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The True Believer: how Sam Bankman-Fried's worldview facilitated the creation and destruction of a crypto Ponzi empire
Through effective altruism, the ends justify the means.
Sam Bankman-Fried is a true believer. Bankman-Fried, or SBF, as he’s referred to in the domain he once ruled, has dedicated his life to the philosophy of effective altruism (EA). He has spent his entire adult life surrounding himself with his ideological comrades, and only his ideological comrades. SBF’s friends believe in effective altruism. His lovers believe in effective altruism. His business partners believe in effective altruism.
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Before we get into effective altruism, let’s first catch up to speed on how a man who was once worth tens of billions of dollars went bankrupt overnight.
Here’s a short summary via Twitter:
Unfortunately, there is no greater return on investment in America today than bribing politicians and regulators. SBF and his network understand that reality. They spent the days before the collapse of FTX delivering massive resources into fixing the regulatory levers of power in D.C. to their liking.
During the crypto token bear market, Sam Bankman-Fried and his collaborators were trying to create a regulatory monopoly for their flagship FTX digital currency exchange, along with their massive venture capital empire, vacuuming up an incredible amount of equity in the digital token space.
Like most Ponzi schemes, things often seem great, at least from the outside looking in, while the Ponzi is operating. FTX was running Super Bowl ads, putting its name on stadiums, recruiting A list celebrities, actors, and athletes, all to prop up the operation.
SBF and his team, including his D.C.-based lobbyist brother (who is also committed to the effective altruism ideology), needed to find a way to eventually de-risk the Ponzi. They sought to win the day by achieving a government-sanctioned monopoly of their fraud scheme. Their lobbying efforts included dishing out hundreds of millions of dollars in political donations, mostly delivered to Democrat campaigns, with a clear intention to generate political indebtedness. Contrary to their stated aims, FTX was not, under any circumstances, on some humanitarian mission to “help crypto” or anything of the sort. The activities pursued by SBF and his team display a campaign to further corrupt legislators and regulators, with the hopes to establish an anti-competitive environment to the benefit of their enterprise.
Engaging in sketchy activity and embracing D.C. corruption sure is morally reprehensible, but, as you’ll understand in a moment, effective altruism can be interpreted as sanctioning such actions for the “greater good.”
Given their frequent meetings with Biden White House officials, SEC chair Gary Gensler, and high-ranking legislators, it was clear that the cash-for-regulatory privileges strategy was working. In all likelihood, had the Ponzi not been exposed right before the new congressional session, SBF would have succeeded in further corrupting the system to his advantage, and securing a safe future for his enterprises.
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One cannot fully understand what motivated Sam Bankman-Fried to pursue this incredible Ponzi operation, along with his network’s media manipulation and D.C. lobbying campaigns, without understanding the effective altruism (EA) movement.
SBF’s ties to the EA movement were fully explored in a recent long-form hagiography hosted on the website of Sequoia Capital, a major venture capital firm with $85 billion in assets under management. Sequoia is a major investor in FTX and SBF has personally invested hundreds of millions into Sequoia’s fund.
It is far from the only overwhelmingly positive depiction of Bankman-Fried, but it stands out in the way it delivers incredible detail about the man himself. Bankman-Fried has made a considerable effort to enhance his own image through investing big bucks in media operations such as Vox, Semafor, ProPublica, The Intercept, and countless additional publishing operations.
And those investments had paid dividends in the SBF personal image marketing department. Just two months ago, SBF was profiled in Fortune as “the next Warren Buffet?"
CNBC anchor Jim Cramer, for his part, described SBF as “the new J.P. Morgan.”
The Sequoia profile, which does a deep dive into SBF’s personal life and background, has been wiped from the internet, for reasons unexplained, but it remains available on the Wayback Machine.
In the glowing profile, the effective altruism philosophy comes up over and over again as the motivating force for the now-bankrupt crypto fraudster.
