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Speaker 1: Previously on Red Pilled America.
Speaker 2: By late twenty eighteen, Alimed Research was already in trouble.
Speaker 3: I mean, the company didn't have any lawyer, so I
Speaker 3: think my utility there was pretty obvious.
Speaker 1: Hundreds of unscrupulous characters began creating their own cryptocurrencies.
Speaker 4: And the currency that you would use would be these munchies.
Speaker 3: You know, it's so outland as that I'm tempted to
Speaker 3: accuse you of just making that up.
Speaker 5: We also recently launched a derivatives exchange called FTX.
Speaker 1: Sam called his new cryptocurrency FTT.
Speaker 2: By the end of twenty nineteen, CZ became one of
Speaker 2: the first major investors in FTX.
Speaker 6: They were treating this guy like it us a guru.
Speaker 7: How did you do this so quickly?
Speaker 2: FTX raked in an industry record nine hundred million dollars.
Speaker 1: I'm Patrick Carrelci.
Speaker 2: And I'm Adriana Cortez.
Speaker 1: And this is Red Pilled America, a storytelling show.
Speaker 2: This is not another talk show covering the day's news.
Speaker 2: We are all about telling stories.
Speaker 1: Stories. Hollywood doesn't want you to hear stories.
Speaker 2: The media marks stories about everyday Americans at the Globalist ignore.
Speaker 1: You could think of Red Pilled America as audio documentaries,
Speaker 1: and we've promised only one thing, the truth. Welcome to
Speaker 1: Red Pilled America. We're at the third and final part
Speaker 1: of our series of episodes entitled Crypto Revisited. If you
Speaker 1: haven't heard the previous episodes, you should go back and
Speaker 1: listen from the beginning. We're looking for the answer to
Speaker 1: the question where is cryptocurrency going? By telling the story
Speaker 1: of the astonishing rise and spectacular fall of crypto entrepreneur
Speaker 1: Sam Bankman Freed.
Speaker 2: So to pick up where we left off at the
Speaker 2: close of twenty twenty one, Sam Bankman Freed was in
Speaker 2: the midst of a power move. The young crypto entrepreneur
Speaker 2: had some leverage. He'd just come off an industry record
Speaker 2: nine hundred million dollar fundraising tour for his cryptocurrency exchange
Speaker 2: FTX and hiss Pitcoin was peaking at nearly seventy thousand
Speaker 2: dollars per coin. The price of Sam's FTT token rose
Speaker 2: along with it. Sam was climbing to the top of
Speaker 2: the crypto world, and his political donations were beginning to
Speaker 2: pay off as well.
Speaker 5: Thank you Chairwater, as ranking Member mckenry, and all the
Speaker 5: members of the committee for having me here today to testify.
Speaker 5: It's an honor to be here.
Speaker 2: He spoke at a congressional hearing on the need for
Speaker 2: crypto regulations.
Speaker 5: I think it is important and I think that is
Speaker 5: healthy that the industry will be regulated.
Speaker 2: Sam appeared to have something up his sleep, and he
Speaker 2: had a trusted sidekick to help him all along the way.
Speaker 3: I think we've always enjoyed working together and thinking together,
Speaker 3: at least I like to think.
Speaker 7: So.
Speaker 2: That's Sam's father, Joe Bankman, talking about working with his son. Joe,
Speaker 2: a Stanford law professor began helping his son early in
Speaker 2: his crypto ventures. Joe would eventually focus on two specific areas.
Speaker 2: The first was ftx's charity endeavors.
Speaker 3: That's about half of what I do, and the other
Speaker 3: half of what.
Speaker 8: I do is regulation broadly speaking, so it's the bills
Speaker 8: moving through Congress, it's whether we'll get approval from a
Speaker 8: regulatory agency, things like that.
Speaker 2: Joe Bankman was a lawyer, so the formulation of regulations
Speaker 2: aligned well with his expertise.
Speaker 3: In fact, all regulatory changes anytime you work through the government,
Speaker 3: that's really legally in KENSIB.
Speaker 2: Regulations also played a pivotal role in the world of finance.
Speaker 2: In effect, they act as the gatekeeper of who does
Speaker 2: and does not get to enter the playing field. So
Speaker 2: how regulations are crafted can mean life or death for
Speaker 2: a company. By the close of twenty twenty one, it
Speaker 2: appeared that Sam and his father had a plan in motion.
Speaker 2: It looked as if they were trying to set up
Speaker 2: a regulatory framework that would benefit Sam's array of crypto
Speaker 2: companies while hurting his competition.
Speaker 9: They wanted to create a monopoly, there's no question about it,
Speaker 9: to match finance that's been.
Speaker 2: Armstrong crypto enthusiast and creator of bitboycrypto dot com.
Speaker 9: So here was the plan. We'll bring in all of
Speaker 9: these other companies to cover lending, to cover defive, to
Speaker 9: cover exchanges, to cover deriva trading, margin trading. They wanted
Speaker 9: to bring kind of one company in that did everything
Speaker 9: from every niche in the crypto world, bring them up
Speaker 9: under FTX. Then they were going to create the Federal
Speaker 9: BIL license.
Speaker 2: Basically a proposed federal license to operate in the US
Speaker 2: crypto industry, and.
Speaker 9: They were going to be the only show in town
Speaker 9: that had the license, and all their companies would get
Speaker 9: the license. Due to being under their umbrella, they did
Speaker 9: have such a head start on anybody else trying to
Speaker 9: apply to get the license that they would just be
Speaker 9: able to win from the ground up. So that was
Speaker 9: kind of the plan.
Speaker 2: But in order to have real influence over the parameters
Speaker 2: of that license, Sam would need to position himself as
Speaker 2: the authoritative voice of the crypto world, so he launched
Speaker 2: one of the most audacious branding campaigns that the world
Speaker 2: of finance had ever seen. Sam had already signed Tom
Speaker 2: Brady and Giselle as FTX folkspersons. He then expanded into
Speaker 2: the NBA.
Speaker 10: Crypto exchange FTX, spending one hundred and thirty five million
Speaker 10: to rename the home of the Miami Heat.
Speaker 11: This is the first time a crypto firm has won
Speaker 11: naming rights to a major US sports venue.
