Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.
Speaker 1: My name is Mike Reagan. I'm a senior editor at Bloomberg.
Speaker 2: And I'm Wildona Hirik, across Acid reporter with Bloomberg, and.
Speaker 1: This week on the show, well WELDNA. I'm not sure
Speaker 1: if listeners quite understand what our work environment is at Bloomberg.
Speaker 1: We're all in this sort of open area. There's not
Speaker 1: even cubicles, there's just desks, no knocks, tweets, so no
Speaker 1: privacy none, and as a result, you can often overhear
Speaker 1: other conversations, other reporters conversations, and I guess it's kind
Speaker 1: of rude to eachstrap, but I mean.
Speaker 2: I do it.
Speaker 1: Yeah, we all do it.
Speaker 2: I listened to your lunch orders.
Speaker 1: But a lot of times what you overhear, what you
Speaker 1: eaveschop on is super boring. You know, oh, why did
Speaker 1: the stock market go Monday? And I'll say, not boring? Sure,
Speaker 1: why is the market up today? What do you think
Speaker 1: of this stock? You know? What does this economic data
Speaker 1: mean for the market. That's where thing. It's very mundane stuff.
Speaker 1: But about a decade ago, I was sitting near a
Speaker 1: guy in next row over from me, who was on
Speaker 1: the phone. I'd say ten hours a day, heavy Boston accent.
Speaker 1: He was the most fun reporter to eavesdrop on I've
Speaker 1: ever had in my career. Everyone else's asking about, you know,
Speaker 1: the latest earnings and you know, what does the java's
Speaker 1: claims number mean? And this guy would be talking about
Speaker 1: scam artists, crime and strip clubs and drugs. Wow. I
Speaker 1: wish I had recorded some of these interviews. It was
Speaker 1: the most entertaining reporter evesdropping I think I've had in
Speaker 1: my career.
Speaker 2: I can only imagine. I'm so jealous. I'm dying of
Speaker 2: jealousy right now because I'd love to hear some of
Speaker 2: this stuff.
Speaker 1: Well, don't be too jealous, because we have him. We
Speaker 1: have him on the show this.
Speaker 2: Week because he wrote a book that was I read
Speaker 2: a lot.
Speaker 1: Of books, not to you know, Oh, I know you do.
Speaker 2: I read a lot of books, but this was like
Speaker 2: the best book I've read this year. It was so fun.
Speaker 2: I read it so fast. Maybe one of these days
Speaker 2: we'll let our audience know what book it. Who the
Speaker 2: guy is without further ado, it's Zeke Fox. He is
Speaker 2: our Bloomberg colleague, and he's the author of the brand
Speaker 2: new book number go up. Inside Crypto's wild rise and
Speaker 2: staggering fall. Zeke, I'm so happy you could join us.
Speaker 2: Thank you so much for coming.
Speaker 3: Thanks for having me and for putting up with my
Speaker 3: really loud conversations all those years.
Speaker 1: And I apologize for Eves wrapping on you all those years,
Speaker 1: but no, it is possible.
Speaker 2: I'm sorry. Yeah, no, he's not sorry.
Speaker 1: What was like do you remember any of the well, so,
Speaker 1: Zeke was pretty famous as an investigative journalist in our
Speaker 1: circles in the financial world, long before Crypto, and I
Speaker 1: think the probably the stuff I was Eves dropping on
Speaker 1: might have been like the payday lender scams. Uh, one
Speaker 1: of the first things you really started digging deep into.
Speaker 3: If I'm not mistaken, I mean, I have to admit that,
Speaker 3: like you said, it's impossible, everyone's going to hear it.
Speaker 3: And I talk pretty loud. I can't control myself. But
Speaker 3: also I know that everyone's listening.
Speaker 2: I want to sit next to you. I'm going to
Speaker 2: request it.
Speaker 1: Every new retrader should have to spend like a month's
Speaker 1: sit next to Zeke and just listening to how he interviews.
Speaker 1: It's a work of art.
Speaker 3: I learned a lot from Max Abelson, who would sit
Speaker 3: near me. It was also very like a loud talker
Speaker 3: and was great at inter getting these billionaires to tell
Speaker 3: him all their secrets. He would be really interested in
Speaker 3: their stories, but also he wouldn't let them off the hook.
Speaker 3: He'd be like, don't just tell me that the new
Speaker 3: CEO of Goldman Sachs is a nice guy? Like how
Speaker 3: is he nice? Was he nice to you last Thursday?
Speaker 3: What did he do that was so nice? How did
Speaker 3: his eyes look while he made that nice statement?
Speaker 2: Okay, so you have your famous in the newsroom and
Speaker 2: outside the newsroom for these strings of very interesting, intriguing stories,
Speaker 2: very interesting characters. Mike mentioned the payday lenders. You have
Speaker 2: so many. But so your new focus is crypto, and
Speaker 2: I want to ask Q what made you go down
Speaker 2: the crypto rabbit hole?
