my time thinking about how to make money trading crypto. I went down to, to shadow him at his office when things were going great. And I was just like, I’m not leaving till he falls asleep on that beanbag. I want to, I want to see him nap on the beanbag. And he did. And he, he slept there for a couple hours and he, at one point he woke up a little bit, opened a package of Nutter Butters, ate them and kind of made a mess on the bean bag and then went back to sleep because I, I had like one last question for him and I was like, well I’m not gonna disturb his nap. So he got those nutter butters. I was like, now’s my chance. Oh nope. Back to sleep.

00:34:50 [Speaker Changed] By the way. I see where the humor in the book comes from. It’s basically how you see the world. It’s really very funny. I’m Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Zeke Fox. He is an investigative reporter for Business Week and Bloomberg News. He has won multiple awards including the Loeb Award. His new book number go up inside Crypto’s Wild Rise and staggering Fall is a fascinating and hilarious ride deep into the heart of crypto. And at the heart of crypto is a stable coin called Tether. And if you go to the Tether website, it will tell you that Tether has $84,165,234,500 and 60 cents for which there is an one equal and opposite Tether coin for each dollar there. You start with the Tether website and you go through the various disclosures including the list of risks. The company could go bankrupt, bank holdings could lose money, the government could confiscate its assets and then you notice what seems like a risk disclosure red flag or we could abscond with the reserve funds. What is the thinking there? Hey, if we ever get prosecuted for stealing money, we could always say, oh no, that was a risk we disclosed upfront.

00:36:20 [Speaker Changed] I mean look at Sam Bateman free, he’s trying to use the terms of service of FTX as a defense now and basically trying to argue that they allowed him to lend all the customer money to his hedge fund. So you know, you ne you never know what maybe they, it could come in handy one day.

00:36:35 [Speaker Changed] So early on you actually asked SBF about tether. FTX has wired lots of money through three different jurisdictions and intermediary banks to move US dollars to Tether. What was Ft X’s relationship to the stablecoin?

00:36:53 [Speaker Changed] I met SBF because I wanted to ask him about Tether. They were one of the biggest users of Tether. Something like 35 billion of Tether passed through. Wow. Them. Now what I’ve learned more recently is that a lot of that came because there was actually in the, during the crypto boom, there was demand for, there was so much demand for Tether that on exchanges like FTX that often traded slightly above a dollar. That’s crazy. And so Alameda, his hedge fund could buy tethers. They had a relationship with tethered the company. They could buy tethers for a dollar and then go sell ’em for a little bit more. The profits are very small, but Alameda’s cost of capital was very low since they were borrowing all the customer money. That’s right. Right. Yeah. So,

00:37:39 [Speaker Changed] So a zero cost of capital, 1% a day is real money. It adds up.

00:37:42 [Speaker Changed] Yeah. Even if it was like a 10th of a percent, they could do it. So I think that accounts for why they were using so much Tether. He did not disclose that at the time. If you think of all the crypto exchanges like different casinos, tether is basically like the cashier and it’s like all in the early years of crypto, these casinos had trouble receiving dollars. Like banks did not want to open bank accounts for crypto companies. So instead the crypto companies would say, Hey customers go to Tether, send them some real money, get some Tether tokens, then you can bring them over here and gamble with them.

00:38:17 [Speaker Changed] So what was supposed to be disintermediation became additional media. You need to had another middleman in the way.

00:38:24 [Speaker Changed] Right. Crypto, it is always sold as as trustless. And in reality it turns out you keep having to trust these people who prove themselves to be totally untrustworthy.

00:38:35 [Speaker Changed] So, so tell us a little bit about the leadership of Tether. Who was the founder and who was the CEO

00:38:41 [Speaker Changed] One of the co-founders was this the mighty duck guy Brock Pierce. And I had a lot of fun meeting him on his mega yacht off the coast of The Bahamas. He sent a speedboat to pick me up. So, you know, I don’t know how often that’s gonna happen in my journalistic career, but, and the CEO was this guy Jean Louis Vanderbilt. And we also met in The Bahamas. The meeting was brokered by Jean Shain, the Inspector Gadget guy. So I’d gone to The Bahamas hoping that I would meet one of these Tether guys and I didn’t see any of ’em there, even though it was a big crypto conference. I thought they’d come. Right. But then finally Shain is like, get over here. jl is he Vanderbilt’s here. And I see this tall Dutch guy with silver hair, kind of a funny scar on his nose. And John introduces me and he is like, Zeke, if you screw this up, I’ll kill you.

00:39:42 Really? With a smile like he’s not killing me, but good line, I appreciate it. Right. So this guy jl, he’s the CEO of one of the biggest companies in crypto. Most people in crypto love to promote themselves. The skeptics. Like this guy Bitfinex would say that there were so little out there about jl, they were like, we don’t even think he’s a real person. So I go to Shake JL Vanderbilt, the CEO of TE’s hand, and I’m like, nice to meet. And then he says, the man who doesn’t exist. And I’m like, wow, I just love these guys.

00:40:12 [Speaker Changed] These guys. They’re full bond villains. They’re playing right into the characters. Yeah.

00:40:16 [Speaker Changed] Hilarious. And we had, we had a a, we spent hours talking in the casino, me and jail and had a conversation another a lot conversation that was very funny. In hindsight, I was telling him, I was like, listen man, I just spent a couple days at Sam Bankman Free’s office. That guy doesn’t have anything to hide. He just let me see, walk around the whole office and see everything. Nothing

00:40:37 [Speaker Changed] To hide.

00:40:38 [Speaker Changed] Yeah, how come you’re being so secret? And then he, he wasn’t like, he totally bought into it and he was like, well it’s easy for Sam Bachman freed, you know, he started his company more recently, you know, tether, we

00:40:50 [Speaker Changed] Had to a little of a sketchy past.

00:40:51 [Speaker Changed] Yeah. I mean he’s basically like, there’s stuff in our past that we can’t reveal

00:40:55 [Speaker Changed] For the record as we’re recording this Tethers trading ad

00:40:59 [Speaker Changed] Still a dollar the coin,

00:41:00 [Speaker Changed] It’s, it’s a dollar. And, and here you referenced this in the book, but their business model now with Fed funds over 5%, you could get Riskless treasuries just about 5%. Their business model is collect $85 billion. Put it in Riskless Treasuries. Hey you are, you are gonna get a billion dollars a quarter for doing almost nothing. That’s not a bad business model.