Speaker 2: FTX would eventually sign a deal with Steph Curry and
Speaker 2: Shaquille O'Neal. He infiltrated Super Bowl fifty six with an
Speaker 2: ad featuring comedian Larry David. Like I was saying, it's FTX,
Speaker 2: it's a safe and easy way to get into crypto,
Speaker 2: I don't think so. Sam carpet bombed young entrepreneurs with
Speaker 2: YouTube influencer endorsements.
Speaker 12: Now, before we get to part two, I have to
Speaker 12: give a quick shout out for today's sponsor.
Speaker 13: It's FTX US.
Speaker 4: You've probably heard of them before.
Speaker 6: One of the largest US regulated cryptocurrency exchanges in the world,
Speaker 6: trusted by millions of users to buy, solid track and
Speaker 6: trade both crypto and NFTs.
Speaker 14: They've been the ones that are going out investing in
Speaker 14: and buying other crypto exchanges that are struggling.
Speaker 6: I'll explain just a moment. Right after I mentioned that
Speaker 6: if you want to take advantage of buying the crypto
Speaker 6: dipp check out our sponsor today FTX.
Speaker 2: Sam also wanted to win over traditional finance who'd been
Speaker 2: a bit skeptical about crypto. Investor Kevin O'Leary initially had
Speaker 2: a negative impression of the crypto industry, but a long
Speaker 2: came Sam bankman Fried, who lathered the Shark Tank star
Speaker 2: with greenbacks, and Kevin remarkably did a one to eighty
Speaker 2: on the subject for the entire finance community to see.
Speaker 15: I don't know where you are in crypto.
Speaker 14: You were so negative for a while, then you got
Speaker 14: totally positive.
Speaker 16: Do you own bitcoin now, Kevin?
Speaker 17: What's your posision at crypto right now?
Speaker 18: You do?
Speaker 14: I have millions of dollars. Twenty percent of my portfolio
Speaker 14: is now in crypto currencies and blockchain. Well, you have
Speaker 14: to be diversified. I own thirty two different positions, including
Speaker 14: equity and FTX, and I have to disclose I'm a
Speaker 14: paid spokesperson for that company.
Speaker 2: And Sam pulled in his new spokesmodel, Giselle, to reach
Speaker 2: into the world of luxury.
Speaker 4: Today, we're going to.
Speaker 10: Be discussing Giselle and Sam's shared mission philanthropy, which is
Speaker 10: the theme of our spring summer twenty twenty two luxury campaign.
Speaker 2: The FTX founder joined Jizelle in a print out that
Speaker 2: was published in America's most prestigious magazines, including Vogue, Dandy, Fair, GQ,
Speaker 2: and The New Yorker. The two took the stage at
Speaker 2: the Bahamas Cryptoconference to announce the campaign.
Speaker 4: And I think it's really important to think about what
Speaker 4: are we leaving behind, because either we're going to be
Speaker 4: part of the solution or were going to be part
Speaker 4: of the problem.
Speaker 5: I think when you start thinking about the trillions of
Speaker 5: people who haven't been worn yet who are going to
Speaker 5: inherit this or from us, the things that we do
Speaker 5: that sort of impact what it is exactly that we're
Speaker 5: passing down to them are just incredibly important and magnified
Speaker 5: way beyond the scope of almost anything else that we do.
Speaker 2: Sam was attracting some of the most gifted virtue signalers
Speaker 2: on the planet. Former President Clinton, popstar Katy Perry, and
Speaker 2: former Prime Minister Tony Blair all attended his event. He
Speaker 2: amped up his effective altruism message and the media sopped
Speaker 2: it up.
Speaker 16: Crypto billionaire Sam bankman Fred is doubling down on his
Speaker 16: embrace of effective altruism This is something that he's talked
Speaker 16: about so much that he's really in crypto so that
Speaker 16: he can give the money away, essentially finding an avenue
Speaker 16: where you can make the most money to give away
Speaker 16: the most.
Speaker 4: He's fully committed a giveving millions and now billions of
Speaker 4: dollars to charities again.
Speaker 2: Ben Armstrong of bitboycrypto dot com.
Speaker 9: Alameda has the greatest propaganda arm we've seen since the USSR.
Speaker 9: They use a combination of paid engagement bots, paid influencers,
Speaker 9: paid spokespeople, paid media in order to control a narrative.
Speaker 2: The FTX branding effort may have looked as if it
Speaker 2: was intended for the general public, but that was a
Speaker 2: peripheral benefit. Its ultimate target was really a very small
Speaker 2: audience in Washington, DC that included the SEC chairman Gary Gensler.
Speaker 1: In March twenty twenty two, Sam reportedly met with Gensler
Speaker 1: to discuss regulations on crypto exchanges like FTX, and Sam
Speaker 1: had an inside track with Gensler. The CEO of Alameda Research,
Speaker 1: Caroline Ellison, was the daughter of Gensler's old boss when
Speaker 1: he worked at MIT. Sam's plan appeared to be falling
Speaker 1: into place. What the problem was that a crypto winter
Speaker 1: was brewing, and Sam appeared completely oblivious to the coming storm.
Speaker 6: When you've become successful and you buy your own media
Speaker 6: and you surround yourself with people who only tell you
Speaker 6: that what you're reading on the cover of Forbes is
Speaker 6: actually a reality, you begin to believe it.
Speaker 1: That's a representative from Doomberg, one of the most widely
Speaker 1: read finance newsletters on subscription based platform Substack.
Speaker 6: Sam Bankmyfree spent a lot of money to buy great press.
Speaker 6: When you read it, it's easy to forget that you
Speaker 6: paid for it and it's not real. And then anybody
Speaker 6: who points out to you that, hey, maybe we have
Speaker 6: these religious here and yes, I understand this is part
Speaker 6: of your pr strategy, but we should consider AB and
Speaker 6: C gets eliminated from your inner circle. And the only
Speaker 6: people who remain in your inner circle are people who
Speaker 6: are willing to lie to you about how great you are.
Speaker 6: So then you come very insulated.
Speaker 1: This was undoubtedly sam situation, and because of it, he
Speaker 1: thought he'd built a rock of Gibraltar, but he was
Speaker 1: about to figure out that he'd really erected a house
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Speaker 1: come alive. Welcome back to red pilled America. So as
Speaker 1: Sam Bankman Freed was soaking in the adoration of his
Speaker 1: charm offensive, a cryptostorm was brewing. The early signs began
Speaker 1: to surface right around the time Sam testified before Congress
Speaker 1: in December twenty twenty one. The signal was, of course,
Speaker 1: the original cryptocurrency.
