Speaker 1: This is Bloomberg Crypto Daily, Bloomberg I heard podcast and
Speaker 1: I'm Mike Reagan in today for Stacy Marie Ishmaal. It's
Speaker 1: Thursday January. In the days leading up to the staggering
Speaker 1: collapse of f t X, a word tweets broke out
Speaker 1: between two top crypto executives. Former ft X CEO Sam
Speaker 1: Backman Freed and Binance CEO Chang Peng Jao or CZ,
Speaker 1: as he's commonly called, are known rivals and just one
Speaker 1: example of their different styles. Backmen Freed appeared eager to
Speaker 1: work with the government, regulators and lawmakers, while c Z
Speaker 1: not so much. But when CZ tweeted that he was
Speaker 1: selling Binance his holdings of crypto tokens that were created
Speaker 1: by f t X, it sparked a run on the
Speaker 1: exchange that ultimately led to the insolvency of f t X.
Speaker 1: The idea that a once flushed crypto exchange where billions
Speaker 1: of dollars could be taken down by a series of tweets, well,
Speaker 1: it raises a lot of questions about the crypto market,
Speaker 1: and it fuels the perception that the digital acid industry
Speaker 1: is led by alpha males caught up in a hyper
Speaker 1: masculine culture. But now that one of the most renowned
Speaker 1: CEOs finds himself facing a slew of criminal charges and
Speaker 1: civil actions, what's at stake for the industry and what
Speaker 1: does it say about the leaders who run it or
Speaker 1: the future of the crypto community at large. My colleague
Speaker 1: Vildanna Hirich joins me, Now, they're not afraid to get
Speaker 1: into fights, they're not afraid to be on Twitter and
Speaker 1: say really outrageous things, And basically that's what we've seen
Speaker 1: happen in crypto over the last ten years or so. Voltana,
Speaker 1: welcome to the podcast. Thanks for having me, of course,
Speaker 1: so FILTONA. One thing I find fascinating is, you know,
Speaker 1: if you cover regular companies, non crypto companies, you know
Speaker 1: there's business wire, pr newswire, they have sort of official
Speaker 1: avenues to make an announcement. Not so much in crypto.
Speaker 1: It's it's basically all on Twitter. We have Twitter, Twitter,
Speaker 1: which which has its pluses and its minuses, but talked
Speaker 1: to mostly but talk a little bit about that idea
Speaker 1: of how important Twitter is to the crypto industry and
Speaker 1: how information is disseminated. It's hugely important. I always say
Speaker 1: that a lot of crypto discourse happens on Twitter. So
Speaker 1: you have a lot of these big personalities that I'm
Speaker 1: sure we're going to be talking about who have huge
Speaker 1: followings on Twitter. They're they're all day with their laser eyes,
Speaker 1: although a lot of them have actually removed their laser
Speaker 1: eyes as of as of late, and they're just basically
Speaker 1: posting anything that comes to mind. A lot of them
Speaker 1: have been known to just be tweeting all day every day.
Speaker 1: I actually find a lot of ideas and great market
Speaker 1: stuff on Twitter because you can find just about anything.
Speaker 1: You can find these feuds that we're about to talk about,
Speaker 1: but also a lot of like coverage about what's happening
Speaker 1: with the market and what people are seeing because, as
Speaker 1: you say, there's no central place where we can get
Speaker 1: this type of information. That's what I think is so fascinating.
Speaker 1: You know, a crypto project that has an announcement to
Speaker 1: make oh we've got a new coin, or we're shutting
Speaker 1: down for maintenance, or hey sorry but we just blew up.
Speaker 1: All your money's gone. You know, Twitter is the official
Speaker 1: sort of platform for them to release that news. But
Speaker 1: mixed in with all that is all this sort of
Speaker 1: other personal sort of bravado. You know, let's talk a
Speaker 1: little bit about the way crypto power players sort of
Speaker 1: communicate with each other on Twitter. It's all very nice
Speaker 1: and ploy and cordial. Right, Oh, it's so nice. It's
Speaker 1: like it's all rainbows and fairies and and nice words.
