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The Real Victims Of Sam Bankman-Fried’s Ponzi Scheme Are Not Celebrities Or Institutional Partners, But Everyday Investors

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Retail customers who held assets on FTX are learning a hard lesson on the importance of taking custody of their own wealth.


There are likely over one million victims worldwide and untold billions of dollars forever lost through the collapse of Sam Bankman-Fried’s digital asset empire, propped up by his once enormously popular FTX cryptocurrency exchange, which last week filed for bankruptcy in the United States.

When liquidity concerns issued by FTX’s competitor sparked a crypto bank run on the exchange earlier this month, the world discovered that many of these assets turned out to be nothing more than paper IOUs. FTX’s real balance sheet did not come anywhere close to matching the numbers on the screen. And given the panicked withdrawals, the “FTT” digital token through which Bankman-Fried’s empire maintained their claimed wealth, lost about 90 percent of its value in a day’s time. FTT was a token that Bankman-Fried and his cofounders created, encouraged customers to purchase, then manipulate its value to pitch future investors on.

We have since discovered that Sam Bankman-Fried was running a massive Ponzi scheme. But with the collapse of FTT, that Ponzi now has no chance of recovering. It is officially game over for Bankman-Fried and the massive fraudulent empire he built.

There seems to be a clear consensus of overwhelming evidence that Bankman-Fried has committed an open-and-shut case of massive fraud. If justice is served equally, he would seemingly be destined to a similar fate to that of the last infamous Ponzi finance fraudster, Bernie Madoff, who was sentenced to 150 years in the big house. But Bankman-Fried has friends in high places.

As part of his efforts to de-risk the Ponzi, Bankman-Fried has made considerable efforts over the last couple of years attempting to bolster his ties to regulators and legislators, seeking to obtain both regulatory dominance for his exchange and good favor with people in positions of power. Over the most recent election cycle, Bankman-Fried granted enormous sums of political donations to Democrat politicians. He is second only to George Soros in doling out political expenditures for Democrats.

As I’ve documented on Twitter, he also has close ties to the very congressional committee that is set to investigate the collapse of FTX next month.

Bankman-Fried has also networked himself in with the executive branch, having secured meetings with SEC Chair Gary Gensler and other top Biden administration officials.

Moreover, honest law enforcement authorities in the U.S. have an admittedly enormously complex case on their hands, because Bankman-Fried’s FTX did most of its business overseas. FTX (which is a separate entity from FTX US, the U.S. registered and regulated entity) was headquartered in the Bahamas, where Bankman-Fried lived in a penthouse apartment commune with his friends, lovers, and colleagues (all one in the same), who were all fellow ideological travelers in the far-left effective altruism movement.

For more on that thread, and how the ideology of effective altruism fits into this debacle, check out my piece in The Dossier: “The True Believer: how Sam Bankman-Fried’s worldview facilitated the creation and destruction of a crypto Ponzi empire.”

FTX had a massively influential footprint on the islands nation, which sports a humble $11 billion or so in gross domestic product, and where authorities are known to be susceptible to corruption. In April, FTX hosted the “Crypto Bahamas” conference, featuring the likes of Bill Clinton, Tony Blair, Tom Brady, and the Bahamian prime minister.

Authorities in the Bahamas (who have received significant financial support from Bankman-Fried) are attempting to crash the party and take the lead on bankruptcy proceedings. After declaring bankruptcy in the United States and resigning as CEO, Bankman-Fried then accessed FTX systems and transferred hundreds of millions of dollars in custodial assets to authorities in the Bahamas under “provisional liquidation” procedures. 

Some of FTX’s individual and institutional partners included the infamously sleazy Anthony Scaramucci and “Shark Tank’s” Kevin O’Leary, in addition to professional athletes like Tom Brady and his ex-wife Gisele, along with venture capital behemoths like Sequoia Capital. These forces were either recklessly neglectful or purposely chose to skip basic due diligence procedures while partaking in this Madoff-like too-good-to-be-true crypto investment scheme. But given that some very powerful interests may want to “claw back” their investments, that may raise the likelihood that SBF does indeed do the time for his crimes.

Of course, the real victims of Bankman-Fried are hardly the aforementioned high-profile individual and institutional partners, but retail customers who held assets on the platform, and wrongly trusted the platform to act as a safe custodian for their wealth.

For the victims of the crypto Ponzi, this episode will serve as an indelible lesson in the importance of taking custody of their own assets. This hard lesson of unearned blind trust may even serve as an “orange pill” moment for the countless victims of Bankman-Fried’s Ponzi scheme.

For years, Bitcoiners have made it a sticking point to encourage “hodlers” to take possession of their assets and assume personal responsibility. Leaving assets on centralized exchanges like FTX possessed a fatal but completely avoidable counterparty risk. Unlike in the traditional financial system, where one cannot simply take physical possession of their investments, one of the advantages of Bitcoin is that you can easily hold your asset in a permissionless, secure fashion.

When properly self-custodied through the use of a “cold storage” mechanism, bitcoin thrives as an easily accessible, but non-confiscatable asset that is protected by the most proven, secure cryptographic encryption that the world has ever known. There is no need to allow Coinbase, Kraken,, or the many centralized exchanges in the crypto world to hold your asset once your purchase clears the market. Using trusted third-party custodians not only adds unnecessary risk to the equation, but it runs counter to Bitcoin’s “don’t trust, verify” ethos.

The FTX Ponzi blowup is just one of many similar incidents that began with the 2013 insolvency of Mt Gox, so a seasoned Bitcoiner has likely experienced one of these “rug pull” events. In the most brutal fashion imaginable, the victims of FTX can learn through this experience to heed the “not your keys, not your coins” mantra trumpeted by Bitcoiners.

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