Speaker 13: Bitcoin is having a December to forget. Along with the
Speaker 13: other major cryptos.
Speaker 16: Bitcoin is hovering just below the fifty thousand dollars level
Speaker 16: heading into the new year. That's after hitting seven eight
Speaker 16: thousand just last month.
Speaker 1: As the new year got underway, the decline continued.
Speaker 16: Bitcoin now trading below that thirty seven thousand dollars handle,
Speaker 16: hitting a one month low.
Speaker 1: At first, people choked up the dip to just the
Speaker 1: volatility of the crypto market, but by early May twenty
Speaker 1: twenty two, the cracks and the dam burst open, and
Speaker 1: many of the companies propped up by the crypto bubble
Speaker 1: began to pop.
Speaker 16: Crypto obviously right now getting crushed.
Speaker 10: Tonight, a massive selloff of cryptocurrency, erasing more than two
Speaker 10: hundred billion dollars from the entire market in a single day,
Speaker 10: the price of bitcoin plunging to its lowest level in
Speaker 10: sixteen months.
Speaker 19: Gone down to its slowest point for quite a while.
Speaker 19: And that's something that doesn't usually do. Actually going down
Speaker 19: to a low pass the year before has only ever
Speaker 19: happened once before. This is quite a big deal. More
Speaker 19: than three hundred billion dollars was wiped out just in
Speaker 19: the last week.
Speaker 20: What has happened?
Speaker 18: What's gone wrong?
Speaker 16: I mean, this is the definition of a black swan event.
Speaker 18: This is the Lehman Brothers coll of crypto.
Speaker 10: The numbers sending some investors spiraling, fearing they could lose
Speaker 10: it all.
Speaker 9: One minute, it looks like the market's going to rip.
Speaker 21: The next minute, it looks like the market's going to dip.
Speaker 16: And I don't know what in the world's going on.
Speaker 20: So I'm out, no moss in totally.
Speaker 2: It seems crazy to say, but I'm then around thirty
Speaker 2: five thousand dollars.
Speaker 4: I actually lost over half my portfolio.
Speaker 3: I lost one point six million on Luna and then
Speaker 3: I put it in another too.
Speaker 10: D can at those trading platform Coinbase now warning that
Speaker 10: if they go belly up, customers could lose all their
Speaker 10: crypto investments, which aren't technically subject to bankruptcy protections.
Speaker 16: And if you're a retail investor, get you're not protected,
Speaker 16: right or does it depend on jurisdiction, You're.
Speaker 19: Not protected pretty much anyway, there's no protections at all.
Speaker 19: Just like with the rest of crypts, any money you
Speaker 19: put in is entirely at your risk.
Speaker 21: Probably with bitcoin, there's something I underpinning. There's no government,
Speaker 21: there's no company, there is no rent, there's something to
Speaker 21: actually kind of prop up the value of cryptocurrency. Stories
Speaker 21: out of New York of people losing half million dollar fortunes, cars, homes,
Speaker 21: literally the whole lot because they punt it on this stuff.
Speaker 21: I said, when everyone's everyone's happy. As soon as that
Speaker 21: turns around, it can really hurt.
Speaker 5: You may think it sound like a Ponzi scape.
Speaker 6: What we have seen is nothing short of carnage.
Speaker 16: It's quite horrible to watch.
Speaker 12: This event is probably the most destructive wealth event in
Speaker 12: the history of crypto.
Speaker 1: By the summer of twenty twenty two, company after company
Speaker 1: that either created their own cryptocurrency or had most of
Speaker 1: their holdings in some new crypto tooken came crashing down.
Speaker 1: How could this have happened? How could an industry that
Speaker 1: had been heralded by financial media been celebrated as the
Speaker 1: next big thing come crashing down in a matter of days. Well,
Speaker 1: a lot of it had to do with those new
Speaker 1: types of cryptocurrency tokens entering the market. Remember when Sam's father,
Speaker 1: Joe Bankman, learned about initial coin offerings or icos.
Speaker 18: Now, in my own personal opinion, the large majority of
Speaker 18: these icos are frauds or they're going to fail.
Speaker 13: I'll totally agree with that.
Speaker 1: By the way, Well, it turns out that by twenty
Speaker 1: twenty two, the industry had become littered with these fraud
Speaker 1: coins as the crypto winter was slowly building. Sam went
Speaker 1: on a Bloomberg podcast and used an analogy to explain
Speaker 1: how many of these cryptotokens come into existence.
Speaker 4: Where'd you start?
Speaker 5: You start with a company that builds the blocks, and
Speaker 5: in practice this box, they probably dressed it up to
Speaker 5: look like a life changing, world altering protocol that's going
Speaker 5: to replace all the big banks in thirty eight days
Speaker 5: or whatever. Maybe for now, actually pretend it does literally
Speaker 5: nothing is just a box.
Speaker 1: Sam went on with this box analogy. He suggested that
Speaker 1: the primary function of this imaginary box was for users
Speaker 1: to put their currency in it, for which they'd receive
Speaker 1: an IOU, and then later they could use that IOU
Speaker 1: to pull their cryptocurrency out of the box. As Sam
Speaker 1: told it, the controllers of this box then produce a cryptotoken.
Speaker 5: We'll call it what for X token, and they're going
Speaker 5: to give them a way for free to everyone uses
Speaker 5: the box. So anyone who goes takes some money puts
Speaker 5: in the box. Each day they're going to air drop
Speaker 5: one percent of the X tokens program amongst everyone who's
Speaker 5: put money in the box. That's for now, what X
Speaker 5: token does. It gets given away to the box people.
Speaker 5: And now what happens, Well, X token has some market cap,
Speaker 5: let's say it's twenty million dollars market cap in the
Speaker 5: world that we're in. If you do this, everyone's going
Speaker 5: to be like, ooh, box token. Maybe it's cool. If
Speaker 5: you buy a box token, you know that's going to
Speaker 5: appear on Twitter and I'll have a twenty million dollar market.
Speaker 4: Cap it shouldn't have any market cap in Siri, but
Speaker 4: practice sale always do.
Speaker 5: Okay, that's right, So X tokens being given out each day,
Speaker 5: all these like cisticated firms are like, oh, that's interesting.