00:41:26 [Speaker Changed] So when I started looking into Tether, interest rates were zero. And so Tether was sitting on this huge pile of money, but, and they had incentive to put it at risk, right. Because they needed to earn interest something. Right. So that was another reason to be suspicious of them. I found evidence they’d invested in Chinese commercial paper, they’d been making loans to other crypto companies. It seemed like not riskless, but now Yeah, you just put it in treasuries, earn 5%. They’re one of, if you believe their numbers, they’re one of the most profitable companies in the world and it’s a shoestring operation. A

00:41:59 [Speaker Changed] Assuming they have all $84 billion or $85 billion accounted for free money to them. Yeah. Now that you’re getting a yield, they really don’t have to do anything other than not get hacked.

00:42:10 [Speaker Changed] Yes. I mean, which to be fair, they have, they were the victims of one of the biggest tax ever. Right. So I don’t know if they’re that trustworthy on that front, but Yeah. Even if, let’s say just hypothetically, let’s say they had been a billion dollars in the hole, they could easily earn their way out of it. Now very, the interest rates are higher.

00:42:28 [Speaker Changed] Right. Very easily. Let’s talk about some of the other players in both crypto and, and stable coins. Binance, founder Chang xo, better known as cz, is he now the richest man in crypto.

00:42:42 [Speaker Changed] He’s gotta be, is down to him and Justin’s son from the Tron blockchain, both of whom show a notable reluctance to enter US soil.

00:42:55 [Speaker Changed] Gee, wonder what?

00:42:56 [Speaker Changed] Yeah. Sun’s been sued by the SEC and Financed has a a number of cases. These guys do still have a ton of money. And when I, I went down to The Bahamas after FTX failed and WI was with Sam bankman free when he just, before he got arrested, he was still thinking, I,

00:43:15 [Speaker Changed] How do I get myself

00:43:16 [Speaker Changed] Out of this? Yeah. I gotta bail myself out. I need to find someone to give five, $10 billion so I can get FTX going again. Pocket

00:43:23 [Speaker Changed] Change. Yeah. Walking around

00:43:24 [Speaker Changed] Cash. But so it, but it was interesting to me was I was like, so who’s got five, $10 billion? He’d already tried cz that didn’t work. And,

00:43:31 [Speaker Changed] And it from the book, it’s pretty clear CZ is the one who stuck the knife in.

00:43:35 [Speaker Changed] Oh yeah. You can’t really blame cz because I mean, fraud is a fraud. You know, if he, he, but he’s the one who made a tweet that got people start starting to pull their money outta FTX, which revealed the hole at the center of the exchange. Right. But the other people, Bingman Fried, said had five $10 billion were Tether. They said, no, we’re not bailing you out. And this guy, Justin’s son who has this coin tron and is like a crazy character in himself, missing chapter from the book.

00:44:06 [Speaker Changed] Let’s, let’s talk about Celsius and, and is it Alex Masinsky another stable coin? Right. He

00:44:13 [Speaker Changed] Had a kind of, Celsius was like a crypto bank and he was saying, semi me your stable coins and I’ll pay you interest on them. We met at Bitcoin 2021, my first crypto conference. And I was there, I wanted to gather info on Tether Celsius, had done business with Tether. So I set up a meeting with this guy Hinky. He was a big hustler. He, he was at every conference. He was the one giving all the speeches. He always wore this T-shirt that said, banks are not your friends. Right. We sit down, he told me his, I asked, I’m polite. So before I get to like the, the investigative questions, I’m like, oh, so what’s your company do? And he is like, well it’s, it’s sort of like a bank. Give us your coins, we’ll pay you up to 18% interest. But if you want a loan, we’ll give that to you for free. Like, we don’t charge interest or a very low rate.

00:44:59 [Speaker Changed] OO of all the frauds in the world of crypto, when you detail many of them when interest rates are zero and they’re gonna pay you 18% on your coins, it sounds like we’re gonna keep 82% of your coins and the 18% is, is a scam. Well it just seems like how can you pay when the 10 year is yielding one and a half percent? How could you legitimately pay 18% other than number go up? Yeah. Is is that all it is?

00:45:28 [Speaker Changed] Maybe he bought a lot of those shoes and he had a whole army of people walking in circles. There you go. But he, he told me, he told me at the, I, I had the same reaction. Even when things were going great, this seemed very fishy. And I was shocked when he told me he had $20 billion. But he told me the banks are the scammers. They’re taking your deposits and they’re earning huge profits and they’re lying to you and they’re saying they can’t pay you any interest. They,

00:45:53 [Speaker Changed] They’re, by the way, they don’t lie to you. They release their profits every quarter. Yes. Hey, here’s how much money we’ve made on your dep. It’s all public. It’s not like it’s hidden.

00:46:02 [Speaker Changed] Yes. And I hated to find myself, I spent a, I was over at Maki’s apartment on the Upper East side and I found myself like defending Wall Street being like, listen, the JP Morgan is very safe. Even in the financial crisis, people didn’t lose their deposits. Right. But he’s like, somebody’s lying. Either JP Morgan is lying or Celsius is lying. And even in the moment I was like, this is a great line. I’m take it’s definitely Alex that’s lying.

00:46:27 [Speaker Changed] I’m gonna take Jamie Diamond over over Alex Mki. Just, just, just because I’m 51 49, I’m leaning Diamond’s. Way

00:46:35 [Speaker Changed] Celsius did collapse in the end. And actually a month or two ago, Hinsey got arrested and charged with fraud.

00:46:41 [Speaker Changed] Un unbelievable. So, so one of the, my favorite stories from this era was the Tara Luna stable coin situation and a, a pretty well regarded hedge fund manager, Mike Novogratz. He got a Howling Wolf Luna tattoo on his upper arm. Tell tell us a little bit about Tara and Luna and, and Novogratz.

00:47:04 [Speaker Changed] So Novogratz back a few years ago, he gave an interview to our colleague Eric Schatzker, where he said something that I thought was very honest and that I, I’d really liked this quote. And he said, listen, this crypto thing is the biggest bubble of our lifetime. There’s great fortunes to be made on the way up and like, I’m gonna get mine. And and

00:47:24 [Speaker Changed] He did. Yeah. For the most part to, let’s give him credit. He, he bought, when things were low, he saw, I don’t, I’m not gonna suggest he top ticked it, but he definitely cashed a decent amount out right before the most recent collapse.

00:47:38 [Speaker Changed] Yeah. I mean I think his profits overall are, are high. He was definitely wrong though on this Terra Luna one. Well,

00:47:44 [Speaker Changed] The whole tattoo thing was just Yeah. You know, talk about, talk about the wrong thing to permanently etch on your body.