Speaker 3: Resisted looking into crypto? Like you said, I have always
Speaker 3: really liked scams, and people would tell me crypto is
Speaker 3: perfect for you, But there's something about it that I
Speaker 3: didn't like it, because I like when you've got like
Speaker 3: a kind of complicated scam and you have to look
Speaker 3: through all the paperwork and figure out like the loophole
Speaker 3: they're using and with crypto, they're just like, hey, buy
Speaker 3: my new coin, and then like suddenly they're a billionaire.
Speaker 3: I got into it like everybody else through Fomo. I
Speaker 3: had this fuddy who we have like a group chat,
Speaker 3: and he was texting us all about something he called
Speaker 3: doggy coin. And this is like the height of the pandemic. Dudes,
Speaker 3: you got to get some of this doggy coin. It's
Speaker 3: so funny. It's going to go up, and I'm like,
Speaker 3: it's dogecoin. And this already went viral, like several years ago.
Speaker 3: They made fun of it on the Daily Show. It
Speaker 3: was not even funny to begin with. This will never
Speaker 3: happen again. But like he was right, doge coin went
Speaker 3: up and he made a fair amount of money. And
Speaker 3: he's sending us pictures from Disney World. He's like, he said,
Speaker 3: I'm freaking nostra damis. You know, if you had listened
Speaker 3: to me and bought dogecoin, you'd all be rich now
Speaker 3: in Disney World, Yes, which would be a I do
Speaker 3: not want to go there, so all.
Speaker 2: The prices are like extortions. Yeah, he must have made
Speaker 2: a lot of money.
Speaker 3: This primed me to be like, you know what I
Speaker 3: really want to prove I am still right. This stuff
Speaker 3: is dumb. I'm going to look into it. And then
Speaker 3: I Joel Weber, the editor of BusinessWeek, came by and
Speaker 3: was like he had an idea for a crypto story,
Speaker 3: and like in the past I might have turned it down,
Speaker 3: but this time I was like, no, I'm going to
Speaker 3: look into it. And once I did, like the first
Speaker 3: part of it was to go to one of these
Speaker 3: crypto conferences, and I was just like, as soon as
Speaker 3: I started, I was like, oh my god, this is
Speaker 3: a crazy world. Whatever you think about crypto, these people
Speaker 3: are making like billions of dollars. This has got to
Speaker 3: be like one of the craziest things happened in the
Speaker 3: history of finance. It turned into like a two year
Speaker 3: trip down the rabbit hole. By the end, I was
Speaker 3: in like Cambodia.
Speaker 1: As one does. Yeah. But so that initial story from
Speaker 1: Joel was about tether, which listeners who are unaware it's
Speaker 1: a stable coin, which is a crypto coin that's meant
Speaker 1: to track the US dollar exactly one to one, no
Speaker 1: more and no less than. The idea is that he
Speaker 1: maybe you made a bunch of money in crypto, and
Speaker 1: now you want to store it in US dollar or
Speaker 1: stable value, or you want to move it from one
Speaker 1: exchange to the other, or whatever you want to do.
Speaker 1: You want to keep it in that one dollar increment.
Speaker 1: So Joel came here about tether, and that put you
Speaker 1: onto the trail of a guy named Brock Pierce. So
Speaker 1: talk to us about brock Pierce, and you're sort of
Speaker 1: pursuit of him to find him and ask him about
Speaker 1: what's going on with Tether.
Speaker 3: The best resume I've ever seen of anyone in finance.
Speaker 3: He started off early. He was a child actor. He's
Speaker 3: in the Disney classic The Mighty Ducks and he plays
Speaker 3: the coach Gordon Bombay in a flashback when he misses
Speaker 3: this crucial penalty shot that haunts him decades later.
Speaker 1: Away.
Speaker 3: Oh no, it's right at the beginning of the movie.
Speaker 3: Don't worry, So he went on. It wasn't just like
Speaker 3: this one movie. He started in one called First Kid.
Speaker 3: He had kind of like a Macaulay Culkin look. But
Speaker 3: then he quit acting. As a teenager, he gets hired
Speaker 3: at this dot com startup called den. He's given like
Speaker 3: this great title, two hundred and fifty thousand dollars a
Speaker 3: year salary. What happens at Den truly bizarre. Not even
Speaker 3: sure it's appropriate to talk about in this podcast. You'll
Speaker 3: have to read about it. Yeah, But by the end
Speaker 3: of it, he's fled to Spain with the founder of Den,
Speaker 3: and he's gotten really into massively multiplayer online games. He
Speaker 3: ran a virtual item trading companies. Basically, you want to
Speaker 3: get ahead quick in this game everquestor World of Warcraft,
Speaker 3: you could pay real money to buy the megasword and
Speaker 3: then you know, bump up to level seventeen really quick.
Speaker 3: This would be big business, and he eventually hired Steve
Speaker 3: Bannon randomly to be like the chairman of the company.
