“No matter what political reasons are given for the war, the underlying reason is always economic.” -A. J. P. Taylor
This is the work of many hundreds of people, distilled and organized in a way that hopefully brings the Bigger Picture to light—at least insofar as we all can research and interpret it better. Apologies to those participating whose work is not included in the scores of links provided.
So far as I can tell, everyone has this story wrong. Many people put together some frame of the puzzle just fine, but this can be a dangerous distraction, so I’d like to take a shot at sorting it out. After all, it’s only human extinction on the line.
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I may edit parts in or out, or write additional articles to clarify related events.
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TL;DR – You may want to break this up into two or three reading sessions. This is by far the longest article I’ve written. It has to be. And it won’t be the tightest or best-edited. But it’s the most important one to date, so I don’t want to hold back. My apologies.
The FTX-Alameda (FTX-A) tale is a prime example of my true motivation for writing at Rounding the Earth, and the reason why I have to fragment the focus: these different threads of war are absolutely necessary for understanding the Bigger Picture. The goal was always to lay out lessons embedded in the articles that might help more people open their eyes to the specifics of what is taking place, and therefore to be able to do something about it. This is the moment when it should become clear why I’ve been doing what I’ve been doing.
The stakes are pretty high—this is a historical battle in the larger World War E. There is no simple preview, but here are some of the topics we hit:
- A giant cryptocurrency exchange, FTX, and its companion quant trading/investment firm, Alameda Research, have collapsed in what appears to be a leveraged Ponzi-esque event that poisoned many other businesses in the nascent crypto-finance ecosystem. This isn’t exactly the right story, and I aim to clarify.
- FTX was likely one of several available attempts by the Globalist Elite to establish the intended new global financial network and currency.
- A second attempt to control digital currencies is likely planned to take place through the regulatory system, using the FTX debacle as the excuse.
- The flood of information about the first point seems meant to obscure the second, third, and other points.
- The pandemic is the fog of war intended to create the opportunity and obscure the activities behind this plan.
- This plan connects a lot of stories, including the activities of Bill Gates and Jeffrey Epstein. It weaves through MIT Media Labs along the way, but goes to the heart of the powers who ultimately control the military-intelligence-banking complex—and that includes the pedophile elite. Whitney Webb has done us great favors tunneling toward much of this, but hasn’t yet reached the core (an overly tall task for any one person).
- The endgame is conceived as an intellectually (genetically) superior human race, but that may be merely a conceptual construct of an insane network of situationally brilliant, if overconfident psychopathic elites. The mass gathering of genetic data and gene-drive technology likely play a role.
Much of the next few pages may repeat much of what you’ve read, but I try to sprinkle the build-up with some important thoughts that may help readers avoid being channeled down the nerfed narrative. After that, things get uglier than you’re probably imagining. I’ll try to make you laugh once or twice in the meantime. Buckle up.
Much has already been said and written about the unusually young crowd running both FTX and Alameda—some that is correct, some that is incorrect, and much that is likely to be misunderstood. So, I’d like to proceed carefully, and ground this story with context.
Know that among the crowd we’re going to talk about, and their tight peer group, are numerous students in educational programs that I crafted and helped run for many of the world’s most “precocious youth”. Sam Bankman-Fried (SBF) still has a profile there, though others around him were more active members of the community.
The FTX-A story isn’t really the SBF story. The pool of players is far larger, and in some cases also murkier. There are hints everywhere about the web of relationships, and it will have to be another article (mine or somebody else’s) that fleshes out even a basic skeleton of the grand summary. Perhaps The New York Times can help with that process.
The full cast of characters would be impossible to know and reveal, which is the very reason why a strong centralized government should always have been viewed as an operation anathema to liberty and organic human development. Part of the magic trick of reaching this point in our timeline has been to raise most of the children as lobotomized cattle, branded with virtue-signaling ideologies like “Progressivism” that leap past all logic to a desired utopian result, and resist critique or cognitive correction with a jello-like kung fu. “What is it that you dislike about progress?!”