00:47:50 [Speaker Changed] Oh my God. So it was run by this guy, this South Korean guy named Dowan, who was very mean on Twitter. He’d always just be insulting people if you ever questioned Tether. But the pitch was a lot like Celsius. You could earn 18%. I think it actually was also 18 or 19%. That

00:48:06 [Speaker Changed] Seems to be the

00:48:07 [Speaker Changed] Magic number. Yeah. That you could earn if you deposited your terra coins into the anchor protocol. And now it, unlike Tether, which is backed by real dollars in the bank or so they say the Terra coins were backed by Luna Coins and you could always trade your tar coins for $1 worth of Luna Coins. Now you might ask, why do I want any Luna coins? And the answer is they’re

00:48:31 [Speaker Changed] They’re back.

00:48:31 [Speaker Changed] Don’t ask about that. They’re

00:48:33 [Speaker Changed] Backed by Tar

00:48:33 [Speaker Changed] Coins. No, the Luna coins were, they actually, there was no story for why you should buy the Luna coins. And a lot of people in crypto, even when this was going on, were like, Zeke, you might wanna take a look at this. Tara Luna one.

00:48:47 [Speaker Changed] So Zoe, even the crypto bros were skeptical of this.

00:48:50 [Speaker Changed] Yes. But Novogratz was a big investor in it and he got the Luna logo tattooed on his shoulder. And I don’t wanna like totally let him off the hook because what he said in his quote, and also by like tweeting about this, tweeting his tattoo.

00:49:04 [Speaker Changed] He was promoting it. He’s

00:49:05 [Speaker Changed] Promoting it and he’s bringing in people who, because the way to really make money on crypto is to get in early. Right. Great.

00:49:11 [Speaker Changed] Find greater fools to sell it to.

00:49:13 [Speaker Changed] Yeah. And a lot of these insiders, I’m not saying him with Luna, I don’t remember the details, but they get special deals and they get the tokens at like for a penny, it can rise and fall and they’re still sitting pretty. And so these guys, by promoting these bubbles, are bringing in new people who are gonna lose real money.

00:49:30 [Speaker Changed] Speaking of losing real money, let’s talk about the initial coin offerings. I was, I always thought they were sketchy. I was shocked to read in the book, 80% of ICOs are fraudulent. Explain,

00:49:44 [Speaker Changed] Yeah. So this was the last bubble. It’s important with crypto, you need to keep coming up with like a new twist on the story. So

00:49:52 [Speaker Changed] Is that where NFTs come from and ICOs come from?

00:49:56 [Speaker Changed] Yeah, I, I would say that, I mean people in this, in the new, in the most recent bubble, people talked about coins. Right. And even in sort of like a loving way, they’d be like, oh, I’m, I’m buying the latest like coin. It’s going to the moon. And that

00:50:11 [Speaker Changed] Literally, by the way, was the cover of a business week edition rhymes with Bitcoin.

00:50:17 [Speaker Changed] Oh yeah. Even people who like NFTs will tell you, they’re basically coins with pictures on ’em. And so ICOs are like the previous iteration of this technology back in 2017, you could just say, Hey, I’m gonna put dentistry on the blockchain. I got DTA coin. That’s like a real one actually, I think one of the more legit ones, but they got like a million bucks. Yeah. Is that,

00:50:40 [Speaker Changed] How is that more legit than others? Like, like I

00:50:42 [Speaker Changed] Think there was some real effort to like get dentists to update their tooth databases or something.

00:50:47 [Speaker Changed] So, so the most legit thing I read had to do with Ethereum and smart contracts. And you can imagine a use case where if Taylor Swift were to put her tickets up for sale, she could build into it, Hey, no, nobody can, can go out and and sell these these for 50 times what fans want to pay if you resell them, I get half of the proceeds. And that, that would keep the scalper to a minimum. Like that is a use case. That makes sense. None of these other things seem to have a real use case.

00:51:21 [Speaker Changed] Yeah. And even, I mean even that use case, I was frankly surprised as continually surprised to the downside in this crypto world with Ape Fest. You would think that this is like the premier NFT event. There’s all this talk about how NFTs will be good, the blockchain will be good for ticketing. It turns out they do not use the NFTs for ticketing. Right. There’s this whole other like complicated system set up to figure out how you get in there. And I think a lot of this stuff sounds good in theory, but wait till my mom buys her Taylor Swift tickets for $2,000. She tries to send it to the Fox head and then she, she can’t remember where she buried the password in her backyard. Right? Like nobody’s gonna like that. People like customer service, they like, you know, to use their credit card. They can get a refund if they get scammed. You know, so I’m not even sure that the idea that that there really is demand to have concert tickets be controlled in some decentralized database. You know, I think there’s a reason why for all that we complain about Ticket Master, there’s a reason why like a central authority has grown to dominate this market

00:52:22 [Speaker Changed] And, and you use the example that Bitcoin has been around for as long as it took us to go from the first website to the iPhone longer than Airbnb and Uber have been around. And those have become real businesses. What is the problem that Bitcoin is trying to solve?

00:52:44 [Speaker Changed] I don’t deny if we had a Bitcoin, if we had Michael Saylor here, he could probably talk quite convincingly about how great Bitcoin is in theory. And I would just say, look at what’s happened in practice. Nobody’s using it for anything. Even in El Salvador where it was really promoted as this great success story where we would see Bitcoin in the real world. Nobody likes it, nobody’s using it. And if this crypto stuff was so great, it would sell itself. You wouldn’t need to be pushing it on people. The technologies that that people like just spread virally. Huh.

00:53:15 [Speaker Changed] Really, really amusing. I wanna talk about some of the damage from crypto, but before we get to that, you’ve been going to the Sand Bankman free trial about Ft X’s collapse. It seems from this book, there’s a lot of blame to people like Carolyn Ellison who ran Alameda Research, Gary Wang, who was their technologist and, and wrote all the code and, and Nisha Singh, is it just that they played the prisoner’s dilemma better than Sam Bankman freed, like everybody was so quick to throw him under the bus. Looks like there’s a lot of culpability on the rest of that crew. They were all adults running a business that had lots of fraudulent activity going on.

00:54:02 [Speaker Changed] What the trial has been so far is Sam’s sitting there and there’s been a parade of his best friends, his colleagues, and they’ve each been saying, I’m really sorry. I committed fraud. I did it with that guy over there. And like the jury has been falling asleep for some of the details.