Speaker 3: They made a big I think they sold it to
Speaker 3: Did they sell it to Goldman Sachs or Goldman Sacks
Speaker 3: broker the deal. Anyway, he gets out of this deal rich,
Speaker 3: and he sees the potential of making real money from
Speaker 3: the virtual world, and he becomes one of the earliest
Speaker 3: investors in crypto. There's some debate over how much credit
Speaker 3: he gets, but he's a co founder of Tether, which
Speaker 3: was this first stable coin. So when I went to
Speaker 3: go look into Tether, the big mystery was like, by
Speaker 3: the time I'm looking into it, Tether claims that they
Speaker 3: have fifty billion dollars in the bank somewhere, but they
Speaker 3: won't say where. So I'm trying to find this fifty
Speaker 3: billion dollars. And at the time, people are really worried
Speaker 3: about this. Jim Kramer's on TV being like this could
Speaker 3: crash everything, Like where's Tether's money? They won't say. Even
Speaker 3: Janet Yellen held a meeting of all the top financial
Speaker 3: regulators where they're like, where's Tether's money, What's gonna happen?
Speaker 3: What does this mean for financial market? Yeah, So as
Speaker 3: I started to look into it, I just couldn't believe
Speaker 3: that this coin that was seemingly so important basically appeared
Speaker 3: to be like the central bank of crypto, a key
Speaker 3: point in the infrastructure holding all these schemes together, had
Speaker 3: been founded by the Mighty Ducks guy. So in the
Speaker 3: book I talk about I went down to a crypto
Speaker 3: conference in Miami and went to a party at Brock's
Speaker 3: house or a house he'd rented for the conference, and
Speaker 3: it was truly just like the weirdest scene, like everyone's
Speaker 3: just sort of milling about, getting like drunk, drunker and drunker.
Speaker 3: Brock's not there, And when After I spend like a
Speaker 3: whole day there, Brock shows up and then immediately disappears.
Speaker 3: I catch up with him at another conference in the Bahamas.
Speaker 3: I hear from a friend of mine is like, hey,
Speaker 3: last night, I was at the craziest party on this yacht.
Speaker 3: It was this mega yacht that this crypto billionaire bought
Speaker 3: from this Russian oligarch. And she's just showing me her Instagram.
Speaker 3: She shows me this video of him jumping off the
Speaker 3: yacht and I'm like, oh my god, Brock's here. So
Speaker 3: I text him. I'm like, can I come to your yacht?
Speaker 3: He sends a speedboat to the sequel. Yes, it was
Speaker 3: very I'm not gonna lie, it was very cool. So
Speaker 3: when we finally talk and get into it and talk
Speaker 3: about Tether, at this point he's sold his stake in
Speaker 3: the company, he says for no money, and he it
Speaker 3: turns out to be kind of like a dead end,
Speaker 3: like he doesn't really know where this fifty billion dollars is.
Speaker 3: But he's a really compelling interview. When we started talking
Speaker 3: about like the mystery and how does he have any
Speaker 3: clues about how to find Tether's money. But he's like
Speaker 3: that do not mess this one up. This could be
Speaker 3: your big chance, and I'm like, I totally agree, But also,
Speaker 3: what's going on here, Brock, I.
Speaker 1: Don't think you guys are thinking of the chance and
Speaker 1: the same sort of outcome.
Speaker 3: Yes, I think what he was saying is that Crypto
Speaker 3: is going to do huge things for the world, and
Speaker 3: if I'm just going to be like another hater, that's
Speaker 3: how it wouldah.
Speaker 2: Teather ends up being the crux of the book. I
Speaker 2: would say, so much revolves around Tether and coming things
Speaker 2: just leading you back to Tether. But one of maybe
Speaker 2: the more interesting avenues was with this character named Vicky,
Speaker 2: who I like to call your pseudo girlfriend, maybe because
Speaker 2: that's an interesting way to put it. So tell us
Speaker 2: who Vicky is, how that relationship developed, and then what
Speaker 2: that led you to. And this is I mean, really,
Speaker 2: this was like such a great part of the book.
Speaker 3: One of the questions I have as throughout my two
Speaker 3: years is who's using tether. One of the people I
Speaker 3: find who's using it a lot I won't get is
Speaker 3: Sam Bankman freed for his exchange FTX. But another thing
Speaker 3: I hear about is people crooks are using this for
Speaker 3: like money laundering, and then one day, I get one
Speaker 3: of those random messages that like everybody gets. It's just
Speaker 3: like a text mess and it's just like, hey, David,
Speaker 3: like how's it going. And I'm like, I'm not David.
Speaker 1: And everyone else ignores these text messages. Yeah, it's like
Speaker 1: I think we got a story here.
Speaker 3: Yeah, I'm like I was kind of like, you know what,
Speaker 3: let's see where this goes. And so I wrote back.
Speaker 3: I was like, I'm not David, I'm Zeke, but like,
Speaker 3: who are you? And she says she's Vicky, and Vicky
Speaker 3: from New York, right from New York. Yes, and we
Speaker 3: kind of become pals. And she doesn't immediately let on
Speaker 3: to what her angle is. She's just telling me about herself,
Speaker 3: asking me what I like to do about my life.