The cast of characters you might not notice in this film includes a mega-billionaire with enough influence to keep his life entirely off Wikipedia, a curious gathering of researchers at MIT, and also some familiar faces from the pandemic you might not have realized would pop up in the largest ever cryptocurrency catastrophe (though you might should guess). Also Jeffrey Epstein.
Now, let’s ground this story with a discussion of SBF. It is worth noting that SBF profiles all seem to include his Stanford Law Professor parents, Barbara Fried and Joseph Bankman. And perhaps that is appropriate in an age in which successful 30-year-olds often appear as grown-up children—like rejuvenated extensions of parental will, arrested in development, potentially capable of carrying out their parents’ whimsical dreams of glory.
Among other things, Joseph and Barbara are known as compliance lawyers who work on tax theory and policy. It is interesting that such work gets signaled as government-friendly given that their son became the largest player in the new currency market largely decoupled from government finance.
If any of this sounds like a scathing rebuke of parenthood among the cognitive elite American Mandarin class, imagine that I toned it down several notches for public consumption. Yes, among my many clients families were plenty of these. And 90% of the headaches came from just 2% of the parents.
What I’ve gathered talking to people who have been around SBF, superficially or closely (none of whom want to reveal their names) is that he’s a spoiled, sadistic, hedonistic, ruthlessly dishonest bully of a manchild. But if you want indisputable facts, he was a high school math camper who graduated from MIT with an undergraduate degree in physics in 2014. After that, he went to work at one of the well-known quant funds, Jane Street Capital, where he had interned the previous Summer. After three years of what I hear was moderately successful trading, SBF left Jane Street and moved back to California.
Back in the Bay Area, SBF attached himself to the Centre for Effective Altruism (EA). If you’re not familiar with EA, you can read through the material on the website before realizing that it’s just one more Geek Cult that young intellectuals of arrested development who yearn for a return to deep dorm room conversation by providing them with a largely pre-baked socially acceptable set of virtue signals that conveniently span a full narcissistic mask. And, like most cults, it seeks out that for which its target audience aspires while simultaneously demeaning the journey: “Hey, feckless white boy, this is the path to socializing with pretty women.”
Is it any wonder that the Pick-Up Artist (PUA) community focuses its sales force on Bay Area nerds?
I don’t know if I’m fairly painting-by-colors the SBF portrait just yet. After all, what I think he recognized with EA is the psychological tool fit for the Woke era: a pseudophilosophy that absolves the power-hungry of their lack of ability or interest in connecting with a or the human community. All you have to say and do is artfully articulate the Woke Utopia as your core set of values (and promise to give away money), and nobody should bother you about any of your actions. Dispensing with the need for human connection might have been just what he needed to plow forward with the next epoch in his life’s story.
SBF quickly quit his brief job at the Centre for EA and established his own (cryptocurrency-focused) quant trading firm, Alameda Research, in late 2017. After some early success with one cool trade, crazy rich people came out of the woodworks to shower him with billions of dollars and stardom, but we’ll get to that part of the story later.
The second central player in this story is Caroline Ellison, another former Jane Street trader whom SBF brought in to help run Alameda. She is SBF’s ex-girlfriend, though it’s oddly difficult to find a picture of the two of them in the same place.
Caroline is another child of ample intellectual opportunity. Her father, Glenn Ellison, is a Professor of Economics and Department Head at MIT, usually ranked as the world’s top school for Economics. During my years as an educator I helped author some of the events in which she participated, so I’m aware of her exceptional math abilities. How many high school kids with blushed cheeks know what it means to apply Representation Theory to particular polynomial fields? Three decades ago, you could replace “high school kids” with “undergraduate math majors” and the answer wouldn’t be all that different.
What I understand less is how she wound up among the particular corrupt clique of power players. From Forbes,
I learn more from this about the society that calls the professor asking for withdrawal of an endorsement of a relatively objective skill than I do about Caroline. But perhaps what there is to know is a product of that environment. Who really remains sane enough to make all the best decisions around such people? No wonder so many of the whiz kids are reaching for the EA cult and calling it a day on the moral growth front.