00:54:20 [Speaker Changed] Does the defense get up and say, so tell us about the fraud. You, you were an adult, right? You didn’t do this when you were 14. Tell us about the fraud you committed when you were running this hedge fund or when you were writing the code. It, it’s kind of, they’re kind of laid back, aren’t they? The

00:54:36 [Speaker Changed] Problem is that if the more they hammer in that these witnesses committed fraud, that would show that these people know a lot about the fraud. And they’re all saying that they did it with Sam. A lot of times they have a lot of details about which fraud they worked on and how they did it. They pulled out like Google Docs that show them doing the fraud. Some of them even have comments from Sam on the Google Doc and it’s not like you get a free ride just ’cause you plead guilty. Right. They’re probably all going to jail for a couple years at least. But

00:55:05 [Speaker Changed] Not 20 or 30 years.

00:55:06 [Speaker Changed] No. Caroline, the head of Alameda, Sam’s ex-girlfriend, she cried on the stand when she was talking about how bad she felt about participating in this fraud. I don’t think they’re trying to minimize their own involvement. They’re just saying this guy was the boss and like we did it with him.

00:55:25 [Speaker Changed] Fair, fair. Fair enough. So, so let’s talk a little bit about, in the book, you talk a lot about some of the damage crypto and, and Tether has caused probably the most harrowing section was on human trafficking. You go to Cambodia to look at at, at some of these slave or prisons. How else do you describe these?

00:55:49 [Speaker Changed] It’s pretty accurate. I mean it’s really crazy. You, you know, we all get these spam text messages, right? Like they’re like, Sam, did you pick up the milk on your way home for the dog? They’re not like that Great at at English. They don’t always make sense. These messages, I learned it. They will try and make friends with you. They, and they’ll eventually try to get you to trade crypto with them to try out some new hot crypto app. And they always use Tether. They’ll say, Hey, I got this great trade idea for you, for you just go buy some tether on Coinbase or some regular app and send it to my special app. We’ll, we’ll make lots of money.

00:56:28 [Speaker Changed] You got a spam text from Vicki who, who sent you pictures clearly not from New York, which is what she told you. And you sent her a hundred dollars worth of Tether and you were able to track it. Yeah. Which is kind of surprising ’cause we’ve always been told all this crypto stuff is anonymous. Turns out not to be very anonymous either.

00:56:46 [Speaker Changed] It’s, it’s kind of weird that way. I mean, it’s pseudo, right? Right. So everybody’s wallet has an address that’s not associated with their name. It’s just like a string of random numbers and you can see all the transaction. If you, if I know like, hey, this string of random numbers is Barry’s address, I might even be able to go see like what exchanges you used or where you sent your money. But if I don’t have that first clue that says this is Barry’s address, then it might as well be anonymous. So these messages are coming from Cambodia or elsewhere in Southeast Asia. And I learned that the people sending them are often victims themselves. I mean, I spoke with one guy, he’s a young guy from Vietnam. He’d been lured to Cambodia thinking that he was gonna be doing something else. When he gets there, they’re like, no, you’re gonna scam 24 hours a day. You’re not leaving this building unless you pay us thousands of dollars. If you don’t scam enough, we’re gonna beat you. We’re gonna shock you with these electric batons. And there’s actually entire office parks. I, in the book I go to one called Chinatown in Western Cambodia.

00:57:52 [Speaker Changed] You have photos, they’re horrifying.

00:57:54 [Speaker Changed] Yeah, it’s like dozens of towers. Each of them filled with people, thousands of people who are sending these spam messages who can’t escape. Obviously this doesn’t prove anything. But what really seemed quite telling to me, I get to Chinatown though, most famous of this scam compound site where this Vietnamese guy interviewed, had escaped from where people were tortured, people were killed. What do I see right at the entrance to this compound? A closed shop that was a currency exchange. And it says right on the, on the big sign out front USDT, like, we will trade your tether $4 right here.

00:58:33 [Speaker Changed] So if you wanna pay ransom to get someone freed, you can do it then and there.

00:58:38 [Speaker Changed] So the crypto guys would say, Hey, the scams existed before crypto. This isn’t really crypto stuff, but I think that crypto made all this a lot easier. Made it possible on a bigger scale. I spoke to a veteran human trafficking investigator from Taiwan who’d been to Cambodia to ransom young women who’d been tricked into going there from Taiwan. And he told me it used to be these human traffickers use banks and like maybe they’d set up, give fake names or whatever when they opened their bank accounts. But those were clues. Now they use Tether. What am I supposed to do? Can’t try. I I can’t try, you know, he was like, this is making my job of investigating human trafficking a lot harder. I I’m

00:59:17 [Speaker Changed] Genuinely shocked the United Nations hasn’t stepped into this ’cause this is really horrific.

00:59:22 [Speaker Changed] You know, it, it is actually risen to their attention now. And they actually put out a report where they estimate that as many as 200,000 people work in these scam compounds. Oh my God.

00:59:34 [Speaker Changed] Yes. That’s horrible.

00:59:35 [Speaker Changed] The Chinese government has cracked down and there’ve been a number of busts. A lot of the worst compounds though, have moved to Myanmar where they’re essentially like outside of the reach of law enforcement. They’re in these like border regions where even like the police don’t go. I went to one in a national park in Cambodia behind like a unbelievable big, big hotel. You know, it

00:59:59 [Speaker Changed] It, it’s really unbelievable. The, another statistic from the book that blew my mind, FTX had donated money to one in three members of Congress. How is that possible?

00:11 [Speaker Changed] Yeah. So Sam, he had this idea that, you know, a lot of people say there’s too much money in politics. He said there’s not enough money in politics. Just think about how, and his logic kind of made sense. No,

00:24 [Speaker Changed] It definitely does.

00:25 [Speaker Changed] The Congress controls these huge pots of money and if you can influence Congress to spend on your preferred causes, even if it costs you, you know, a hundred million dollars to buy influence, that could actually be very small in comparison to how much money you get Congress to spend. So he basically funneled as much money as he could to everybody in Congress. And he took this really cynical and illegal approach to it where he was like, I can’t just give to everybody because then the Republicans won’t like me. ’cause they know that I give to a lot of Democrats. The Democrats won’t like me if they see that I’m not on their team. So he picked two of his lieutenants and he was like, all right, you’re the Democrat and you’re the Republican. We’re gonna funnel your our donations through you.

01:01:12 [Speaker Changed] It was mostly to Democrats, but a lot went to Republicans.

01:01:15 [Speaker Changed] Yeah. So he was one of the biggest donors to the Biden campaign, gave something like $5 million. And these were not like, you know, cash in bags. These were like donations that like other corporations give. And I, I think it was like pretty much two thirds to Democrats, but still a third to Republicans. He
01:01:34 [Speaker Changed] Used to work at a hedge fund. He knows how to hedge his betts. Right? Yeah.

