FTX, SBF, and Crypto (A Series)

Crypto’s a scam!
Crypto’s full of crooks!
Crypto’s not real!

You might think that Sam Bankman-Fried’s jailing and the FTX exchange’s collapse were inevitable because, you know, crypto. Crypto’s a scam. It’s full of crooks. It’s not real. Of course, it collapsed.

But that wouldn’t be exactly correct. Crypto was a minor role player — more like the drug pusher standing outside the backstage entrance greasing the party wheels. A problem-enabler, but not the problem. 

The collapse itself was due to plain ole, run-of-the-mill f’nancial reindeer games. Namely, FTX-Alameda Research was a Ponzi scheme wrapped around a highly volatile asset class run by a bunch of people (or at least one person) who overestimated their abilities and underestimated the need for adults in the room. 

First, let’s tackle why FTX and Alameda Research were a Ponzi scheme.