{"id":1737526,"date":"2022-11-14T06:02:04","date_gmt":"2022-11-14T11:02:04","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1737526"},"modified":"2022-11-14T07:18:28","modified_gmt":"2022-11-14T12:18:28","slug":"bankman-fried-from-crypto-king-to-king-of-tech-bubbles-losers","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/bankman-fried-from-crypto-king-to-king-of-tech-bubbles-losers\/","title":{"rendered":"Bankman-Fried: From Crypto King to King of Tech Bubble\u2019s Losers"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">20<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fbankman-fried-from-crypto-king-to-king-of-tech-bubbles-losers%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1737526&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><div><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/11\/77ef9921ed48a36de64b22c0e2fff3f6\" class=\"ff-og-image-inserted\" alt=\"image\" \/><\/div>\n<p>(Bloomberg) &#8212; Few could have anticipated the sudden collapse of Sam Bankman-Fried\u2019s multibillion-dollar crypto empire.<\/p>\n<p>Most Read from Bloomberg<\/p>\n<p>Yet for all the twists, revelations and anguished Twitter threads, it\u2019s a fall from grace with an unmistakable ring of familiarity.<\/p>\n<p>A week that began with two crypto CEOs tweeting barbs ended with the bankruptcy of FTX, one of the largest and most prominent crypto exchanges, along with around 130 other companies that it owned. The business had been trying to cover a shortfall of as much as $8 billion, with the specifics of its failure &#8212; now subject to multiple investigations &#8212; yet to be revealed.<\/p>\n<p>This much is clear: an intoxicating brew of easy money, wishful thinking and hyped innovation contributed to an implosion that while spectacular was also nothing new when considered next to scandals like Enron, WorldCom and Lehman Brothers before it. The particulars differ, but common to each were hubris, regulatory weakness and the realities of an economic cycle with plenty of precedent.<\/p>\n<p>\u201cWe\u2019ve had an industry that was really built primarily on FOMO and easy money, and now that governments around the world are raising interest rates and that restricts easy money, you\u2019re just surviving on FOMO,\u201d said Hilary Allen, a law professor at American University in Washington. \u201cIt\u2019s not as appealing anymore.\u201d<\/p>\n<p>While blame is in no short supply, the arc of the FTX\u2019s fortunes can also be seen as a garden-variety consequence of Federal Reserve policy. FTX, along with crypto itself and a host of other market gimmicks, from meme stocks to stay-at-home tech fads and special purpose acquisition companies, flourished as the Covid-19 pandemic spurred the Federal Reserve to cut interest rates to zero and leave them there for two years.<\/p>\n<p>Now, up against the Fed\u2019s most aggressive tightening cycle in four decades, shaky empires are evaporating as fast as the liquidity that propped them up. FTX\u2019s demise is a calamity, to be sure, unique in many respects, in which billions of dollars in paper wealth and trading profits are likely to be torched. But the failure of FTX is far less extraordinary when considered next to 11 months of wreckage in technology stocks and centuries of asset-bubble history.<\/p>\n<p>FTX\u2019s scandal has notable parallels with what befell Enron. Both were led by messianic figures in Bankman-Fried and Jeff Skilling who dazzled faithful with feats of technical wizardry. Both bathed in near-universal adoration from the press and the financial establishment. Both also seem to have made basic financial mistakes in trying to keep the party going. The crypto empire reportedly allowed its balance sheet to rest precariously on a token tied to its own fortunes, hearkening to Enron\u2019s use of its own stock to prop up its financing structures.<\/p>\n<p>In the end, a doomed hope that rising markets would hide mismanagement or outright fraud became the epitaph of a once-flourishing enterprise. When Bankman-Fried stepped down from his position as CEO of FTX.com Friday, his replacement was John J. Ray III &#8212; the former chairman and president of Enron left to pick up the pieces of its bust in the early 2000s.<\/p>\n<p>The boom-overbuild-bust cycle looks familiar to Bokeh Capital Partners Chief Investment Officer Kim Forrest. It\u2019s happening in the whole economy at the moment, but the tech industry is the posterchild, she said. Where is crypto in that metaphor? \u201cGround zero.\u201d<\/p>\n<p>\u201cI was a software engineer in the late 90s, I saw the excesses, \u2018wow they\u2019re hiring way too many people,\u2019\u201d Forrest said. \u201cThese companies had not been productive in hiring too much, not getting enough output and not showing the return of capital.