01:01:37 [Speaker Changed] And, and he had a lot of things, a lot of priorities. But one of the things he wanted was for the CFTC to regulate crypto. It seemed to me even when things were going well, he was basically trying to get his preferred crypto legislation passed that would effectively cement FTX as like the go-to crypto exchange that followed all the rules, right. And box out some of his competitors like Binance that were not run by Americans, didn’t have the same political influence and wouldn’t be able to comply. I think that was part of his plan to grow and grow and grow and get out of this hole of borrowed money that he was in. Huh.

01:02:16 [Speaker Changed] So you also mentioned in the book two of my favorite authors, the first being Carl Hessan, who I, I just love everything he ever writes. Just the, the Best Beach reads about the endless corruption in Florida. He, he’s an amazingly entertaining writer, but also Michael Lewis who has a book out going Infinite that came out just around the same time you guys did. What are your thoughts on Lewis’ portrayal of SBF? What did he get wrong?

01:02:49 [Speaker Changed] I was writing this book. I became aware that pretty early on that Lewis might be working on a crypto book too. And this is my first book, you know, he’s like the goat, like when

01:03:01 [Speaker Changed] It comes to this, he’s the poet laureate of financial. Right, right, right. So,

01:03:05 [Speaker Changed] I mean, so that was pretty, that was pretty scary in me. But then I was at Crypto Bahamas where I saw the mooch, I saw Michael Lewis interviewing Sam Bankman free on stage. I was looking forward to hearing what he had to say at this point. I’d learned about the shoes, I’d learned about the Pokemon game. I mean, I came in pretty skeptical of crypto. Right. And all I was seeing was like a bunch of scams. And then I see Michael Lewis on stage interviewing Sam and he’s just like fawning all over him. He’s saying great things about him and it goes beyond just being polite. He says, listen, look at the traditional financial world. Look at the crypto world, crypto’s better. And I’m like Michael Lewis, like I I I, I grew up reading your books. I learned a lot about finance from you, but I really think I, I can’t believe you would say that. So at that point I actually wondered maybe he’s not writing a book. Maybe he’s just here giving speeches or maybe he’s working on a documentary or something. It turned out he said he was not paid and he did write a book. He was there to write a book.

01:04:07 [Speaker Changed] So, so he wrote a book, which turned out to be a best seller. Yeah. And he sold the movie rights to Apple TV for a decent amount of money.

01:04:14 [Speaker Changed] Yeah. Now he said something in what I assume was a paid speech. He spoke at Bitcoin 2023 in Miami. He was on stage with Arthur Hayes, the head of BitMEX. And Michael Lewis said he got asked about, he was like, you know, all you guys here want to know, do I believe in in crypto? And he’s like, you’re re you remind me of the born again Christians that I met when I was writing the blindside. You everyone wanted to know if I, if I believed. And he’s like, listen, it doesn’t matter what I think about crypto. My book isn’t about what I think about crypto, my book’s about Sam Bankman freed and it only matters what he thinks about crypto. And I think this is a mistake. I think that crypto, it’s like the biggest financial mania in modern times. And there’s no way to write about that accurately without having an opinion about crypto by just like saying, oh, I’m neutral. I’m, I think you’re missing out on explaining what’s happened over the last few years.

01:05:16 [Speaker Changed] So if you read the end of Going Infinite, Michael Lewis suggests that the bankruptcy trustee who who said FTX was a bigger mess than Enron, which was a giant mess in and of itself. He implied that by the time this is all said and done, by the time they liquidate the venture investments and everything else, the missing $8 billion is gonna be found. The, is that still the case today? Or has that, has that gap narrowed? Has it gotten wider? What’s going on with that recovery of the missing funds?

01:05:51 [Speaker Changed] It’s still a bit mysterious now. Bankruptcy claims traders are not paying, you know, 90 cents on the dollar for FTX claims, they’re going for like 40 cents.

01:06:02 [Speaker Changed] All right. So a little above average, but not a whole lot above average.

01:06:05 [Speaker Changed] So I mean, what that suggests is that they think there’s gonna be a pretty good recovery, but not the whole thing. 80 cents,

01:06:10 [Speaker Changed] Something like

01:06:11 [Speaker Changed] That. Yeah. Now Sam Bankman Free’s lawyers, this is the defense of Sam Bankman free. Sure. But like, hey, the, the money isn’t actually gone. Right.

01:06:19 [Speaker Changed] It’s just misplaced like literally other places were saying, Hey, is this your $300 million? Right. In Bitcoin we’re holding Now,

01:06:26 [Speaker Changed] First of all, it’s come out at trial. Everyone at all the witnesses said we committed fraud, we took the customer’s money, we knew it was wrong. Right. And Sam Bateman Free’s lawyers have brought this up and they’re like, Hey, how about we bring up as a defense that like some of these betts worked out and maybe the money’s not gone. And the judge addressed this and he said, the argument that you’re making and that Michael Lewis’s semi making in the book, he’s like, that would be like, I robbed the Federal Reserve and then I went and bought a million Powerball tickets, then I won and I’ve returned the million dollars. It doesn’t matter, you still rob the Federal Reserve, you’re still going to jail.

01:07:04 [Speaker Changed] So to be fair, Lewis says, it wasn’t that the betts were gonna pay off, it’s that all the money wasn’t accounted for properly. And if that happens, maybe that money will be missing. Since then, we’ve learned a lot of that money has been speculated with or gambled with.

01:07:22 [Speaker Changed] If Lewis was saying that the money was simply misplaced, like that has been proven to be wrong. The money was definitely not just misplaced. And they found it like it was bet on a lot of things. And for example, it came out at the trial that customers give money to the exchange. They’re counting on the exchange holding it and giving it back when they wanna withdraw. Just like you’d count on Right. E-Trade to have your money when you want to take it out. And what he had done in one instance was give $500 million to his hedge fund to invest in some AI company. And that turned out to be, it looks like it was a pretty good bet. Giant

01:07:58 [Speaker Changed] Winner.

01:07:58 [Speaker Changed] Yeah. But it doesn’t mean it was okay. The customers never agreed that he could gamble with their money. They thought that they were gambling with their money on Dogecoin or whatever.

01:08:09 [Speaker Changed] Right. Thi this is, you know, part of the description was Alameda had broader parameters for going over the limits, the lending limits. ’cause they were helping to facilitate making a market. But that would’ve been a little over not billions of dollars over tens of billions of dollars over.