Speaker 1: No that there's actually a lot of um. I guess
Speaker 1: we can call it fighting or in fighting between some
Speaker 1: of these CEOs and people who are at the helms
Speaker 1: of these different crypto companies, and like I said, they
Speaker 1: love to have huge followings. A lot of them do
Speaker 1: have huge followings, and they sort of just build these
Speaker 1: basis of supporters and followers on on Twitter who like
Speaker 1: to come in the fence of some of them. But
Speaker 1: I think a really good example of what you're talking
Speaker 1: about is the feud that we saw between Sam Bank
Speaker 1: and Freed from f t X, the former CEO of
Speaker 1: f t X, and what happened with Finances c Z,
Speaker 1: where for years people sort of watched them feud with
Speaker 1: each other via Twitter and sort of just throw barbs
Speaker 1: at each other. Where you can even just you know,
Speaker 1: tweet about someone without having to tag them, and your
Speaker 1: followers will know who exactly you're talking about. But they've
Speaker 1: had a spat going on on Twitter, sub tweeting as
Speaker 1: they say, exactly, there's a major crypto ceo who I
Speaker 1: think is a fraud. I'm not to say who, but
Speaker 1: but but you know who is? You know you may
Speaker 1: know who you rehash are the listeners How that feud
Speaker 1: sort of reached its climax and what it meant for
Speaker 1: f t X, well, it meant the downfall of ft
Speaker 1: X really not to not to give the sort of
Speaker 1: the ending of the story, but both are huge names
Speaker 1: within crypto. They were even before any of this happened.
Speaker 1: C Z is at the helm of the largest crypto
Speaker 1: exchange in the world. F t X was the largest
Speaker 1: one of the largest in the US, and so to
Speaker 1: have the two of them sparring was always going to
Speaker 1: be drawing headlines. But basically what happened was that Finance
Speaker 1: held a huge chunk I think something like two or
Speaker 1: three billion dollars worth of the FTX token f t
Speaker 1: T and what sparked all of this was c Z
Speaker 1: tweeting out that he was going to be offloading that
Speaker 1: investment that they were holding, and there was a lot
Speaker 1: of back and forth from f t X where f
Speaker 1: t X had offered to buy it for I forget
Speaker 1: what the yeah exactly. At one point at ft T
Speaker 1: the token had been trading above eighty dollars I think
Speaker 1: in September of last year, and for for market watchers
Speaker 1: actually for people who were seeing that on Twitter, they
Speaker 1: did not take that as a good sign that f
Speaker 1: t X was willing to do that. And from there
Speaker 1: we sort of saw this rather quick unraveling of what
Speaker 1: happened with f t X, because then we had to
Speaker 1: have Finance say that they were going to help take
Speaker 1: ft X over a deal that actually ended up falling through,
Speaker 1: which is something that the market foresaw because we saw
Speaker 1: cryptocurrency selling off when all of this was happening. So
Speaker 1: a lot of market participants and people who were watching
Speaker 1: what was going on between the two parties was that
Speaker 1: they just didn't have a lot of faith this was
Speaker 1: actually going to play out in a good way. That
Speaker 1: token ft T played such a crucial role as collateral exactly,
Speaker 1: the hedgephone that's sort of strapped to f t X
Speaker 1: on me to research exactly and c Z kind of
Speaker 1: you would assume nobody was doing perhaps by undermining faith
Speaker 1: in that token, that it wasn't. A later tweety said
Speaker 1: that it's better for a crypto project to fail early.
Speaker 1: You know, he kind of was hinting that he knew
Speaker 1: what was going to happen. Yeah, this is the interesting
Speaker 1: thing because and we can think about this in a
Speaker 1: bunch of different ways in terms of, you know, coin
Speaker 1: Desk was the original news source of what sort of
Speaker 1: helped spark some of this, and what helped spark c
Speaker 1: Z saying that he was going to be off floading
Speaker 1: those FTT tokens that obviously has had huge repercussions for
Speaker 1: the industry that Coin Desk covers. And then the same
Speaker 1: thing happening with finance, where you're just seeing these huge
Speaker 1: repercussions that aren't exactly great for finance either because we
Speaker 1: just have this huge loss of faith in the system,
Speaker 1: reputational damages, people fleeing the market without any hopes that
Speaker 1: they're going to be coming back, especially from some of
Speaker 1: the retail investors. And so I think the repercussions just
Speaker 1: I don't think it played out exactly as hidden. Yeah,
Speaker 1: I thought they might, and we've learned so much since then. Obviously,
Speaker 1: the fraud charges all, you know, the sec the CFTC
Speaker 1: complaints against Sam Bagman. Freed suggests that this company was
Speaker 1: a big mess. Basically, this may or may not have
Speaker 1: happened eventually, but it tweets that sure did accelerate things,
Speaker 1: which sure did. But I'm curious, you know, as a man,
Speaker 1: maybe I'm not the best person to analyze sort of
Speaker 1: the crypto culture because it does seem to me that
Speaker 1: it's this sort of bro culture, for lack of a
Speaker 1: better word, this kind of hyper masculine, alpha male culture.