\u201d<\/p>\n<p>For its own part, FTX had raised around $4 billion in funding across its network of affiliated companies, which included Alameda Research, a trading house co-founded by Bankman-Fried, FTX Ventures and a separate exchange for American investors.<\/p>\n<p>While more spectacular, FTX\u2019s collapse shares storylines with much that has gone amiss in markets and the technology space in the pandemic era. Besides its obvious resemblance to fellow crypto casualties Three Arrows Capital, the Terra ecosystem and Celsius Network, its demise was fueled by complacency and belief in its own genius that bears hallmarks of the crises afflicting Meta Inc. and Twitter Inc. at present.<\/p>\n<p>As far as bubbles go, few were as enthusiastically foretold as this one. Along with meme stocks, the crypto craze has been ridiculed by securities industry veterans almost since the moment it began, with the pitch of the critique growing along with the price of Bitcoin in 2020. Charlie Munger once said he admired the Chinese for banning it, while Black Swan author Nassim Nicholas Taleb likened Bitcoin to a \u201ctumor.\u201d<\/p>\n<p>They came off as cranks then. Now those predictions are coming true as the Fed tightens the screws. Meme stocks are little more than a sideshow, save for the occasional pop in the likes of AMC Entertainment Holdings and GameStop Corp. Highly speculative growth shares have crumbled, dragging Cathie Wood\u2019s Ark Innovation exchange-traded fund &#8212; one of the highest-fliers of the pandemic era &#8212; to its lowest level since 2020.<\/p>\n<p>A bull market masks a lot of sins, only to be laid bare by a turn of the cycle. History is littered with such examples, perhaps none more famous than the demise of Bernard Madoff\u2019s massive Ponzi scheme, which hummed along for at least 15 years before plunging equity markets in 2008 led clients to seek more withdrawals than he could accommodate.<\/p>\n<p>\u201cYou need to have a degree of volatility in financial markets because that will prevent overlevering and taking advantage of the system,\u201d said Michael O\u2019Rourke, chief market strategist at Jonestrading. \u201cMadoff was only exposed because of the global financial crisis.\u201d<\/p>\n<p>Even with regulation seemingly on the horizon for the crypto industry, the off-shore location of many crypto firms (FTX included) has left authorities like the Securities and Exchange Commission with their hands tied. Hester M. Peirce, an SEC Commissioner, said that questions around lack of jurisdictional clarity are \u201cpartly our fault\u201d given investors and businesses had asked the watchdog \u201ctime and time again to provide more clarity about where our jurisdiction lies and we\u2019ve not done so.\u201d<\/p>\n<p>As a result, the financial playground that is crypto has been allowed to flourish with limited oversight. \u201cThere isn\u2019t a holistic digital asset regime that is accepted globally, and that that creates massive opportunities,\u201d said Jay Wilson, investment director at London-based venture capital firm AlbionVC.<\/p>\n<p>The cost is clear to Bokeh\u2019s Forrest: this will happen again. The players and details will be different, she said, but human psychology will be the same.<\/p>\n<p>\u201cPeople don\u2019t change. People just don\u2019t change,\u201d Forrest said. \u201cAs much as we\u2019d like to think we learn from the past &#8212; we may learn not to invest in WorldCom, but we don\u2019t know to not look for another one.\u201d<\/p>\n<p>Most Read from Bloomberg Businessweek<\/p>\n<p>\u00a92022 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>(Bloomberg) &#8212; Few could have anticipated the sudden collapse of Sam Bankman-Fried\u2019s multibillion-dollar crypto empire.Most Read from BloombergYet for all the twists, revelations and anguished Twitter threads, it\u2019s a fall<\/p>\n","protected":false},"author":1,"featured_media":1737529,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_image_alt":"","footnotes":""},"categories":[547],"tags":[],"class_list":["post-1737526","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-the-bongino-report"],"fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1737526","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1737526"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1737526\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1737529"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1737526"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1737526"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1737526"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}