Speaker 5: Like if the total amount of money in the box
Speaker 5: is one hundred million dollars, then it's gonna yield sixteen
Speaker 5: million dollars this year in X tokens being given out
Speaker 5: for it. That's a sixteen percent return. That's pretty good.
Speaker 5: We'll put a little bit more in and maybe that
Speaker 5: happens until there are two hundred million dollars in the box.
Speaker 5: So you know, sophisticated traders and or people on crypto
Speaker 5: Twitter go and put two hundred million dollars in the
Speaker 5: box collectively, and they start getting these X tokens for it, right,
Speaker 5: and now all of a sudden, it's like wow, people
Speaker 5: just decide to put two hundred million dollars in the box.
Speaker 4: This is a pretty.
Speaker 5: Cool box, right, Like this is a valuable box, as
Speaker 5: demonstrated by all the money that people have apparently decided
Speaker 5: should be in the box. And where we to say
Speaker 5: that they're wrong about that? Like boxes can be great. Look,
Speaker 5: I love box as much as the next guy, and
Speaker 5: so then you know, X token price goes way up
Speaker 5: and now it's at one hundred and thirty million dollars
Speaker 5: market cap token because of you know, the bullishness of
Speaker 5: people's usage of the box, and now all of a sudden,
Speaker 5: of course, the smart money. It's like, go, wow, like
Speaker 5: this thing's now yielding like sixty percent a year an
Speaker 5: X tokens, right, so they pour another three hundred million
Speaker 5: dollars in the box and you get a site, and
Speaker 5: then it goes to infinity and then everyone makes money.
Speaker 1: The two journalists were a bit stunned by his explanation.
Speaker 13: I think of myself as like a fairly cynical person,
Speaker 13: and yep, that was so much more cynical. Yes, I
Speaker 13: would have described farming like you're just like, well, I'm
Speaker 13: in the ponzi business and it's pretty good.
Speaker 4: And did any of this require any sort of like
Speaker 4: economic cases. Just like other people put money in the box,
Speaker 4: and so I'm going to too, and then it's more valuables.
Speaker 4: They're going to put more money in. And at no
Speaker 4: point in the cycle did it seem to like describe
Speaker 4: any sort of like economic purpose.
Speaker 13: Can you comment on like the sustainability of that, yeah,
Speaker 13: because like you know, on the one hand, you're like, well,
Speaker 13: a trillion dollars in social money is going to come
Speaker 13: into a bitground. On the other hand, you're like, basically,
Speaker 13: there are a lot of ponzis that have done really well.
Speaker 5: Okay, cool, I'll say, on the cynical route, think about,
Speaker 5: like cynically, what could happen here? Well, okay, so you've
Speaker 5: got things. Box is kind of dumb, but like, what's
Speaker 5: the endgame?
Speaker 12: Right?
Speaker 5: His boxes were zero?
Speaker 1: Obviously, Sam Bankman Freed inadvertently described the nature of much
Speaker 1: of these cryptotokens. They're built out of nothing. Many of
Speaker 1: the boxes or companies were worth zero.
Speaker 6: Again, Dumberg I firmly believe these are all totally unrestared,
Speaker 6: wildcat banking ponzi schemes with nothing but thin air backing them.
Speaker 1: By Midsummer twenty twenty two, Sam Bankman Freed was bailing
Speaker 1: out cryptocurrency firms left and right. The media dubbed him
Speaker 1: the crypto world's lender of last resort, but his actions
Speaker 1: were not benevolent. Many believed he was bailing out companies
Speaker 1: because of fear the insolvency contagion could spread to his firm.
Speaker 1: Sam even began hinting that there were more collapses to come.
Speaker 1: In an interview with Forbes, Sam stated, quote, there are
Speaker 1: some third tier exchanges that are already secretly insolvent end quote.
Speaker 1: Little did anyone know that it was Sam that was
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Speaker 2: Welcome back to Red Pilled America. So just as Sam
Speaker 2: Bankman Freed looked like the bailout savior during the crypto winter,
Speaker 2: what no one yet knew was Sam's companies were teetering
Speaker 2: on the edge as well. His crypto trading firm, Alameda Research,
Speaker 2: was nearing insolvency. He was no longer friends with cz
Speaker 2: of rival Crypto Exchange Finance. Sam had nowhere to turn
Speaker 2: but the mirror. But then something happened. In late September
Speaker 2: twenty twenty two, one hundred and seventy three million FTT
Speaker 2: cryptotokens materialized, and then they were miraculously given to Alameda Research.
Speaker 2: At the time, the trading price for FTT tokens was
Speaker 2: roughly twenty four dollars each. This fresh minting of FTT
Speaker 2: tokens put four billion dollars on Alameda Research's balance sheet.
Speaker 2: In one fell swoop, the supply of FTT tokens in
Speaker 2: existence increased by a reported one hundred and twenty four percent.
Speaker 2: Just like the Federal Reserves dollar printing press, these FTT
Speaker 2: tokens were just created out of thin air. As anyone
Speaker 2: with an elementary understanding of economics would know, the act
Speaker 2: of just printing a currency from nothing could not immediately
Speaker 2: add value to a company. The only institution that can
Speaker 2: get away with that is the Federal Reserve. Where did
Speaker 2: this value come from? How was it that these FTT
Speaker 2: tokens were valued at twenty four dollars each?
Speaker 20: Again, Ben Armstrong, FTT was one of the ways that
Speaker 20: SBF would pump up the net value of Alameda and FTX.
Speaker 9: They basically wash trade FTT back and forth between the
Speaker 9: two companies.