SBF has EA to thank for both his early success and his enormous wealth creation. The now-deleted Sequoia article explains that in 2018, EA members helped him clear incredible regulatory hurdles that gave him access to execute overseas arbitrage bitcoin trades through east Asian banks. By taking advantage of the higher price of bitcoin in Japan, SBF raked in hundreds of millions, if not billions of dollars, by facilitating trades through his special trans continental access to normally super restrictive Asian banking enterprises, according to reports. The MIT alum is, by all indications, a very bright individual, and his early success in traditional finance proves a level of bonafides. Surely, he was on a path to success, but this enormous series of special favors via the EA network made this initial boom happen. Moreover, Sam was not producing anything of value. He had inherited easy money, accumulated through a bitcoin arbitrage trade, which allowed for him to raise the capital to launch FTX.
Dating back to his days as an intern at the Jane Street trading firm, SBF has been vaulted to success by members of the EA community. Notable EA advocates include billionaires such as Skype developer Jaan Tallinn and Facebook co-founder Dustin Moskovitz, among several additional prominent Silicon Valley founders and entrepreneurs. Sam Bankman-Fried is far from the only beneficiary of the EA network. EA movement financiers have deployed tens of billions of dollars into advancing the influence and success of its advocates.
When SBF became enormously wealthy, he founded the FTX Future Fund for this purpose of advancing effective altruism. He also rewarded fellow ideological travelers — including founders of the EA movement — with board seats throughout his sprawling empire.
What is “effective altruism,” exactly?
Effective altruism is a well-funded, niche, but growing ideological movement that explains itself as a doctrine that uses “evidence and reason to figure out how to benefit others as much as possible, and taking action on that basis."
The term itself was coined in 2011, and EA advocates generally cite three philosophers for its foundational building blocks: Peter Singer, Toby Ord, and William MacAskill. MacAskill served on the FTX Future Fund board, but has since strongly disavowed Bankman-Fried following the collapse of SBF’s empire.
An integral staple of EA’s foundation is the notion of “earning to give.”
When he was worth tens of billions of dollars, SBF frequently cited effective altruism’s earning to give platform as the impetus for his wealth creation. Bankman-Fried was not like those greedy capitalists, he explained. No, Sam wanted to maximize his wealth so that he could eventually give it all away, he insisted.
Now, here’s how that idea, which is similar to the philanthropic principles advanced by the likes of Bill Gates and Warren Buffett, can be interpreted as a major red flag.
To quickly summarize the worldview of the intellectuals who coined effective altruism and continue to disseminate its ideas through Silicon Valley and the Ivy League-Oxbridge academic world, EA can best be understood as a version of progressive utilitarianism.
Effective altruists want to do good, they claim. But they can’t develop a consensus on what exactly is good, only that they want to do good. Again, EA advocates are almost uniformly statist progressives, so they generally tend to lean strongly into authoritarian governance principles.
And through “earning to give,” we get more clarity on the mission of dedicated effective altruists.
Effective altruism advocates believe that free markets will not produce human flourishing. In fact, most would consider free markets as a detrimental force in society. However, unlike somewhat ideologically aligned socialists and communists, effective altruists also accept the notion that free markets are an ideal means of wealth creation. Therefore, for the effective altruist, taking advantage of market-based systems to accumulate enormous sums of wealth is an acceptable pursuit, because the altruistic end game of “earning to give” justify the means of engaging in a supposedly objectionable system.
SBF was not just an effective altruist through his business pursuits. He devoted himself to the ideology in his personal life, too. He ran FTX with like-minded effective altruist friends and lovers from a 10 person commune in the Bahamas. Sam, his co-founders, friends, and lovers, which were often one in the same, were all devoted, in cult-like fashion, to their interpretation of the movement.
Sam Bankman-Fried and his collaborators were True Believers. Their interpretation of effective altruism created a moral justification for the creation and growth of an incredibly widespread Ponzi scheme. The lies and fraud were justified as noble lies and noble fraud, because SBF and his comrades were going to “earn to give” it all away. Sam Bankman-Fried’s empire was built through the commitment to a collectivist ideology that allowed for morality to leave the equation. In the end, his fraudulent operation, which was morally sanctioned through his network’s worldview, led to his demise.