01:08:29 [Speaker Changed] Yeah. And, and what the witnesses have testified to is that from actually very early on, Alameda was allowed to treat like the customer money, like a piggy bank and use it to gamble on whatever. And actually one of the things that Michael Lewis has said that has also been shown to not be true at the trial, he said FTX, if you set aside the fraud, it was a good business. Right.

01:08:53 [Speaker Changed] Well, the argument is, hey, we’re gonna do a bajillion crypto trades and take a tiny little piece of each and it’s a couple of billion dollars a year.

01:09:02 [Speaker Changed] So the problem is that FTX, the way the exchange was set up, they claim they had this great risk management system, this amazing liquidation engine. But it turned out that they didn’t, and the exchange over the years actually took big hits at different times. And that they covered those up by shunting the losses to Alameda. So,

01:09:21 [Speaker Changed] So not just hacks, but actually trading losses.

01:09:24 [Speaker Changed] Yes. So they, the exchange lost almost a billion dollars because of a failure of the liquidation engine on something called mobile coin. And if they had disclosed this, first of all, that would’ve erased all the exchanges profits. Right. So like no more venture capital, you know, 32 billion valuation. So instead they had Alameda take the hit and Alameda could take the hit ’cause they had a limited access to the customer money. Right.

01:09:50 [Speaker Changed] And there were no outside real owners. ’cause it was all Yeah, mostly sand bankman freed.

01:09:55 [Speaker Changed] So that is not a good business. And the, it, it’s looking like the truth is much closer to this was a fraud from the start, then this was a good business that was, that got outta control because Sam Bankman fried wasn’t paying attention.

01:10:10 [Speaker Changed] So, so the summation that I came away from with your book as opposed to lots of other, the other things I’ve read on crypto is there’s no regulation, there’s no disclosure requirements, there’s no transparency when there’s a billion dollar loss. Nobody says anything. It’s all covered up. And, and, and on top of all of that, there’s no federal reserve or federal government as a backstop as much as the libertarian crypto bros, the FDIC and the government. Hey, no matter what happened during the financial crisis or during, even during the pandemic, my ATM card still worked.

01:10:49 [Speaker Changed] I don’t talk about the SEC that much in the book. And I actually would blame the SEC for not being a little quicker to crack down on some of this crypto stuff. But I think the book is, if anything, like a argument for financial regulation and saying that some of these age old rules make sense. There’s a reason why companies have to disclose stuff and it’s to prevent Exactly. Things like this FTX collapse.

01:11:11 [Speaker Changed] Really, really interesting stuff. So you, you guys have sniped at each other a little bit in public, you’ve traded barbs. What’s it like when an author whose books you’ve loved is is taking a swing at you?

01:11:24 [Speaker Changed] Yeah, he said some pretty nasty things to the New York Times about me. Oh

01:11:30 [Speaker Changed] Really? What did, what did he say?

01:11:32 [Speaker Changed] He called me, he said that I was skier than sand bankman Freed.

01:11:37 [Speaker Changed] Come on. Really? That’s not right.

01:11:39 [Speaker Changed] Yeah. So look, I didn’t like that. And I, I think it’s been pretty cool. A lot of the reviews have compared our, our books. And I like really didn’t imagine that people would prefer my book to Michael Lewis’s. And, and I’ve been like amazed to see that it’s gotten such good reviews.

01:11:59 [Speaker Changed] This is the book to read on crypto is what Wired said. Read the other SBF book.

01:12:05 [Speaker Changed] What I realized when I finished the book is that before all this I was just like, you know what, this was an amazing adventure. I’ve always wanted to write a book like this. I’m really proud of how it came out. I’m sure Michael Lewis’s book is gonna be a hit, but like whatever, I don’t care about his book. I think people should read this and it’s gonna be, and it’s a lot of fun. I actually just don’t know where I’m gonna get another story like this. Like this is like the story I’ve been waiting for my whole life.

01:12:32 [Speaker Changed] Well you’re, you’re a relatively young guy. I’m sure there’s a a another book that will come along. This is really a, a deeply researched work of investigative journalism number go up. And if you were skeptical or, or even just crypto curious beforehand, it’s hard to read this and not come away with the thought that this is a massive bubble that will end badly for everybody involved.

01:12:59 [Speaker Changed] You know what, I’ve been particularly pleased. I’ve gotten some comments from crypto people and they’ve said that they actually really liked the book. And one guy said, please stay in crypto. We need you to make fun of us.

01:13:11 [Speaker Changed] So, so when I, I put a something out on Twitter yesterday saying, Hey, I got Zeke Fox tomorrow, what should I ask him? There were a handful of kind of goofy questions. Ask him if he shorted Bitcoin was one of ’em. Someone said, Hey, you know, would you and Michael Lewis ever this, someone slipped into a DMM and said, Hey, would you and Michael Lewis ever sit down on a stage together and have a debate about Sam bankman free FTX and crypto?

01:13:38 [Speaker Changed] I would love to do it if Michael Lewis, if you’re listening, let’s do it. You know, we can, you’re a big draw. We can sell tickets, we can give money to one of the charities that SBF stiffed.

01:13:49 [Speaker Changed] And, and to be fair, I really enjoyed both books, but they’re two very different types of books. The one other question I wanted to ask you before we get to our favorite questions, you were part of the team that wrote this interesting business week series on how local New York state courts had been weaponized by debt collectors sign here to lose everything. You want a Loeb award for that? Tell us a little bit about that bit of investigative journalism.

01:14:20 [Speaker Changed] One of like the best threads that I pulled in my whole career has been this world of brokers who sell small business loans and it’s called Merchant Cash Advance. Right. And basically the guys who were like worked for Jordan Belfort, like back in the nineties, that that whole business of cold calling people and selling stocks has dried up. And if you’re still, but if you, if you still wanna quote, call people and earn commission, a lot of those guys now sell merchant cash advance to small businesses. It’s like calling up a bodega and being like, Hey, do you need 10 grand? I’ll get it to you tomorrow. But if you, if you sign up, you’re gonna have to pay back like 15 in two months or something like that. Crazy rates way higher than loan sharks that were charged.

01:15:00 [Speaker Changed] Sounds luxurious and should be illegal.

01:15:03 [Speaker Changed] Yeah. But they’ve got all these loopholes and the series was about this one amazing loophole that they came up with. These guys are super creative and I I like a good scale.

01:15:14 [Speaker Changed] Is this the confession of judgment? Yeah. So because that’s been around for a long time, but it wasn’t really used.