Speaker 2: In other words, they gained the system on Wall Street
Speaker 2: wash trading is an illegal way for traders to manipulate
Speaker 2: the market. A buyer and seller, for sometimes one investor
Speaker 2: acting as both the buyer and seller, illegally collude to
Speaker 2: sell a particular stock between each other to mislead other
Speaker 2: traders into believing that the trading volumes for the stock
Speaker 2: are higher than they actually are. Their goal through this
Speaker 2: wash trading is to trick others into trading the same
Speaker 2: stock and in the process illegitimately increasing its price. To
Speaker 2: wash trade in the crypto world, you just swap out
Speaker 2: stocks for cryptotokens like FTT. The process that Sam allegedly
Speaker 2: used to prop up the value of his companies was
Speaker 2: not a new process. In finance. The scheme looks something
Speaker 2: like this. First, you create a stock, in this case,
Speaker 2: a cryptotoken, and you retain the majority of those tokens
Speaker 2: in your possession. Then you pump up the price of
Speaker 2: those tokens through wash trading, or buying them with customer assets,
Speaker 2: or through creating propaganda campaigns, whatever you need to do
Speaker 2: to drive up the price of the token, and in
Speaker 2: a largely unregulated industry like crypto, it wouldn't be that hard. Now,
Speaker 2: since you've retained the majority of the tokens. Someone with
Speaker 2: a huge batch of said tokens can't lower the price
Speaker 2: of them by selling them on the market at a
Speaker 2: rock bottom price. Now, with this artificially high value token
Speaker 2: on your balance sheet, your company looks like it's worth
Speaker 2: a ton of money. So you can go to the
Speaker 2: banks asking for loans with the tokens as collateral, or
Speaker 2: you can go to investors asking for investments, because hey,
Speaker 2: look at my balance sheet, I've got millions upon millions
Speaker 2: of dollars. The banks and investors want in because they
Speaker 2: don't want to miss out on the chance to make
Speaker 2: easy money. They give you real dollars, not cryptotokens, and
Speaker 2: now you can use that money to go on a
Speaker 2: wild spending spree, like buying the naming rights to stadiums
Speaker 2: or locking arms with the biggest supermarket in the world.
Speaker 2: The only thing you have to do is keep your
Speaker 2: token price high, so the banks keep lending you money
Speaker 2: and investors keep buying into your business. But the problem
Speaker 2: now is the people that hold your token in the
Speaker 2: public want to take advantage of the high prices, and
Speaker 2: they sell your token in the market. If enough people
Speaker 2: do that, flooding the market would supply. When there was
Speaker 2: no real increase in demand, then the token price drops,
Speaker 2: as does the value of your company, making it harder
Speaker 2: for you to get loans or attract investors. So now
Speaker 2: you have to continue the process all over again, pump
Speaker 2: up the price of the token through wastch trading, or
Speaker 2: using customer assets to buy the tokens at a higher price,
Speaker 2: or any other scheme, whatever it takes to raise the
Speaker 2: token price. Eventually you run out of money. That's when
Speaker 2: you come up with an idea. If you control the token,
Speaker 2: you can just print up more of them and place
Speaker 2: them in your account to make your company look more
Speaker 2: valuable on paper. You basically create cryptotokens out of thin airers.
Speaker 2: That that is what Sam bankmin Freed did in this
Speaker 2: moment of crisis at the end of September twenty twenty two.
Speaker 20: Again Ben Armstrong, so you just have a long history
Speaker 20: of Sam creating money out of nothing, and even there's
Speaker 20: a video where he explains how he does it.
Speaker 9: And when they needed more money, they would just print
Speaker 9: more FTT and then they would be able to immediately
Speaker 9: add value to their balance sheets.
Speaker 2: By late October twenty twenty two, Sam must have felt
Speaker 2: like he'd stabilize the businesses because he became a little
Speaker 2: bit cocky. At the time, Finance ftx's primary competitor was
Speaker 2: apparently in some legal trouble, so Sam decided to sucker
Speaker 2: punch Finance's owner CZ. He jumped online and tagged his
Speaker 2: old front of me in a tweet suggesting that CZ
Speaker 2: wasn't even allowed to go to Washington, d C. Because
Speaker 2: of his legal issues. The public potshop must have burned
Speaker 2: CZ up. The stage was set for an epic chess move.
Speaker 2: In a stunning coincidence, just a few days after Sam
Speaker 2: sucker punch CZ, Alameda Research's balance sheet leaked to the press.
Speaker 2: Crypton New's outfit Coindesk was the first to publish a
Speaker 2: report on it, claiming that Alameda Research had fourteen point
Speaker 2: six billion dollars in assets. But here's the kicker. That
Speaker 2: value was almost entirely derived from FTT tokens. In other words,
Speaker 2: it was Sam Bankman's breed's own token that was propping
Speaker 2: up his company, not real US dollars, gold or some
Speaker 2: other universally recognized asset, not even bitcoin. The coin desk
Speaker 2: report got the ball rolling, but it was someone else
Speaker 2: that Dug Deeper, an investigative journalist that goes by the
Speaker 2: moniker Dirty Bubble Media, also received the leaked Alameda balance
Speaker 2: sheet and he expanded on the coindesk original report.
Speaker 12: Two days later, I published an article.
Speaker 2: That's Dirty Bubble Media.
Speaker 12: That basically took that information, plus the information I saw
Speaker 12: in their balance sheet, the actual copy of it, and
Speaker 12: basically broke it down in a way that people can
Speaker 12: understand it to explain why it was as bad as
Speaker 12: it was. Essentially, they were using worthless assets as collateral
Speaker 12: for loans and that they were insolvent in very real terms.
Speaker 2: The news of his article spread quickly within the crypto
Speaker 2: communities on Twitter and YouTube.
Speaker 7: Newses came out that FTS is actually insolvent, and Dirty
Speaker 7: Bubble Media actually went ahead and did a lot of
Speaker 7: digging up.
Speaker 2: All The reporting sparked an idea in CZ's mind. Again,
Speaker 2: Ben Armstrong.
Speaker 9: So bini Itz and FTX obviously had beef with one
Speaker 9: another at that point, but it goes back much further.
Speaker 9: When you really look at CZ verse Sam. For about
Speaker 9: six months, there was a deterioration of that relationship. Is
Speaker 9: I believe CZ found out more and more about what
Speaker 9: Sam was doing.
Speaker 2: Caught wind that Sam was trying to monopolize the crypto
Speaker 2: industry by influencing federal regulations. This didn't sit well with CZ.
Speaker 2: He no doubt felt that it was a direct attack
Speaker 2: on his company finance.
Speaker 9: And then at some point he found something out that
Speaker 9: was like, Okay, now I can't look back, I can't
Speaker 9: turn away. At this point, I got to slam down
Speaker 9: on this and do something. That's what he did. He
Speaker 9: announced he was doing it, and he did.