Speaker 3: She asked me to send her a picture.
Speaker 1: It sounds like the typical catfishing scheme at first. Yeah,
Speaker 1: it's not quite that right. I was kind of playing
Speaker 1: along and waiting for this to happen. And what it
Speaker 1: is that she starts to let on that she's a
Speaker 1: great crypto trader, like she's learned some tricks from like
Speaker 1: her uncle or something. After like days of chatting and
Speaker 1: where I finally had to be like, Vicky, I need
Speaker 1: one hundred grand so I can get a Tesla. And
Speaker 1: then she was like, I'll let you in on my secret.
Speaker 1: And this is what I really wanted, what I was
Speaker 1: waiting for. She has me download like a crypto trading
Speaker 1: app that I had to like, she had structured me
Speaker 1: how to sideload it on my iPhone, like it wasn't
Speaker 1: from the official app store, and it looked like pretty legit.
Speaker 1: But this is how the scam works. They get you
Speaker 1: to buy tether on a regular trading app like coinbase,
Speaker 1: orcrypto dot com, and then send it to this special
Speaker 1: app where you're gonna learn how to use the like
Speaker 1: short term nodes, and like, once you've sent the money
Speaker 1: to it was called zbxss, it appears to be in
Speaker 1: your account and everything, just like it would be on
Speaker 1: a normal app, and like if you make trades, they'll
Speaker 1: show you gains. They might even let you make a
Speaker 1: small withdrawal, but like, really, once you've sent the tether
Speaker 1: over to zbxss, it's gone. So at this point I
Speaker 1: feel like I've gotten her tether address, and I feel
Speaker 1: like I've let this go on long enough, and I'm
Speaker 1: like Vicky, I have to tell you, Like I'm an
Speaker 1: investigative reporter. I've been looking into these kinds of crypto
Speaker 1: scams and how they use teather, and I've heard some
Speaker 1: like disturbing things about what might be going on, which
Speaker 1: I'll get into. Can we talk about can we get
Speaker 1: real here? And then Vicky just said oh no, no, no, no,
Speaker 1: it's not what you think, and she disappeared.
Speaker 2: I'm shocked.
Speaker 3: Yeah, So this is the real crazy part, which is
Speaker 3: that I learned from reports out of Cambodia that a
Speaker 3: lot of the people who run these kinds of scams
Speaker 3: are themselves victims. And it sounds like some sort of
Speaker 3: Quanon conspiracy theory, but they're victims of human trafficking. And
Speaker 3: there's actually these whole office towers, floor after floor of
Speaker 3: people who've been let's say they've been lured from say
Speaker 3: like Vietnam, with the offer of like a good job
Speaker 3: and like customer service. Then when they get there, they're trapped.
Speaker 3: They're told they can't leave, they're beaten, they get electric shocks,
Speaker 3: other forms of torture, and they're just made They're given
Speaker 3: like ten phones each and made to like try to
Speaker 3: lure people into scams from around the world. So I
Speaker 3: suspected that Vicky was like one of these people, and
Speaker 3: I wanted to, Like I was hoping she would tell
Speaker 3: me more about like her working conditions, or that even
Speaker 3: I might be able to, like somehow help her.
Speaker 1: But no Dice.
Speaker 3: So I start to go down this rabbit hole of
Speaker 3: these other people who've looked into this, and there's actually
Speaker 3: this crazy organization of people who've been scammed who, instead
Speaker 3: of trying to get revenge, have made it their mission
Speaker 3: to help these human trafficked scammers. Through them, I meet
Speaker 3: a lot of experts are working on this. One guy
Speaker 3: tells me that a crypto tracing expert, he estimates that
Speaker 3: this accounts for like that ten billion dollars has been
Speaker 3: lost this way and all using tether. From these guys,
Speaker 3: I get connected with a YouTuber in Vietnam who's his
Speaker 3: thing that he pays ransoms to help people get out
Speaker 3: of these scam compounds. He connects me with some of
Speaker 3: the victims who he's helped rescue, and I start talking
Speaker 3: with them with a translator about their experiences. And I
Speaker 3: meet this one guy, Twee, who had just gotten out
Speaker 3: of one of the most famous compounds in Cambodia. He
Speaker 3: tells me about just like horrific things like this. He's
Speaker 3: in this compound that holds some people, say like five
Speaker 3: or six thousand people.
Speaker 1: Wow. And it's all in Cambodia.
Speaker 3: Yes, and Seannookville in southwestern Cambodia, and it's it's called Chinatown.
Speaker 3: It's run by like Chinese gangsters. So I've made arrangements
Speaker 3: with two reporters in Cambodia who had really been instrumental
Speaker 3: in exposing this problem and bringing it to light, and
Speaker 3: went over to out there to meet some of these
Speaker 3: victims and to see some of these compounds myself.