Others are already writing about drug-fueled orgies among the FTX-A circle. We could skip the examinations of everyone’s sex lives, but for the purposes of this story, Caroline’s public commentary does uniquely add to the data pool. Through her we hear that the FTX penthouse in the Bahamas was a polyamorous community where she came to believe in the “imperial Chinese harem” model:
Really, is this the product of some form of insidious abuse that we haven’t yet fully described as a culture? Now, 26 billion points for Slytherin if you can square this circle:
Is this a fully mature CEO of a multi-billion dollar quant somethingorother crypto-Ponzi centerpiece, or the sexualized twelve-year-old daughter of one of the world’s most powerful university professors? It really looks like Peter Pan’s Lost Boys had a little girl tag along, somewhat heterosexualizing the adventure. What could possibly result in such arrested development along one vector dimension? Is this just a particular case of growing up in a heavily cushioned bubble? Or something else?
I’ll leave you to ponder that while we move forward.
There is much about all of this that looks cartoonish on the surface. The phrase “controlling most major world governments” sounds like quite the hyperbole until you’ve fully widened your scope of the players in this story.
This all seems sloppy for a circle of young adults with genius IQs, likely backed by a solid cadre of lawyers. Something else explains this. We’ll come back to that. We have a few more personalities to cover.
Sam Trabucco, yet another math camper and contest champion, has a reputation as a top notch gambler and game player. He got started trading at the Susquehanna International Group (SIG), the world’s largest equity options trading firm (where I also learned the option trading game). Part of the SIG training program includes a lot of hours of no limit hold’em. Perhaps that experience helped him know when to jettison from his position as Co-CEO with Caroline at Alameda back in August. It seems likely that Sam had a solid grasp of the Bigger Picture developing between FTX and Alameda, and recognized troubled waters ahead.
Nishad is a former Facebook engineer who has been described by a peer as having done “bogstandard machine learning” work, which is good enough for most trading teams—particularly the ones that might be faking their trades. He and Gary Wang were described to me as “quiet, deep thinkers” by somebody I talked with who had superficial contact with them at various programs over the years. Nishad and Gary seem unlikely to be among a mastermind inner circle, and one person I talked with wondered if they were prodded down an unstable path after being seduced into the projects: low-confidence followers. Both have already jumped ship, leaving SBF and Caroline likely working with real adults to bail water.
FTX’s Chief Regulatory Officer Daniel Friedburg was the lawyer/fixer from the Ultimate Bet and Absolute Poker cheating scandals (secret tapes here). This does not allay concerns anyone might have that FTX-A planned an illegal course from early on (h/t 2ndsmarestguyintheworld).
Though I’ve managed to gather some details about the members of the FTX Penthouse orgy crew, I don’t think it’s necessary to the story.
There is a strange paradox among the whiz-kids-turned-finance-power-players muddying the story of FTX-A, and it needs to be untangled. Were these kids sloppy-stupid while organizing these Ponzi-like entities that would blow up under such a wide array of circumstances?
I guarantee that these are people who understand public-private key cryptography. In fact, one of them took my course on Number Theory that brings students up through the basics of modular arithmetic and systems of linear congruence when he was 11 years old. It is likely that he knew at least basic cryptography math prior to even arriving at MIT. That something seems incongruous about this story reveals a disturbing reality: the real security behind this whole operation was either a set of completing damning shared secrets, mafia security, or both.
I’m betting on both.
As the prying eyes of the world examine the players and the details around the unique event that is the FTX-A collapse, the players are busy playing geeky misdirection games to cover their tracks. However, this story calls too much attention to so many others that feel more well tied together than ever before.
Now, if you’re thinking this is just a story of a bunch of narcissistic brats who lost a bunch of money, I understand your reaction. But know that this misses the larger points. You need to dig deeper. Keep reading…
A Carefully Engineered Public Relations Campaign
The rise of SBF looks plotted out by experienced and expensive PR veterans—assassins of creative image building. From the building blocks of “MIT” (where most everyone is somewhere between “pretty darn smart” and “supergenius”), a stint at a well-known quant trading firm (Jane Street Capital), and one sweet and sexy trade (arbitraging the Japan Bitcoin premium), enough was on the table for the Mad Men Illusionists to go to work with cloth tailored from the silken fabric of effective altruism.