Speaker 1: I'm curiously, you know, as a woman covering the space,
Speaker 1: interacting with with a lot of these guys, how do
Speaker 1: you perceive that culture? Yeah, well it's hard for me
Speaker 1: to say. Actually, maybe you are the better voice in
Speaker 1: terms of being able to say what exactly is going on.
Speaker 1: But you and I actually worked on a story about
Speaker 1: this together, and one of the people we spoke with
Speaker 1: called it blood sport. Basically, this is like a blood sport.
Speaker 1: What he said was, it's it's about not just winning,
Speaker 1: but vanquishing and winning at the expense of my opponents,
Speaker 1: which is basically what we saw happening, where people were
Speaker 1: trying to outdo each other in the process. End it
Speaker 1: up also hurting themselves. Yeah, that was a great quote
Speaker 1: from Peter Atwater at William and Mary. A smart guy.
Speaker 1: He studies confidence and the role of confidence in finance,
Speaker 1: and maybe a little too much confidence from these guys.
Speaker 1: And I wonder about that idea of blood sport. You know,
Speaker 1: finances are it's not like it's ever had a kind
Speaker 1: and gentle reputation, right, you know, Wall Street bankers are
Speaker 1: not known for getting together and singing compared to what's
Speaker 1: going on in Yeah, do you said, do you sense
Speaker 1: a big difference? It's much more aggressive in in crypto
Speaker 1: for sure. The whole idea of crypto is that it's
Speaker 1: anti establishment, that it's this new thing, a new innovation,
Speaker 1: new technology is a new way to to pay and
Speaker 1: live and new everything. Basically like a financial revolution, is
Speaker 1: what a lot of crypto people will tell you. And
Speaker 1: the type of people to help lead through that are young, brash,
Speaker 1: they're not afraid to get into fights, they're not afraid
Speaker 1: to be on Twitter and say really outrageous things. And
Speaker 1: basically that's what we've seen happen in crypto over the
Speaker 1: last ten years or so. If you compared traditional financial markets,
Speaker 1: they're not huge companies but they're making names for themselves
Speaker 1: sometimes thanks in part to what the founders are doing
Speaker 1: and saying on Twitter and in the public. Yeah. I
Speaker 1: keep thinking of the Hedge fund that really went after
Speaker 1: do Quan and the Terraform blockchain project earlier in the year. Um,
Speaker 1: they sort of on Twitter liking themselves to the Romans
Speaker 1: sacking Carthage in the Punic Wars. So that blood sport
Speaker 1: idea really, you know, it conjures up this image of
Speaker 1: sort of gladiators, gladiators and and and there really is
Speaker 1: kind of that sort of mentality at playing a lot
Speaker 1: of these people involved. Yeah, I think so. You and
Speaker 1: I had a quote also from Peter Adwater and he said,
Speaker 1: it's the modern day gladiators, these CEOs, They're perceiving themselves
Speaker 1: as disruptive warriors, is what Peter told us. Coming up
Speaker 1: more of my discussion with fill Donna on what the
Speaker 1: biggest crypto rivalries mean for the industry, we'll be right back.
Speaker 1: I thought, I also wanted to talk a little bit
Speaker 1: about sort of this image that Sam bankman Fried had cultivated.
Speaker 1: Not your average sort of Wall Street buttoned up suit
Speaker 1: and tie fleece, best type of guy. Was he it's
Speaker 1: funny that we think of that as as buttoned up
Speaker 1: and we're comparing. So he was known for sort of
Speaker 1: having disheveled hair, for wearing sort of loose, baggy T shirts,
Speaker 1: flip flops shorts. When we would see him actually go
Speaker 1: in front of Congress, a lot of people made a
Speaker 1: big deal about him wearing a suit or just wearing
Speaker 1: a button down. But then they would zoom in on
Speaker 1: his shoes and the shoelaces would be all like totally
Speaker 1: messed up, like he doesn't on a daily basis tie
Speaker 1: his shoes and had maybe forgotten how to do it.
Speaker 1: But yeah, that's that's the image he had, and now
Speaker 1: we know that that's the image he was trying to cultivate.
Speaker 1: That's an interesting point is that it very much fits
Speaker 1: in with sort of that the counter culture outsider image
Speaker 1: of crypto. Right, you know you do you don't want
Speaker 1: to look like a banker, right? Absolutely. I remember this
Speaker 1: one story when things first started falling apart for f
Speaker 1: t X, I think one of the stories said something
Speaker 1: like he wanted to look like he was in his
Speaker 1: bean bag chair because he was very well known for
Speaker 1: like not having a regular sleeping schedule. And just sleeping
Speaker 1: whenever he could on his bean bag chair, like in
Speaker 1: the office next to his computers where he was working
Speaker 1: or playing video games. Where when he had investors coming
Speaker 1: in or anybody of importance coming into, you know, check
Speaker 1: out the FTX offices or check out what they were doing.