Speaker 2: It, and CZ had just the right thing to take
Speaker 2: out Sam. Remember those FTT tokens that Sam gave CZ
Speaker 2: when he bought out Caz's share in FTX. Well, CZ
Speaker 2: held onto those FTT tokens and a little over a
Speaker 2: year later those tokens transformed into digital scud missiles on
Speaker 2: Sam's business. If CAZ decided to flood the market with them,
Speaker 2: the price of FTT tokens would plummet, bringing Sam Bankman
Speaker 2: Freed's entire scheme to an end. You see, Sam's company
Speaker 2: were holding the majority of FTT tokens. The company's enormous
Speaker 2: value was derived from them, so Sam needed the FTT
Speaker 2: token price to stay high so that he could continue
Speaker 2: to raise money based on their high value. If the
Speaker 2: price fell, so would Sam's house of cards. CC must
Speaker 2: have seen the opening and he decided to take the
Speaker 2: shot again. Dirty Bubble Media.
Speaker 12: The head of the Finance Exchange, which is the largest
Speaker 12: exchange in the world and previously an investor in FTX,
Speaker 12: announced that they were going to be selling some six
Speaker 12: hundred million dollars worth of this token that FTX had
Speaker 12: created out of thin air and was using a collateral.
Speaker 12: Basically put them between a rock and a hard place.
Speaker 12: So that, combined with the resulting panic sparked by my
Speaker 12: reporting other reporting kind of led to withdrawal cascade.
Speaker 2: In other words, there was a run on Sam's bank.
Speaker 2: Fearing the FTX and Alameda Research were both insolvent, people
Speaker 2: began withdrawing their funds from FTX.
Speaker 7: Unfortunately, I have some bad news to report currently, a
Speaker 7: bank run is happening on FTX. Its reserves, specifically, Etherium
Speaker 7: is being drained off by the hundreds of millions right now.
Speaker 2: Sam took to Twitter to try and calm the market.
Speaker 15: Over the weekend, speculation rose about the solvency of FTX.
Speaker 15: This came after a coined Ask report revealed Alimedd Research's
Speaker 15: balance sheet is full of ftx's native token FTT so
Speaker 15: FTX CEO Sam bankman Free took to Twitter this morning
Speaker 15: to clear something up. He said that a competitor is
Speaker 15: trying to attack the company with rumors. He then says
Speaker 15: in the same tweet, ftx's fine assets are fine.
Speaker 2: Alimeter Research to CEO Caroline Ellison tried to calm the
Speaker 2: storm as well, tweeting the Alameda had assets not included
Speaker 2: in the leaked balance sheet. To keep the FTT token
Speaker 2: price from falling, she publicly offered to buy CZ's tokens
Speaker 2: at the then market rate of twenty two dollars each
Speaker 2: to keep him from putting in up for sale on
Speaker 2: the open market. Cz turned her down. He must have
Speaker 2: smelled blood. Cz then proceeded to flood the market with
Speaker 2: the FTT tokens he possessed, and the price of ftx's
Speaker 2: crypto coin plummeted. In just two days, FTT went from
Speaker 2: twenty two dollars a token to just five dollars and
Speaker 2: fifty cents a token. A day later, it dropped another
Speaker 2: sixty percent. Sam desperately tried to raise over a billion
Speaker 2: dollars from Silicon Valley, but no one bit, so Sam
Speaker 2: took drastic action.
Speaker 7: Breaking news. It appears that FTX has stocked with draws
Speaker 7: for to pass basically four hours the jig was up.
Speaker 14: And some people saying that if they log into FTX,
Speaker 14: they have a bounce of zero.
Speaker 12: Now FTX, the Big exchange, has filed for Chapter eleven bankruptcy.
Speaker 12: I'm trying to understand exactly how a company, the second
Speaker 12: largest crypto exchange in the world, has become.
Speaker 4: Insolvent and followed for bankruptcy in the space of a week.
Speaker 21: The company's controversial chief executive, Sam Bankman Freed, resigning a
Speaker 21: CEO and will remain to assist in an orderly transition.
Speaker 2: Sam Bankman Freed was eventually arrested. In addition to the
Speaker 2: federal indictments of wirefraud and a list of other charges.
Speaker 2: News began to surface it Sam was not necessarily the
Speaker 2: effective altruis that he claimed to be.
Speaker 1: The company FTX. Sam Bankmint Freed, himself and his.
Speaker 4: Parents all owned around three hundred million dollars worth of
Speaker 4: luxury or real estate out in the Bahamas.
Speaker 20: Well, here's the thing.
Speaker 18: If you're running any kind of currency operation and you're
Speaker 18: involved in a polyamorous relationship with seven other people.
Speaker 1: I gotta thank you whack ten ten other people totally.
Speaker 2: What do they do?
Speaker 20: They just were polyamorous living in a house together.
Speaker 1: I'll live together in the same place in the Bahamas.
Speaker 2: And then I'll just bang each other SBF, just thirty
Speaker 2: two years old, was sentenced to twenty five years in
Speaker 2: prison and ordered to pay eleven billion for its fraudulent schemes.
Speaker 2: Sam Bankman freed with the darling of the crypto industry,
Speaker 2: considered the man with the master plan for crypto, yet
Speaker 2: his company joined the graveyard of crypto companies that fell
Speaker 2: during the crypto winter. The turn of events started to
Speaker 2: make people wonder where does crypto go from here.
Speaker 1: The dilemma for the cryptocurrency industry is that after more
Speaker 1: than a decade, no one has derived a commercial use
Speaker 1: for crypto. It hasn't become a form of digital cash
Speaker 1: to make purchases, and it's too volatile to be a
Speaker 1: digital asset like gold and silver. Crypto technology, especially bitcoin
Speaker 1: in the blockchain, was touted as being the technology that
Speaker 1: would allow people to bypass the central bank. It was
Speaker 1: initially promoted as internet cash used to buy and sell products,
Speaker 1: but when experts in the field are asked when will
Speaker 1: that happen? Has stubbornly remained the same.
Speaker 11: Are we going to actually see more payment services carried out,
Speaker 11: more customers, consumers using things like for example, Bitcoin re event, dogecoin,
Speaker 11: if you're Tesla to actually make purchases. Is this the
Speaker 11: year and where that actually happens?
Speaker 9: Well, I think that We're going to have to just
Speaker 9: see about And the reason I'd say that is I
Speaker 9: think people want dollars.
Speaker 4: I think they want to make payments and dollars.
Speaker 9: Well, bitcoin's been around ten years, twelve.