The next Warren Buffett! The next JP Morgan! And an “effective altruist” to boot! He’s even the vegan who’s going to save the animals as your heart will melt each time he hands you a hundred dollar bill that you’re definitely not buying steak with, right?
Surely Sequoia, the mammoth VC fund that projects an image of Neo-Futurist Capital Gods, understood the manufacturing of the SBF brand when they threw money at him and projected that unrealistic image through their cultivated influencer network.
Never mind that SBF only made $20 million off that trade and then reportedly squandered most of it, and that his billions were entirely due to valuation pumped up from capital infusions.
But if you were paying attention, there were definitely cracks in the facade. Granted, only a portion of the wider world has figured out that Sam Harris is a paper-thin intellectual woo guru, but this must have been a signal of trouble for at least some adroit observers.
OMG, SBF talked about “hierarchies of infinities” and probably understands the Spiritual Singularity to come after the breakdown of…linearity. After heaping effusive unearned praise onto SBF, I’m guessing Harris is going to try to sweep this one under the rug and walk away without drawing attention.
It only gets worse.
Just in case veganism, utopian pseudophilosophies, and Clinton Foundation appearances are boring, SBF spent or committed to $350 million on sports partnerships.
With SBF pumped up so high, crypto news outlets give SBF credit for inserting several-year-old ideas, well-known to the entire ecosystem, you have to know he’s getting special treatment. This was just an opportunity to push his name alongside Elon Musk’s:
One must wonder whether this was a paid advertisement. One way or another, in what seemed like the blink of an eye, SBF and FTX were everywhere. You couldn’t swing a dead cat without hitting somebody working on the PR campaign.
The Rise and Fall of FTX and Alameda Research
If the finance talk bores you, or you find it incomprehensible (that’s understandable if you’ve never been involved in any of this for a living), scroll down to the next section and beyond. The most interesting stories are beyond that point.
Binance, a China-based organization, is the world’s largest cryptocurrency exchange. This likely irritates Western leaders—particularly those in and around the military-banking complex. If nothing else, this is evidence that the world of digital currency is not simply a Ponzi scheme as some naysayers dismiss it. Indeed, most of the world’s currency is already electronic and has been for many years now. Whether or not you agree, all I can do is encourage you to learn more. That said, establishing a powerhouse successor seems to have been a priority among those who funded and organized the FTX-A Death Star.
You’ve probably read much on this topic already, or want a simplified story before moving on, so I’ll see if I can take you where you might not have gone.
Step 1: Establish Alameda Research trading firm.
Step 2: Complete one kick ass trade.
Step 3: Build a well-projected media image of the Altruistic Death Star.
Step 4: Build the Death Star (FTX-Alameda).
Step 5: Explode.
Alameda Research was likely established with the Japanese (and maybe South Korean, which is a harder problem) Bitcoin premium arbitrage in mind. SBF pulled that off, and even if he and his team squandered much of the winners, that was enough to propel them to Step 3, which we’ve covered. At that point, as the story goes, SBF talked with Binance CEO Changpeng Zhao (CZ) who suggested that SBF build an exchange.
I question this last piece because it doesn’t make sense on numerous levels:
- Why would CZ encourage a competitor to his business?
- It was likely understood that Alameda needed an independent (or “independent” given the closeness of the relationships) partner to engineer the Global Digital Central Bank (GDCB) model that we’ll talk about later.
Next, as the story goes, SBF went out looking for capital and tough nuts like Sequoia and Softbank basically handed him the keys to the vault. It’s unclear whether this was before or after what must have been a phenomenal team of lawyers designed the FTX-A corporate blueprint.
A simple hedge fund typically includes at least three separate vehicles for the purpose of taking in funds from investors, moving them into another account from which the hedge fund operates, and then a trading account aside from that. Perhaps blueprints like this exist, but I’ve never seen anything like it. Nor have I ever seen the level of guaranteed returns FTX offered investors.
One thought I’ve had is whether Bitcoin was held back (short selling paper coordinated with the Chinese mining ban), but would be pushed forward by coordinated powers once the Death Star was fully operational. That could conceivably help cover such returns.