Speaker 1: Yeah, you know, and this is a scam that sounds
Speaker 1: like it's really would only be made possible because of
Speaker 1: crypto and because of the sort of you know, no
Speaker 1: border transactions that are allowed with crypto.
Speaker 3: That's really what made me think it was so interesting,
Speaker 3: because I yeah, like there've always been these kinds of scams,
Speaker 3: but there haven't been such a first of all, I mean,
Speaker 3: the Crypto's story makes it very plausible that or at
Speaker 3: least mildly plausible, that someone like Vicky might have some
Speaker 3: secret trading secret.
Speaker 1: I mean, in the crypto world, like people are getting ridy.
Speaker 1: Everyone's suffering from fomo. Like you said, you know, everyone's thinking,
Speaker 1: you know, should I be in? Should I be in
Speaker 1: this asset class? Everyone else's seems to be making money.
Speaker 1: It's it's perfect timing for a scam like that.
Speaker 3: I feel weird just even thinking about it, but I'm
Speaker 3: getting what I would get to Cambodia with these reporters,
Speaker 3: mech Doron, Danielle Keaton Olsen, who had brought this Chinatown
Speaker 3: problem to light. Right at the entrance to Chinatown, there
Speaker 3: was a cash exchange store and I could still see
Speaker 3: their like faded sign where they offered to trade tether
Speaker 3: for cash. And like I'd spent like years looking ato crypto,
Speaker 3: I'm not seeing any place where it's actually used in
Speaker 3: the real world. But then, like in panom Pen, I
Speaker 3: went to a currency exchange place to advertise teather. Outside
Speaker 3: I saw a bunch of these and I, you know,
Speaker 3: I had some tether on my phone, zapped it over
Speaker 3: to this Chinese guy working behind the counter. He gave
Speaker 3: me US dollars, no questions asked, and finally I'm like, oh,
Speaker 3: like this is what crypto is good for.
Speaker 2: That's another part of the book that I wanted to
Speaker 2: ask you about. Where you go to this money exchange
Speaker 2: and this man comes in with flip flops and pajama pants.
Speaker 2: He has this big plastic bundle of one hundred dollars bills. Ye.
Speaker 3: So this currency exchange was in the capital in Panompen
Speaker 3: and the capital of Cambodia, in a sort of Chinese neighborhood.
Speaker 3: So the boss was Chinese. This other Chinese guy walks
Speaker 3: in kind of like hungover and just walks out with Yeah,
Speaker 3: this brick of hundreds that a clerk told me later
Speaker 3: was fifty grand. This is the Teather exchange. And I
Speaker 3: since I sent some tether to the exchange place, I
Speaker 3: got their wallet address and was able to see that
Speaker 3: they were making big transfers every day. And this is
Speaker 3: just one of many exchange places. And I visited another
Speaker 3: town that was reportedly home to a lot of these
Speaker 3: scam compounds with forced labor. It was the first place
Speaker 3: I saw in Cambodia. I crossed the border, I got
Speaker 3: off the bus. I'm at this town that's full of
Speaker 3: like scam compounds where I've seen videos of like workers
Speaker 3: getting beaten and right in the parking lot of one
Speaker 3: of these casinos. I see a little booth that's advertising
Speaker 3: trade your dollars for tether, Trade your tether for dollars,
Speaker 3: And I was just like, I don't know, it's not
Speaker 3: evidence of anything, but I'm.
Speaker 1: Like, so, you know, I think throughout the crypto boom,
Speaker 1: many people were where released suspicious that yeah, it's frequently
Speaker 1: you crypto is frequently used to facilitate scams like this
Speaker 1: or make sort of this new version of these scams possible.
Speaker 1: But what caught a lot of people by surprise, I
Speaker 1: think fil Donna and I included, and then many in
Speaker 1: the press, is that some of the players who were considered,
Speaker 1: you know, the righteous leaders of this movement were scam
Speaker 1: artists too, allegedly. And obviously the name that comes to
Speaker 1: mind is Sam Bankman Freed. He really seemed to have
Speaker 1: the world convinced that he was just sort of this
Speaker 1: honest programmer who's building the infrastructure for crypto and you
Speaker 1: can trust him. He testified before Congress. You met Sam
Speaker 1: a few times in the Bahamas, and I think one
Speaker 1: time in Miami too. It just talked to us about
Speaker 1: meeting him, your first impressions and just kind of your
Speaker 1: reporting process with SBF.
Speaker 3: I met him first time at this first crypto conference
Speaker 3: I went to in Miami. He was there to have
Speaker 3: the Miami Heats arena named after his company. He was
Speaker 3: not like quite so famous yet, and I just wanted
Speaker 3: to ask him some questions about tether But as soon
Speaker 3: as I met him, I'm like, this guy is a
Speaker 3: really fascinating character in himself. He's twenty nine years old,
Speaker 3: he's worth like twenty billion. But what really gets me
Speaker 3: going is that he tells me about I mean, his
Speaker 3: shop worn story about effective altruism. But like, when this
Speaker 3: guy was a teenager at MIT, and I've talked with
Speaker 3: other people who knew him, like, I don't think this
Speaker 3: is made up.
