In the Sequoia profile they greatly admire how Bankman-Fried plays League of Legends while pitching to investors, and takes naps in his office when he’s supposed to be in meetings. How surprised can they realistically act that their genius lost 8 billion dollars in a “hidden, poorly internally labeled account”.
The investment industry needs to face their role in this debacle. The Ontario teachers’ pension fund sent tens of millions to FTX with apparently no due diligence. That money ended up in the pockets of crypto insiders and also funded promotion like Super Bowl ads that sucked more retail dollars into FTX. Some of those poor FTX customers who are facing a 100% loss on their crypto “investment” may have been teachers from Ontario.
Pension funds and VCs don’t generally invest in gambling and drugs. Why do they invest in crypto?
There's a lot that went wrong in 2008, but none of it looked anything like this.
edit: And a ton of others, like every major investment bank (who also used customer funds as collateral for prop bets) except that the government bailed them out.
We phoned one of these well known investors to tell them what had happened. By that of course I mean the person in charge of the little piece of the massive fund that was allocated to us.
On the call the guy goes "when I tell my boss in 5 minutes, I'm going to get fired for investing in you". He wasn't wrong.
The thing that shocks me is the due diligence. There's a heck of a lot of things you have to do to get Ontario to invest in your fund. All sorts of documents, double signature statements from banks, meetings where you wear a suit. We'd have lost the investments if we were playing video games, there's no doubt about that. Maybe culture changed but it seems really odd, because part of due diligence is qualitative: does this team seem like serious people?
If you’re building consumer facing software like a social network or app, and you have massive wild growth, you have a money printing machine in progress.
It’s pretty straightforward to get there with a seed of blind luck and some sweaty immature skilled tech guys from top schools who have literally no fucking idea how to actually run a company.
Everyone has seen that before. It works out. You invest the money they use it to hire people who know how to run a business and you win. You have no internal controls or systems for awhile and some accounts get nuked and there’s a breach or two and it doesn’t matter it’s a photo sharing website.
Then you apply that logic to healthcare or financial services and they make a Netflix mini series about just how much of a fucking moron yoi were for not understanding those are fundamentally different business models.