These are not the only details of the story that feel oddly contrived. One thing that you should never expect from a top quant firm is the level of public discussion of their operations projected out of FTX-A. Both times I went to work at top quant funds, I was immediately given talks about discretion and corporate spying. Educational materials were not even put in writing outside of what we wrote in our personal notebooks, and it would have been total betrayal to share those with anyone.
FTX-A wanted the world to know that it really was one of the cool kids (major hedge funds) already, so they churned out videos to support the image. In reality, the primary reason why this might not get in the way of profits is that some of their trading cannot be replicated because some trades take organizational capabilities specific to cryptocurrency (and perhaps also to running your own exchange).
Many on the internet have pointed out the images of amphetamines and other drugs designed to provide dopamine sitting on SBF’s desk. You can see him squiggling constantly in his seat. FTX-A employed a psychiatrist and another coach, perhaps to enable their own risk-benefit assessment of chosen drug-regimens.
One of the projects undertaken at FTX was something called Project Serum. This is one that should have raised eyebrows.
So, you’re telling me that this team of kids who made their careers learning how to trade are running these fancy finance companies and are simultaneously good enough developers to understand how to solve the Holy Grail of trustless decentralized finance trading?
Could they use some of that brainpower to design a small peptide inhibitor for a novel coronavirus? Asking for a friend.
Let’s talk about the liquidity crunch.
It started with a leaked Alameda balance sheet on November 2, though most of the world was unaware of the seriousness of the situation until after Midterm elections had passed. That leaked balance sheet showed that a substantial portion of Alameda’s assets (several billion dollars worth) were in the form of FTT, the FTX (fiat) token of highly volatile and speculative value. It is “Crypto Winter” already in the historical almost-four-year cycle with volume in the markets depressed following a catastrophic breakdown in the unrealistically overhyped yield farming corner of decentralized finance (DeFi), so large numbers of eyeballs began sifting through FTX-A, revealing a plethora of worrying signals.
At this time, a lot of information feels chaotic at least partially because there are innocent panicked people at all levels below the FTX-A Royalty layer, but communication broke down around the center. Some of this may be to dodge clawbacks. Imagine getting your money out only to have some auditor come after you and take some of that away to distribute to those who did not? It’s a competitive situation. Some of this is due to employees and contractors moving back home. Expect a lot of additional facts to come to light.
Now, let’s take a look at the carnage from this past week. I’m not going to dwell on rewriting this part of the story as it’s still changing quickly. From WallStreetOnParade.com,
Hacked? Back-doored during an inside job? Who knows at this juncture.
What is known is that a lot of the idiosyncrasies of the crypto markets played a role. So much of crypto finance is new that even the geniuses in the space are constantly rethinking things and making new insights. It’s an exciting, Wild West atmosphere in many ways, and FTX-A appears to have underestimated that factor. For example, one of FTX-A’s exposures was to Three Arrows Capital (3AC), which seems to have been engaged in statistical arbitrage of the premium associated with Bitcoin trust Grayscale (GBTC).
The premium began to move in one direction earlier this year and speculation of fractional reserves (not truly holding the requisite Bitcoin assets) turned into contagion. Such unexpected questions of fidelity result in price crashes—particularly during Crypto Winter after the breaking of Terra/LUNA peg in May that sent half of the decentralized finance (DeFi) space into disarray.
A friend of mine suggests that GBTC may be fully funded as intended, evidenced by their interest in becoming an ETF. I’m sure we’ll all find out in the coming weeks.
This is all exactly how the DeFi space is not supposed to work. Were all of these assets held by individuals in wallets (addresses), provable on a public ledger, there would be no need for paranoia. But the gold rush is being led by people behaving like Tiger parents bootstrapping their toddlers to the rotting flesh of yesteryear’s Great People of History. This isn’t your grandparents’ financial system.
And this is all going to require a lot of expensive therapy.
The visible scope of the carnage as this Titanic mess sinks continues to grow by the day. Careless investors are out many billions, collectively. I’ve talked with multiple people who lost millions. There are cries for heads to roll. Part of the problem is that SBF & Co. seemed to reach out and lace together as many entities as possible and as quickly as possible during their Crypto-zerg. Scores of bankruptcies will take place, and if the illiquidity contagion isn’t controlled, the problem could get worse than that.