Speaker 1: He was.
Speaker 3: He was a vegan, he was an activist. He was
Speaker 3: like handing out animal cruelty pamphlets. Then he meets this
Speaker 3: philosopher who's they're talking about life. Sam is like, how
Speaker 3: could I do something good for the world, And a
Speaker 3: philosopher is like, I got an idea. Yeah, I mean,
Speaker 3: anyone can give out pamphlets. How about you get rich
Speaker 3: and give the money away? And he called this earning
Speaker 3: to give. He he decides to do that and then
Speaker 3: ten years later when I meet him, he's legitimately one
Speaker 3: of the richest people in the world.
Speaker 1: See Ke, You've got one of the best BS detectors
Speaker 1: in the world. It feels like that, at least at
Speaker 1: the beginning, was genuine. Do you think this altruism?
Speaker 3: Yeah, So, now that FTX has been revealed to be
Speaker 3: like a fraud and that users lost so much money,
Speaker 3: he's about to go on trial. A lot of people
Speaker 3: have questioned, did he ever believe any of that? Was
Speaker 3: it a scam from the start? I kind of think
Speaker 3: that it was true, that he really did want to
Speaker 3: make money to give it away, and that in fact,
Speaker 3: his belief that he was a good person who was
Speaker 3: going to do good things for the world may have
Speaker 3: led him to take risks to do fraudulent things because
Speaker 3: he was like, if it's going to make me rich,
Speaker 3: is justified, because I might save the world from the
Speaker 3: evil robots that are coming. But yeah, so when I
Speaker 3: met him, I was suspicious of Crypto, but I did
Speaker 3: not think I thought it was a bit weird that
Speaker 3: he's supposedly this great guy, but he's running what's essentially
Speaker 3: like an offshore gambling parlor where like I think people
Speaker 3: are all going to lose their money because like even
Speaker 3: day trading is a bad idea, like it's proven to
Speaker 3: be a money loser.
Speaker 1: But I mean, you can be an honest broker running
Speaker 1: an offshore gambling parlor.
Speaker 3: Right I so immediately though, I was really taken by
Speaker 3: his idea, because, like you were saying, I've always talked
Speaker 3: with these scammers. I've actually even sort of had this
Speaker 3: idea that it would be kind of cool if somebody
Speaker 3: ran a scam for good and gave them money to charity.
Speaker 3: And one of our first like in depth conversations I
Speaker 3: was talking with Sam, he hadn't given very much money
Speaker 3: away yet because and he was like, listen, I've given
Speaker 3: away like a hundred million, but it's hard for me
Speaker 3: because so much of my net worth is locked up
Speaker 3: in the valuation of his private company, which I thought
Speaker 3: was like, come on, you can't borrow against it. But whatever,
Speaker 3: it was at least like a plausible excuse. But I
Speaker 3: was like, Sam, you have so much credibility the crypto world.
Speaker 3: You could do a scam right now. You could probably
Speaker 3: make like several billion dollars give it away right now.
Speaker 3: Wouldn't that be better? Than like whatever you're working on.
Speaker 3: If what you're working on is too slow, and he
Speaker 3: was just like, I think I could make more money
Speaker 3: in the long run, being honest that checked out. I
Speaker 3: was like, you know, you're probably right, even if you
Speaker 3: could make a few billion with a scam. I later
Speaker 3: went to go visit him in the Bahamas after FTX
Speaker 3: had collapsed, but before the cops got there, and he
Speaker 3: told me he was like, there was one thing I
Speaker 3: wasn't totally straightforward with you about the first time we met.
Speaker 3: You know, I told you my net worth was twenty billion.
Speaker 3: If you like really looked at my networth on paper,
Speaker 3: it was more like one hundred billion. He had so
Speaker 3: much money of but all in these random coin cryptocurrencies,
Speaker 3: some of which like he'd invent it. But I don't know.
Speaker 3: I think they the people, these guys really all got
Speaker 3: caught up in the craziness.
Speaker 1: And who wouldn't. I don't know, Zeke, your stories are
Speaker 1: so crazy that for the first time ever on Booker's Up,
Speaker 1: I think we're gonna skip our craziest things and just
Speaker 1: keep hearing more of Zeke's fat.
Speaker 2: Yeah, because it pales in comparison to some of this
Speaker 2: stuff that we're hearing. So the book, Like you just
Speaker 2: told us like three or four great stories, there's so
Speaker 2: many more in the book. And what struck me is
Speaker 2: that you took part in a lot of this, like
Speaker 2: you actually did, you know, like the trading with and
Speaker 2: texting with Vicki. You also try to buy your own
Speaker 2: NFT so you can get into a party that you
Speaker 2: ended up not having to need the NFT for, right,
Speaker 2: And I'm just wondering about like your real world interactions
Speaker 2: with the crypto industry, the crypto space, the people who
Speaker 2: are part of this space, and maybe some of the
Speaker 2: shortcomings of what you experienced. You know, when you sent
Speaker 2: Vicki one hundred tether you actually sent eighty one tethers
Speaker 2: because the fees were so high that they exchange took
Speaker 2: and et cetera. There was just so much of your
Speaker 2: experience being a part of this.
