On the Odd Lots Podcast, the founder of FTX spoke to Matt Levine about yield farming in an episode dedicated to discussing cryptocurrencies. It’s also the setting where Sam Bankman-Fried outlined his crypto “Ponzi scheme” that would eventually bankrupt his platform.
YouTube personality Coffeezilla broke down the podcast seven months ago, outlining how Bankman-Fried laid out his personal Ponzi scheme. Additionally, the defense adds to the defense that SBF engineered the largest theft in crypto history to date.
Bankman Fried and the Crypto Ponzi
Everyone in finance knows what a Ponzi scheme is and how dangerous it can be. For the most part, the contemporary market is smart enough to avoid them, but crypto’s youth makes it much easier for these things to be present.
In a podcast with Matt Levine, Sam Bankman-Fried spoke about the process of yield farming. Afterward, he inadvertently outlined a crypto “Ponzi scheme” that foreshadowed his own criminal acts with his multi-billion dollar cryptocurrency exchange platform FTX.
Source: Pandaily
Bankman-Fried went on to explain yield farming by starting with a “box.” Adding that you dress up to look like a “life-changing, world-changing protocol that will replace all major banks in 38 days”. Note that in practice the box does nothing.
Bankman-Fried goes on to develop a scenario in which this protocol issues an “X-Token”. That promises all, “cool” out of the box would be split among the shareholders who would vote on what to do with those proceeds.
On the podcast, Bankman-Fried assures listeners that the box does nothing and therefore the token is meaningless. Furthermore, it is expressed that despite its insignificance, it has a market cap of $20 million; for unexplained reasons.
Source: Forbes
When pressed, Bankman-Fried assures that the market cap is due to the effort involved in creating the box. Subsequently, through the interaction of the Twitter sphere with this box, the prize would reach its imaginary $20 million.
Finally, Bankman-Fried went on to illustrate a world where this box and this token will be more invested. Eventually, $200 million was slammed into the box by people on “crypto twitter” and “savvy investors.” After that, you will get this token back.
I guess you see where this is going…
Source – CNN
To his credit, Matt Levine’s laughter emphasizes the nature of the Ponzi scheme in Bankman-Fried’s statement. What SBF says about Levine calling it “worthless” doesn’t prove him right.
It is all the more interesting to consider how FTX went down. It was almost as if the entire collapse started with the deteriorating value of a native token…
Source: CNBC
The reality is that this one-of-a-kind podcast fails to explain how Bankman-Fried misused client funds via trading firm Alameda Research. Still, it shows a man who never viewed crypto with any responsibility for the funds entrusted to him by investors.
It then shows a man who sees the industry not as a pursuit of financial freedom, which defi and digital assets can represent, but as how to raise millions.
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