01:15:19 [Speaker Changed] Yeah. So these guys, they would, if, if you were the bodega, you would have to, before you got the loan, you’d have to sign a paper that said, I have defaulted on this loan and if judge when you see this document, please rule against me and seize my assets. So the lender would be holding that document and if they ever

01:15:40 [Speaker Changed] Dated or undated. Ooh. Because if you’re getting the loan on October 1st and the confession of judgment is dated October 1st seems a little sketchy. They

01:15:48 [Speaker Changed] Had all that covered. Right. The wording was not exactly how I just said it, it was it all, it would all get stamped fi It would be it. The, the point of the series is this was legal. You, you could do this, you could take it to court. If so what would happen is the bodega misses a payment. That’s it

01:16:04 [Speaker Changed] Done.

01:16:04 [Speaker Changed] And yeah, the lender goes to court with this document, no warning, they get it stamped. ’cause you already signed it. And then amazingly the lender could take this document to New York City Marshall Yeah. Who’s like a sheriff, sheriff. And that sheriff would then fax something to the bank where the bodega has a bank account and get the whole 15,000 right there. So instead of waiting two months to get your you serious return, you get it in like a week or two if you, if the bodega missed a payment or even if you just claim they did. ’cause there’s no chance for them to contest it. Wow. So me and my colleague, Zach Mitre did a series about this. We wrote about a bunch of crazy characters who were exploiting this loophole. And then New York State passed a law closing this loophole. After that they, they moved to Connecticut and started doing it there. We exposed that loophole. Connecticut passed the law closing the loophole. I’m sure they found a new state.

01:17:02 [Speaker Changed] So, so how did you talk about a thread to pull? How, how did you find this?

01:17:06 [Speaker Changed] I was writing about these crooked brokers and I I was doing, I did a kind of fun story about how it was around the time the Wolf of Wall Street came out and it was the, the point of the story was sort of like, these guys are down on their luck and like the cold calling business is no good anymore. Right. And a lot of these guys, so I was spent a long time taking ’em out for, you know, stakes at, at Harry’s or whatever downtown. And they would, a lot of them told me they’d gotten into this cash advance business. And finally I was like, what is this cash advance business that you’re all doing now? This might be kind of interesting. And one of the first guys I met in it, this is back in like 2014, I went to this guy’s office. So the financial district, like, it’s like the, it’s got the lowest office rents in New York. These offices are like dumps. I go to this guy’s, but

01:17:53 [Speaker Changed] It’s a Wall Street address. Right.

01:17:55 [Speaker Changed] So I, I go to this guy’s office who runs this thing called Pearl Capital. And I meet this guy named Abe runs Pearl Capital. And he, it’s one of these cash advance outfits that charge like 500% interest. And it’s like this dumpy office with like cases of Red Bulls stacked up. They,

01:18:12 [Speaker Changed] They’re not wasting money on marble and, and Walnut.

01:18:15 [Speaker Changed] No, no, no. And I, I meet one of his, his minions who’s like 18 years old, he had this, he has his minion Gimme a ride home. The guy’s driving like AV 12 Mercedes. He is this like high school dropout who can with this thick Brooklyn accent. And as he drives me home in his a hundred thousand dollars car, he’s calling these these bodega owners and being like, you’re late on your payment. And I’m just like, what is with these guys? And so Abe told me, you see my empire here with like the stained carpets, I’m gonna sell this company to like a hedge fund. We’re making so much money, I’m gonna make a hundred million dollars. I’m gonna be rich.

01:18:56 [Speaker Changed] Just, just don’t tell any of that to an investigative reporter from business week. And you might have something left to sell.

01:19:04 [Speaker Changed] Whoa. So he did tell me that. And then I was like, I wa I was newer at this so I wasn’t quite sure how to do the story. But then one day I obtained a letter and it said, dear Abe, we would like to buy your company for a hundred million dollars. Get out. Sincerely. Goldman Sachs Get out. Yes.

01:19:25 [Speaker Changed] And did he sell,

01:19:26 [Speaker Changed] He did sell. He didn’t get quite a hundred million. He sold to a different company and he had actually, he moved, he did the Puerto Rico tax thing. Right. Moved.

01:19:34 [Speaker Changed] You talk about in the book, by the way, Puerto, what, what is it about Puerto Rico, Miami, Bahamas, all these fraudsters. They like warmer weather. What what, what’s that about?

01:19:43 [Speaker Changed] You can actually, you can get out of all your taxes by moving your company and yourself to Puerto Rico.

01:19:49 [Speaker Changed] 4% Puerto Rican tax rate. That’s all you owe.

01:19:52 [Speaker Changed] Yeah. No federal tax, no capital gains, no state tax. Yeah. But you have to live in Puerto Rico for more than half the year.

01:19:59 [Speaker Changed] So if you don’t wanna pay New York state tax, New York doesn’t care where you live. As long as you’re not in New York for more than half the year Puerto Rico is saying, no, you have to be here. Rainy season, hot, whatever. Yeah. Half a year and a day.

01:20:15 [Speaker Changed] And so it takes like a certain kind of person who’s so concerned about maximizing their money that they’re willing to do that. Why

01:20:22 [Speaker Changed] Would you wanna live someplace if you could afford not to? Well

01:20:25 [Speaker Changed] This this Ave guy, he had a funny, he was a great character there. At one point James Franco was talking to him about playing him in the movie. That didn’t happen. Oh really? But he said he, so he grew up poor in Brooklyn. He was from this big family. And he said that, you know, like riding the subway was a treat ’cause the parents weren’t gonna pay like 20 bucks to, to swipe everybody in. Right. And he was like, when I was younger, when I was poor, if you asked me, I would’ve said, what’s the difference between $10 million and a hundred million dollars? And he is like, now that I got it, I know there’s a difference. And like he really wanted to get to that, that like next level

01:21:02 [Speaker Changed] That that’s really, that’s really interesting. All right. So I only have you for a few more minutes. Let me jump to my favorite questions. We’ll, we’ll kind of make this a speed round. Starting with what have you been streaming? Tell us some of your favorite Netflix, Amazon Prime or, or even podcasts you listen to.