Speaker 3: Yeah, it was instructive to try to use crypto myself,
Speaker 3: and I was kind of shamed into it because crypto
Speaker 3: people were always like, you can't, you're biased, you don't
Speaker 3: have crypto, you haven't tried it. How do you know
Speaker 3: about crypto? So I finally was like, all right, fine,
Speaker 3: you got me, I'm gonna try it. And I bought
Speaker 3: a very expensive NFT one of these cartoons that go
Speaker 3: for like hundreds of thousands of dollars. Mine was only
Speaker 3: twenty thousand. It was like a picture of a melting monkey.
Speaker 2: When I read this part of it, I literally was like,
Speaker 2: don't do it, don't do it.
Speaker 3: Yeah, if you get one of these, you're allowed to
Speaker 3: go to ape Fest, which is like a week long festival.
Speaker 3: But it was very instructive. This kind of boring part
Speaker 3: of just like buying this ape because the process of
Speaker 3: sending money from my bank to like crypto world was
Speaker 3: just like horrible. It was terrifying. And when I learned
Speaker 3: essentially if you know browser extensions like ad block, the
Speaker 3: little icons next to the URL box and Chrome, it
Speaker 3: was like, oh, like my money is going to live
Speaker 3: there and if I click the wrong button, it'll just
Speaker 3: be gone. I'm like, this is no fun in a
Speaker 3: crypto app. It was a really popular one called meta Mask,
Speaker 3: and when you sign up, they have you watch this
Speaker 3: video where they're like, don't lose your password, we really
Speaker 3: mean it in fact for real, have it engraved on
Speaker 3: a piece of metal and then bury it in your backyard,
Speaker 3: and I'm just like, first of all, no, I'm not
Speaker 3: doing that. I'm too lazy. And then when I got
Speaker 3: to ape Fest, this revealed like another problem with NFTs,
Speaker 3: which is that they're supposed to be cool. When I
Speaker 3: got to the club, everybody had a board epe. Mine
Speaker 3: was the cheapest one, and even like pimply teenagers were like,
Speaker 3: your board ape sucks. I even was able to confront
Speaker 3: one of the promoters of the bard Ape Yacht Club,
Speaker 3: who really, it's got very popular with celebrities. One of
Speaker 3: the celebrities that was like instrumental and giddio it going
Speaker 3: with Jimmy Fallon. He was there, but I was like, hey, Jimmy,
Speaker 3: check out my board ape. He pretended to be interested.
Speaker 3: At this point, the value of board apes had recently
Speaker 3: gone down by like fifty percent. It had still had
Speaker 3: a long way to go.
Speaker 2: But maybe it was this party or a different party
Speaker 2: where you asked somebody like, what is the how can
Speaker 2: this be useful for the everyday person? And the person
Speaker 2: said to you, why are you asking me this? Like
Speaker 2: why do you care so much about that aspect of it?
Speaker 2: It's not that important.
Speaker 3: He was just like, truly baffled. That was at a
Speaker 3: party for a different NFT thing called Degenerate Trash pandas
Speaker 3: I tried to go to one called Solana Monkey Business
Speaker 3: that they were costing twenty five thousand at the time,
Speaker 3: but I wasn't ready. I was like, I'm not paying
Speaker 3: for like a trash Panda or like monkey business. I
Speaker 3: want the one that Justin Bieber has. But as soon
Speaker 3: as I got that board ape, I was like, I
Speaker 3: have to unload this, like I couldn't sleep. I was
Speaker 3: able to sell it after the ape fest at only
Speaker 3: a small loss.
Speaker 1: Zeke, let me square the circle here a little bit
Speaker 1: and bring it back to Tether. You know, as we
Speaker 1: started at the beginning, this is sort of what drew
Speaker 1: you into the crypto rabbit hole. And yeah, and you
Speaker 1: and I have talked about this before, and your original
Speaker 1: Business Week story on Tether is just phenomenal. You know,
Speaker 1: if I recommend people read the book, but also go
Speaker 1: back and read that original BusinessWeek story, and I think
Speaker 1: you had a line in there. How Tether as a
Speaker 1: company seems to be like, you know, it's a carpet
Speaker 1: knitted out of red flags basically, you know, there was
Speaker 1: so much there to be suspicious of and rightly so,
Speaker 1: you know, I no one knew where these reserves were.