The latest Forbes article purporting to deconstruct Caroline Ellison naively challenges the notion that Caroline, SBF, and their circle ever really believed in the tenets of effective altruism.
You mean to say that there are philanthropaths who virtue signal charitable attitudes that disarm people with torches and pitchforks while snickering about it in private, and even get bold enough to flash the joke in your face once in a while? You don’t say!
Maybe that explains why the philosophy of EA is simple enough that it has come to mind for perhaps 90% of eleven-year-old school children during an essay about what they want to do when they grow up.
Meanwhile, SBF continues to play the game, signaling to whoever might buy it that this was all just a big whoopsie.
Can you really blame a kid who was on top of the world for no good reason? Let’s see if he can convince the world that it’s okay when people walk into the bank and the banker says, “So, this thing happened where I spent a bunch of your money on hookers and blow at my penthouse in the Bahamas that was also purchased with your assets. Call it an error of judgment.”
This was all really just a windup for the real pitch. Here it comes…
And there it is: “If we fail, bring in the regulators. Because they’re good people doing a hard job, but it has to be done to protect you from the likes of me, even though they can’t keep up.”
Brush off the cringe. This is only going to get darker. A lot darker. Put the children to bed and pour a glass of something strong…
Establishing a New Global Financial Order in One Fell Swoop?
We might as well jump right to it. I submit that it is highly likely that FTX-Alameda’s planned best hope was to establish a new Global Central Digital Bank (GCDB). This GCDB would be the ultimate issuer of Central Bank Digital Currencies (CBDCs, though eventually the plural would not be needed under the then-inevitable governance structure), such as the one now being pushed on Australia. This is why SBF would be elevated above all other [actually] successful hedge fund managers and cryptocurrency entrepreneurs to share the stage with Bill Clinton, the head of the U.S. Treasury, and the CEO of Blackrock. Many financial engineers had a part in constructing the Death Star.
What is the Death Star, exactly?
Much has been said about the obviously inappropriate relationship between FTX and Alameda. Thankfully, Arnold Kling provides the correct explanation from the chair of an actual Economist:
Who could even think up such a scheme?
Gensler is a journeyman insider. A former whiz kid himself, Gensler made partner at Goldman Sachs at the age of 30 (the youngest in history at the time). He later served as Assistant Secretary of the Treasury for Financial Markets, Under Secretary of the Treasury for Domestic Finance, and Chair of the Commodity Futures Trading Commission (CFTC), all prior to his current position as Chair of the Securities and Exchange Commission, a position made possible by Joe Biden’s election in 2020. It should not surprise anyone then, as cryptonews reports, “Speculation is mounting in the community that Securities and Exchange Commission (SEC) chairman Gary Gensler could have worked with FTX co-founder Sam Bankman-Fried to find legal loopholes the exchange could take advantage of.”
Gensler also served as a Senior Advisor to Hillary Clinton, for whom SBF’s mother Barbara Fried worked as an attorney. Barbara Fried is also co-founder of the political fundraising organization Mind the Gap, which pushed $20M into the hands of Democrats running in (“undervalued and underfunded”) competitive elections in 2018, then far more during the 2020 election where it helped spearhead mail-based voter registration—a topic we’ll come back to later.
Clearly this is not just SBF’s story. But does that mean that these globalist power players had the engineering of a GCDB in mind from the start?
This tweet makes no sense at all if they did not have the establishment of a GCDB in mind. There is no reason why the FTT token should have any value at all aside from the expected money saved by token holders trading on FTX (the defining feature of the token) plus the product of the probability and final value of the established GCDB. And this is exactly the reason to usher in regulation: because it cements industry leaders. Just as Amazon rode the tax-free online shopping wave in a way that current competitors cannot, FTX-A would have risen in an unregulated environment where future competitors would be hampered. From the Intercept:
Meanwhile, while the dust is still settling on the FTX-A scandal, the Federal Reserve Bank of New York quietly announced a pilot program for the new digital dollar. Probably means nothing.
Mathew Crawford is an educator, entrepreneur, statistician and finance specialist. This article was originally published on Rounding the Earth Newsletter.