01:21:22 [Speaker Changed] So my recommendation is a series of Korean action movies. I love action movies. Oh really? It’s called the one that I like the best. It’s called the Roundup. That’s entry number two is the Crime City series. And it stars this guy Don Lee. And he plays, he’s like the prototypical cop from like a eighties, nineties action movie where like he, he, he doesn’t follow the rules but he always gets his guy. Right. You know, he is always like beating up the suspect instead of, you know, asking him the questions like the other cops do. And it’s got, it’s funny, it’s got great action scenes. I love it. Yes. Round upt

01:22:01 [Speaker Changed] Up subtitles or, or you watch it dubbed

01:22:03 [Speaker Changed] You gotta get subtitles. And I’m waiting. There’s the, the Roundup three is out. It came out in theaters but you can’t stream it yet. So I’m waiting for for number three. Alright, so

01:22:13 [Speaker Changed] Let’s talk about your early mentors who helped shape your career.

01:22:17 [Speaker Changed] My first job as a reporter was at a paper called the Brooklyn Paper. It was like a free weekly you got at the supermarket. I was an unpaid intern. My boss was Gersh Kuntzman. And he was like a tabloid guy. He’d worked at The Post. He was an amazing mentor because he was, he was a very tough editor and he insisted that each of the stories be interesting. Like we couldn’t, as we wouldn’t, there was no like meandering the story. Had to have a point right before when you pitched the story, you had to think of like what the headline would be and why anybody would care about this. And he’d, even if you came back, I was working for him when Obama won and he was like, all right, go find some people who are happy about this. Interview him come back with some quotes.

01:23:01 And I think it was rainy. So I spent like a couple hours out in the rain stopping people on their way home from work and being like, what do you think about this? You know, not like the most fun assignment. I came back with what I thought were some pretty good quotes and he was like, those quotes are boring. Get back out there. And like, I didn’t like it at the time, especially ’cause I was not getting paid. But I think that that’s a, it’s true. You gotta put in the time in this crypto world. I spent day after day talking to these guys looking for

01:23:28 [Speaker Changed] The most, you must’ve been interesting.

01:23:29 [Speaker Changed] 20

01:23:30 [Speaker Changed] Countries in the book. I mean, you traveled all around the world.

01:23:33 [Speaker Changed] I really thought, alright, it’s my first book. I don’t know, I don’t wanna disappoint anybody. I want the reader to feel like I did my best. I went to look at everything I could think of and like any questions you had, I really did my best to go to Cambodia to answer them or to El Salvador to see if like this Bitcoin experiment was real. So maybe some part of that came from Gersh telling me quotes are boring. Get back out there to the subway station and ask people about the election.

01:23:57 [Speaker Changed] So let’s talk about some other books. What are you reading and, and what are some of your favorites?

01:24:03 [Speaker Changed] My Pixar, there’s a pretty mainstream because the kind of book that I wrote is the kind of book that I love. Like when I was a teenager I always, I loved these crazy nonfiction adventures. So that was like into Thin Air that by John Krakauer or The Perfect Storm, or I loved Bringing Down The House by Ben Mezrich, the about the MIT blackjack kids. And I still love that kind of book. Like David Grand, the Lost City of Z or Patrick Routing Keef. I just, I love these like true stories that, that are too crazy to believe.

01:24:40 [Speaker Changed] Did have you ever read Endurance the the Shackleford story?

01:24:45 [Speaker Changed] No.

01:24:46 [Speaker Changed] Put that at the top of your list. The book has to be true. ’cause if it was fiction, people would throw it away and say this is just too not believable if you like into thin air. Oh, this is the book that started that genre. It’s insane.

01:24:59 [Speaker Changed] Oh, nice. I’ll check it

01:25:01 [Speaker Changed] Out. So, so that’s a good, what I have

01:25:02 [Speaker Changed] A a, a more off the run one that you might, you might wanna check out is called The Tiger by John Valiant. And it’s about like a killer tiger in in Siberia and the guys who, like, they’re guys who are like Tiger detectives who have to go find the Killer Tiger are all true. Right. Ama one of the best of non-fiction books of this genre. Right now I’m reading a lot of Diary of a Wimpy Kid to my children. I have twins who are six. Right. And my son loves this serious Diary of the Wimpy Kid. Actually very boring. I don’t like it. I actually like children’s books a lot of the time. But these, these wimpy kid books, it’s the number one children’s book. They’re super popular. Popular and they’re terrible. They’re just like, it’s a di it’s a kid’s diary, you know, it’s, it’s a little repetitive. Right. There’s like 20 of ’em. We’re almost to the end, but then they, Eli said, we’re gonna start back at the beginning.

01:25:54 [Speaker Changed] No, no, no. Good. So let’s get to our last two questions. What sort of advice would you, you give to a recent college grad who is interested in a career in journalism, investigative reporting finance or crypto? What, what would you suggest to them

01:26:10 [Speaker Changed] If you get into financial journalism? One thing I didn’t really understand is that finance guys, a lot of ’em are on, they’re on the phone all day, right? They’re just gossiping with their buddies and you can like get in the mix and if you just act like you belong, you can call these guys up and be like, Hey did you hear about Jill at Goldman Sachs? Like I heard she took a big loss last week. And they’ll talk about it with you. Happy to dish. You know, they’re talking with their friends about the same stuff. If you don’t act super official and you just feel like you’re part of the mix, people will talk to you about, about what’s going on at work because

01:26:44 [Speaker Changed] Now you let them in on the secret method.

01:26:46 [Speaker Changed] Yeah, go for it.

01:26:48 [Speaker Changed] That that. That’s amazing. And finally, what do you know about the world of, again, investigative journalism, reporting or finance today? You wish you knew, I dunno, when did you begin your career? Like 15, 20 years ago.

01:27:00 [Speaker Changed] That’s about right. Yeah. There was one thing about the world of crypto that I wish I knew when I started this book, which was that

01:27:06 [Speaker Changed] Number goes up,

01:27:08 [Speaker Changed] Number go. I actually wish I knew that Alameda would research Sam Bankman Free’s hedge fund was secretly borrowing all the customer money from FTX because I’m still kicking myself that I didn’t catch this guy. That could have been like my claim to fame.

01:27:21 [Speaker Changed] Really interesting stuff. Thanks Zeke for being so generous with your time. We have been speaking with Zeke Fox, author of Number Go Up Inside Crypto’s Wild Ride and Staggering Fall. If you enjoy this conversation, check out on any of the previous 500 or so discussions we’ve had over the past nine years. You can find those at iTunes, Spotify, YouTube, wherever you find your favorite podcast. Sign up for my daily reading list@hels.com. Follow me on Twitter at ritholtz. Follow all of the Bloomberg family of podcasts on Twitter at podcast. I would be remiss if I did not thank the crack team who puts these conversations together each week. Rich Ani is my audio engineer. Atika BR is my project manager. Anna Luke is my producer. Sean Russo is my researcher. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.





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