Speaker 1: They said they invested in commercial paper. No one in
Speaker 1: the commercial paper market had ever heard of them. It
Speaker 1: just seemed so suspiciously. But the ironic thing is that
Speaker 1: so many things fell apart in crypto, FTX and Terra,
Speaker 1: you know, the Luna Holy ecosystem and all the dominoes
Speaker 1: that fell afterward. Tether is still there. It's still for
Speaker 1: most of the time worth a buck. Walk us through
Speaker 1: sort of the story arc of Tether from where you
Speaker 1: started into where we are now and how you're thinking
Speaker 1: about Tether, you know, is all these red flags what happened?
Speaker 3: Yeah, it was very surprising. I mean I was not
Speaker 3: alone in thinking that they were like the most suspicious
Speaker 3: company in crypto, and like when I published after I'd
Speaker 3: investigated for a little while. I mean, there's a whole
Speaker 3: backstory of it's the boss of Tether, who's former plastic
Speaker 3: surgeon from Milan who had like a weird career and
Speaker 3: import export business. But Tether was sued by New York's
Speaker 3: Attorney General for misrepresenting its reserves. But in twenty twenty two,
Speaker 3: in the summer when everybody's all the other crypto companies
Speaker 3: started collapsing, really like a legitimately high percentage of all
Speaker 3: the people I met in crypto their companies had were collapsing,
Speaker 3: but Tether stayed strong and like they still have not
Speaker 3: provided the detailed accounting of their risk of where they're
Speaker 3: keeping their money that the critics had asked for. But
Speaker 3: I mean, the way Tether works, you send money in,
Speaker 3: they send you these Tether tokens, and if you send
Speaker 3: the tokens back, they're supposed to send you the money back.
Speaker 3: And people you can tell from looking at the blockchain
Speaker 3: people during the crash, people did send back in billions
Speaker 3: of dollars, billions of tokens, like five or ten billion
Speaker 3: worth of tokens. And if those people did not get
Speaker 3: their money, we would have heard the complaint. Tether was
Speaker 3: able to send back a lot of money, Like they
Speaker 3: clearly had at least a lot of money, and it
Speaker 3: kept growing to where now it's seventy or eighty billion
Speaker 3: dollars that they have. To the skeptics, they're like, hey,
Speaker 3: just because they had if they may have had five billion,
Speaker 3: that doesn't mean that everything they're saying now is accurate.
Speaker 3: The owners of Tether are like, what more do you
Speaker 3: want from us? We redeemed like ten billion dollars. But
Speaker 3: the real plot twist for Teather came with interest rates.
Speaker 3: So their business used to be kind of a bad business.
Speaker 3: They were sitting on all this money, but they couldn't
Speaker 3: do anything with it.
Speaker 1: Theoretically would be in the safest investments sealing nothing right.
Speaker 3: And that's where like there were some questions early on
Speaker 3: that I think were legitimate. Were they taking some risks
Speaker 3: with that to juice their returns? Now they can just
Speaker 3: put it in treasuries. It's a small operation. And these guys,
Speaker 3: if if their numbers now are accurate, they're saying they
Speaker 3: are put buying treasuries and they're earning like billions of
Speaker 3: dollars a year, like they're one of the more If
Speaker 3: if this is all accurate, Tether's one of the most
Speaker 3: profitable companies in the world. Like they're making more money
Speaker 3: than like Nike. It's and it's just like this weird
Speaker 3: former plastic surgeon in Italy, buddy from the importing business.
Speaker 3: They are like the real winners of crypto and I
Speaker 3: when I went down to the Bahamas in at the
Speaker 3: end when Sam bankman Fried's company had collapsed. He was
Speaker 3: a big user of tether, all these offshore casinos were,
Speaker 3: and I thought maybe now he'd let me in on
Speaker 3: the secret. I was like, so about Tether you got,
Speaker 3: maybe now you can tell me the big secret.
Speaker 1: And he was like, no, Well, don I think I'm
Speaker 1: gonna petition. Have my desk moved back closer to Zeke?
Speaker 1: Can you tell us what's next? What's next on the
Speaker 1: Zeke Fox agenda?
Speaker 3: Honestly, I've I only I wrote this book now because
Speaker 3: I felt I'd never felt like I'd found the right story.
Speaker 3: And I really don't know how I'm gonna how I'm
Speaker 3: gonna match it.
Speaker 2: He needs a vacation.
Speaker 1: Well, Zeke Fox, author of Number Go Up and our
Speaker 1: good friend here at Bloomberg. We could go on for hours,
Speaker 1: but I think I think that's gonna have to do
Speaker 1: with Zeke. Thanks so much for your time. Really appreciate it.
Speaker 1: Thanks Mike, Thanks.
Speaker 2: What Goes Up. We'll be back next week. Until then,
Speaker 2: you can find us on the Bloomberg Terminal, website and
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Speaker 2: us on Twitter, follow me at Wildona Hirich. Mike Reagan
Speaker 2: is at Reaganonymous. You can also follow Bloomber Podcasts at podcasts.
Speaker 2: What Goes Up is produced by Stacy Wong and our
Speaker 2: head of podcasts is Sage Paulman. Thanks so much for
Speaker 2: listening and we'll see you next week