Speaker 1: Years, that's Peter Schiff, famed CEO and chief Global strategist
Speaker 1: of Europacific Capital Incorporated. Peter is perhaps the world's leading
Speaker 1: critic of bitcoin and thinks the cryptocurrency industry is the
Speaker 1: biggest Ponzi scheme of his life. He argues that bitcoin
Speaker 1: is no longer in its infancy and yet still hasn't
Speaker 1: found a use case.
Speaker 9: It's never evolved beyond a speculative token in the first
Speaker 9: twelve years, so why shouldn't the next be any different?
Speaker 1: Dirty Bubble media is skeptical as well.
Speaker 12: Is there any use case for I don't know, I
Speaker 12: haven't yet come across a project that seems to actually
Speaker 12: be generating positive cash flow and generating something of economic value.
Speaker 12: I haven't encountered that yet. So and the thing is,
Speaker 12: if this technology was so useful, why isn't Google using
Speaker 12: it right? Why isn't Amazon using it? Why isn't Facebook
Speaker 12: using it?
Speaker 1: There's a real split amongst cryptocurrency enthusiasts. Many believe the
Speaker 1: other new tokens are just fraudulent, get rich quick schemes,
Speaker 1: while Bitcoin is the real deal, the one digital currency
Speaker 1: that can free citizens of the world from the disastrous
Speaker 1: policies of central banks. And there is an argument that
Speaker 1: Bitcoin is different than these other tokens. It does appear
Speaker 1: that it launched organically, the public couldn't game that system.
Speaker 1: It's also decentralized, no one controls it, and bitcoin is
Speaker 1: by far the most adopted cryptocurrency of them all. Does
Speaker 1: the fact that so many people believe in it give
Speaker 1: it some kind of network effect? Or people use it
Speaker 1: because so many people use it? I asked Stumberg if
Speaker 1: there was any legitimate quality to bitcoin or was it
Speaker 1: just a massive Ponzi scheme?
Speaker 3: I would say both.
Speaker 6: So to the first part of your comment, there is
Speaker 6: undoubtedly a network effect for the creation of value, and
Speaker 6: a quintessential example of that is gold. I mean, gold
Speaker 6: is a inert metal that has some interesting chemical properties,
Speaker 6: but collectively, over five thousand years, people have decided that
Speaker 6: gold is a valuable asset worth owning. And since enough
Speaker 6: people have decided that, and enough examples in history of
Speaker 6: hyperinflating fiat currencies have proven that those who at the
Speaker 6: early stages of a hyperinflationary environment were shrewd enough to
Speaker 6: get their hands on as much gold as they could
Speaker 6: did very well.
Speaker 1: But in Dumberg's assessment, the jury was still out on
Speaker 1: bitcoin reaching the status of a digital pressures medal.
Speaker 6: The Bitcoin network the people who believe in it is
Speaker 6: not nearly as big as gold, and it has not
Speaker 6: had as enough validation events as a sort of store
Speaker 6: of value as an emergent phenomenon as gold has had.
Speaker 6: But it's possible. I could say, like, if you ask
Speaker 6: me which of the cryptos I had to put a
Speaker 6: certain amount of money in, I would select the Climb.
Speaker 6: And again, mostly because of the regulatory clarity with which
Speaker 6: a US citizen who wishes to remain within the bounds
Speaker 6: of the laws can own transact and participate in the
Speaker 6: bitcoin world. There is no central party that controls it
Speaker 6: that that would be the one exception to sort of
Speaker 6: the whole crypto universe.
Speaker 1: Dooomberg believes that if any cryptocurrency survives the crypto crash
Speaker 1: of twenty twenty two, it will likely be Bitcoin and
Speaker 1: the technology built around it.
Speaker 6: Much like when we had the dot com boom, where
Speaker 6: basically all manner of startups rush to put dot com
Speaker 6: and their name, and most of them are vs. And
Speaker 6: then when the dot com bubble first, I mean, people
Speaker 6: forget how violent that was and how many people lost
Speaker 6: all of their life savings and their investments. And yet
Speaker 6: from that rubble came Microsoft and Amazon, Apple and the
Speaker 6: survivors of the catastrophe of the dot com bubble bursting.
Speaker 6: It's seductive to imagine that we're about to see the
Speaker 6: same thing, Like there's very interesting things going on in
Speaker 6: the crypt universe. Not everybody tried to create a ponzi
Speaker 6: token out of it. There will be technologies that survived
Speaker 6: this crash. There will be entities that survived this crush,
Speaker 6: Bitcoin among them. I mean a bigcointwor's going to keep running.
Speaker 6: Whether a bitcoin costs you quote seventeen thousand US dollars
Speaker 6: today or four hundred dollars a year from now. The
Speaker 6: bitcoin network is going to keep running.
Speaker 1: But Doomberg has a rather dark view of what will
Speaker 1: happen with the blockchain technologies that survived this crash.
Speaker 6: The technologies that survived this flush and are ultimately taken
Speaker 6: over by the government to impose central bank digital currencies
Speaker 6: on the world, which we think is a great plagu
Speaker 6: on personal freedom. The owners of that technology will be
Speaker 6: handsomely compensated.
Speaker 1: Central bank digital currency are basically the government's version of bitcoin.
Speaker 1: Think of it as a federal digital coin issued by
Speaker 1: the Federal Reserve.
Speaker 6: Central banking digital currencies. For those that aren't familiar, it's
Speaker 6: essentially the elimination of physical cash and the elimination of
Speaker 6: the Fourth Amendment. And the government can basically see and
Speaker 6: control how you spend your money, and so they could
Speaker 6: just decide that the only legally accepted currency the United
Speaker 6: States is you know, FED coined, and you're not allowed
Speaker 6: to buy guns with a FED coin, for example. Are
Speaker 6: you're only allowed to buy so many gawns of gasoline
Speaker 6: in a week because your carbon footprint has been exceeded,
Speaker 6: or you can only buy so many baggs of chips
Speaker 6: and sodas with sugar in them, because you know, buy
Speaker 6: and large. Healthcare has become nationalized, and you're being an
Speaker 6: undue burden to society by living in the way that
Speaker 6: you could do. And so it's a very very small
Speaker 6: step from a central panking digital currency to what we
Speaker 6: have called in a piece we wrote last year called
Speaker 6: Dystopia coin, where you cannot hide from the you know,
Speaker 6: the eye of Soren, and the government shall see everything
Speaker 6: that you do. There's no tipping with cash, know, giving
Speaker 6: a few hundred dollars to a friend that you don't
Speaker 6: report to the irs. All the way in which most
Speaker 6: Americans express their freedom will be removed in such regard
Speaker 6: and our fear in our base case and ultimately, you know,
Speaker 6: our objectives to trying to analyze the situation unemotionally is
Speaker 6: that the technologies that prove to be useful in the
Speaker 6: crypto cycle that we've just gone through will be hijacked
Speaker 6: and leveraged by central bankers around the world and they're
Speaker 6: never rinning thirst for more control over the populace. And
Speaker 6: that's coming. But the technology is developed in the cycle
Speaker 6: agreed that we've gone through will undoubtedly be sifted through
Speaker 6: and hijacked by the world central bankers and their desire
Speaker 6: to eliminate cash and by extension, to eliminate privacy and
Speaker 6: by extension, to eliminate private property ownership, which is, by extension,
Speaker 6: the elimination of freedom, and of that we are significantly concerned.