Speaker 1: That he wanted it to look like he was rolling
Speaker 1: out of the sleeping bag chair, like that he had
Speaker 1: been working so hard and out of nowhere. You sort
Speaker 1: of like walk in and you catch him still like
Speaker 1: taking a mini nap or something, and that that is
Speaker 1: exactly what he wanted to be perceived as, where he
Speaker 1: told his employees, it's actually good for me to look
Speaker 1: like my hair is so dishovel. Well, I kind of
Speaker 1: follow that strategy to myself, But if I slept in
Speaker 1: a bean bag chair, I don't. I would need a chiropractice.
Speaker 1: But your hair looks exactly like his. Yeah, at least
Speaker 1: you brushed it. You brushed yours today. I'm curious how
Speaker 1: you're thinking about sort of the legacy of all of this,
Speaker 1: the culture of Twitter, It's future, the sort of widespread
Speaker 1: suspicion and anxiety that exists now because of what happen
Speaker 1: and with that t X. It seems to me that
Speaker 1: things have changed forever in this industry, that everyone's going
Speaker 1: to be second guessing sort of this notion of oh,
Speaker 1: here's this quirky outsider sleeping in a being back chair.
Speaker 1: You think that's fair to say? And you and I
Speaker 1: had a great story about this as well. If I
Speaker 1: got a good stories, if I can pat us on
Speaker 1: the back. What we started to see pretty much over
Speaker 1: the summer, I would say, or late summer, was a
Speaker 1: huge wave of people leaving CEO roles at crypto companies,
Speaker 1: so founders and and people who had sort of built
Speaker 1: names for themselves within this space leaving, you know, their
Speaker 1: CEO roles at those companies and up types taking their
Speaker 1: place so that buttoned up types could could take over.
Speaker 1: I think we we had some really great quotes from
Speaker 1: that story as well. One of them said, some founders
Speaker 1: could be moving on because the industry is getting more professional,
Speaker 1: and they come from an era where it was more
Speaker 1: tin hat, where the crypto people were more tin hat basically,
Speaker 1: and you have more traditional finance types moving in to
Speaker 1: help clean up the mess. So I wonder, you know,
Speaker 1: is crypto justis going to be sort of joined at
Speaker 1: the hip to this kind of masculine, alpha male, tough guy,
Speaker 1: sort of leader of the pack image or or do
Speaker 1: you think this will change things? Is there more room
Speaker 1: for sort of a more reasonable, mild manner type of
Speaker 1: leader in crypto? Now it's possible. I mean, I don't know,
Speaker 1: we'll see what actually happens in terms of all of
Speaker 1: what we're seeing in the wake of f t x
Speaker 1: is collapse. A lot of people are saying that we're
Speaker 1: definitely going to be seeing more regulation. So if that's
Speaker 1: the case, it's possible that you have sort of more
Speaker 1: serious types coming in. The new CEO of f t X,
Speaker 1: who I think led Enron through its troubles in the
Speaker 1: early two thousand's John Jay Ray. He is building this
Speaker 1: image of himself of being a super studious and serious
Speaker 1: person and coming out and talking about some of the
Speaker 1: things that he had unearthed over the last couple of
Speaker 1: weeks in terms of what had been happening at f
Speaker 1: t X. So it's possible that we do start to
Speaker 1: see more people like that coming in and, like I said,
Speaker 1: sort of clean up the mess. Yeah, you think he
Speaker 1: sleeps in a beanbag chair? Definitely not, No, definitely not. Well,
Speaker 1: thank you, Vill Donna. I think Mike you forgot the
Speaker 1: most important thing about this conversation. What's up? You and
Speaker 1: I host our own podcast? I forgot about forgot about that.
Speaker 1: I forgot about the highlight of my week every week. Yes,
Speaker 1: can I plug it, plug it and plug away as
Speaker 1: guest hosts? Thank you so much. Soul Stacy Marie finds
Speaker 1: out all out. Yeah, no, I think she would be
Speaker 1: happy with this too. I think she's a fan of
Speaker 1: ours as well. What goes up? What goes up? Wherever
Speaker 1: you get your podcasts? Yeah, exactly. And also you can
Speaker 1: find more of Bill Donna's reporting on the Bloomberg Terminal
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