Speaker 1: Ben Armstrong agrees that central banking digital currencies or CBDCs
Speaker 1: are coming.
Speaker 9: Yeah, it's inevitable. There's no doubt about it's inevitable. It
Speaker 9: can be stopped. Digital dollars already out, guys. It's called USDC.
Speaker 9: Circle is behind it, Coinbase is behind it.
Speaker 1: Jerome Palak, the chairman of the Federal Reserve.
Speaker 9: Back in twenty twenty, said, we're open to the private
Speaker 9: sector helping us to create the digital dollar. It's already
Speaker 9: been created. They're already working as well with the European
Speaker 9: Union on creating the digital euro. I believe we're three
Speaker 9: to four years away from digital dollar coming out, and
Speaker 9: I think there's no there's no way to find it,
Speaker 9: to be honest with you, one thing we want to
Speaker 9: turn our attention to very soon is we want to
Speaker 9: outlaw the use of a social credit score in combination
Speaker 9: with your money, in combination with a digital dollar. So
Speaker 9: what we really need to do is figure out ways
Speaker 9: to make that digital dollar safer and to protect ourselves
Speaker 9: in the future from great reset from the elites, from
Speaker 9: you know, whatever you want to call them, the overlords,
Speaker 9: whatever you want to call them. You know, we want
Speaker 9: to do our best to protect those through legislation and
Speaker 9: just accept the fact that it's coming.
Speaker 1: Doomberg agrees that the American public needs to protect itself
Speaker 1: from the inevitable adoption of a digital dollar.
Speaker 6: We in the West, who grew up with in cherishire
Speaker 6: privacy in our freedom, desperately need a modernized version of
Speaker 6: the Bill of Rights, and I would say a digital
Speaker 6: Bill of rights. I think that there still exists within
Speaker 6: the Western world a thread of freedom loving citizens who
Speaker 6: have an appropriate lack of trust in centralized authority, and
Speaker 6: pushed hard enough, will demand a new digital Bill of rights.
Speaker 6: Donald Trump can't freeze my bank accounts without some due process,
Speaker 6: or Joe Biden can't freeze my bank accounts without due process.
Speaker 6: And for a politician to be able to inspect my
Speaker 6: transactions without any suspicion of wrongdoing should be illegal, and
Speaker 6: we should codify this. And perhaps the fear of totally
Speaker 6: losing your rights and freedoms might provoke an appropriate political
Speaker 6: response that leads us to a place where we can
Speaker 6: incorporate the benefits of these technologies.
Speaker 1: Which leads us back to the question where is crypto going?
Speaker 1: It appears that the crypto world is developing technologies that
Speaker 1: could one day lead to the end of the paper
Speaker 1: dollar and the establishment of a central banking digital currency,
Speaker 1: and this could be an extraordinary challenge to American freedom.
Speaker 1: When we started our inquiry into the world of crypto
Speaker 1: in twenty nineteen, we asked the question is bitcoin dangerous
Speaker 1: to America? What sparked our interest in that subject was
Speaker 1: a statement earlier that year by then President.
Speaker 17: Trump, a crypto is being talked about. The President actually
Speaker 17: weighed in and tweeted about cryptocurrencies last night. He wrote,
Speaker 17: in part this, I'm not a fan of bitcoin and
Speaker 17: other cryptocurrencies, which are not money and whose value is
Speaker 17: highly volatile based on thin air. He writes, unregulated crypto
Speaker 17: assets can facilitate unlawful behavior, including drug trade and other
Speaker 17: illegal activity.
Speaker 1: Rights the president to make this argument, Trump administration and
Speaker 1: other politicians claimed that cryptocurrencies were completely anonymous and therefore
Speaker 1: would facilitate massive illegal activity. But when we dug into
Speaker 1: this claim, we found the argument was flawed. It was
Speaker 1: actually the technology underpinning bitcoin, the blockchain, that allowed criminals
Speaker 1: to be tracked down. So we concluded that bitcoin was
Speaker 1: not necessarily something Americans should fear. But did we get
Speaker 1: it wrong? Well, I think it's fair to say that
Speaker 1: Donald Trump thinks he got it wrong.
Speaker 12: The crypto collapse does not appeared to be worrying one
Speaker 12: major celebrity.
Speaker 14: Former US President Donald Trump, has officially entered the cryptosphere.
Speaker 1: Trump used a cryptocurrency to launch a digital trading card. Ultimately,
Speaker 1: technology like bitcoin is just a tool, like Twitter, or
Speaker 1: Facebook or a gun. What makes any tool dangerous is
Speaker 1: the user operating it. Paper cash is used by lemonade
Speaker 1: stand operators and the Mexican cartel. If the experts are right,
Speaker 1: an a central bank digital currency is inevitable that Americans
Speaker 1: need to demand a digital bill of rights, one that
Speaker 1: prohibits a tyrannical government from using a cryptocurrency to dictate
Speaker 1: our behavior. And for those of you that think a
Speaker 1: federal crypto dollar is a thing in the far off future.
Speaker 1: Perhaps you should reconsider your timeline.
Speaker 18: So you might have missed what happened Wednesday afternoon at
Speaker 18: the FED. They started their central bank digital currency, so
Speaker 18: they rolled it out and it's in its beta test now.
Speaker 2: Red Pilled America is an iHeartRadio original podcast. It's owned
Speaker 2: and produced by Patrick Carrelci and me Adriana Cortez of
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