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Today’s episode is a bit of a double-decker.

We’re going to break down the layoffs and big Tech over the last few weeks and then we’re going to bring back the award winning Financial journalist.

0:58

Bill Cohen to guide us through the weirdest story and Tech and finance which is obviously the unfolding SBF FTX disaster in crypto.

So one way I think of this interview is like, you know, there’s going to be a movie in a few years about SPF and this whole mess.

1:17

What are we learning from it?

He’s a journalist right now about what might be, the key scenes of that movie, they were all going to be watching going to have Bill walk us through his SPF Chronicles in just a moment.

But first the big Tech convulsion, the latest layoffs newsstands like this. 12,000 announced gone at Google 10,000 at Microsoft 18,000 at Amazon.

1:42

Sales force is laid off ten percent of its Workforce Spotify which owns the ringer.

This podcast announced a X % layoffs.

All told more than 130,000 people have been dismissed from their jobs at large Tech and media companies in the last 12 months 130,000 people is more than the total number of workers at Apple before the pandemic.

2:06

It’s a lot of people But the overall employment rate in the US remains 3.5% and that is the lowest Mark of the 21st century going out to one decimal point.

So there’s a bit of a mystery here, a discrepancy between massive layoffs at Big Tech and an unusually low unemployment rate throughout the rest of the economy.

2:31

So before I offer some theories, tell you how I’m seeing the situation, let me start at the most human level to say Lay off suck, they really suck for people being laid off.

I’m not going to discuss where I am going to discuss numbers in a second numbers have a way of flattening, Human Experience and turn everything into a stage statistic.

2:53

So I do want to start by saying this that when 130,000 people lose their job, even a good job.

Even a decently high paying job.

That’s still life scrambling and it’s anxious and it’s hard and it’s shitty.

So what is going on?

This is a profoundly weird flipping of the 21st century economic Norm, that we’ve come to know and understand right in the 2010s, the economy was weak.

3:20

The labor market was weak, it was Silicon Valley, that was booming, and then during the pandemic even more.

So the US economy had this flash freeze depression but the tech sector absolutely boomed by mid 2021.

This is crazy.

I think the stat came from the subset Grider.

3:36

Noah Smith just five.

With tech stocks Apple, Microsoft, Google Amazon and meta represented 23% of the entire S&P 500 Index.

Five companies were a quarter of the whole S&P 500, that is insane today, it’s the opposite.

3:56

The US Labor Market, seems by some measures very strong and yet the tech and media Industries are the ones that are bleeding.

So what’s going on?

And what does this inversion of 21st century Norms?

Tell us about the state of the economy?

Explanation number one.

And this is the explanation.

4:12

I think that is being most commonly offered in the news right now is that big text simply over hired in the pandemic, pure and simple, the big Tech CEOs made a mistake and this now is the correction.

So what does this mistake look like in numbers?

4:28

Will look at meta the parent company of Facebook and Instagram in 2019 meta.

Had about forty four thousand employees by September of 2022.

They had Eighty-seven thousand employees.

So, during the first two and a half years, the pandemic meta added another meta in head, count.

4:48

It invested in workers in anticipation of an economy that did not arise.

So why didn’t it arrived?

Why did all these companies make the exact same mistake.

Well, as I wrote last week in the Atlantic, I think the post pandemic economy has just ended up much weirder than most people anticipated.

5:07

A lot of people Putting myself in this category, predicted that the digitization of the economy that we were seeing in the pandemic, right?

Like the rising streaming everyone was screaming, no one was going to movie theaters.

Everyone was adding new food delivery apps.

No one was shopping in grocery stores, everyone was joining Peloton and doing at home fitness stuff, rather than going to Jim’s.

5:28

We called these accelerations, we said the pandemic is pushing everyone into a future that’s coming anyway, and so tech companies invested like it.

They they in some cases, doubled their Workforce, but maybe the pandemic wasn’t an accelerant media was a bubble, right?

5:48

We’re familiar with calling pandemic, stocks bubbles like Peloton and Robin Hood.

These stocks that ship sword and then crash but like 90% will the same happen with employment and then of these tech companies like alphabet and Amazon, the face, all sorts of challenges during the pandemic, whether it was supply chain challenges than inflation happened than in.

6:08

Straits increased, then their stock valuations were punished.

And so, all of these companies thought the pandemic was like this time machine thrusting them into the future.

And it wasn’t it was a mirage.

And now the Mirage has disappeared and so are the jobs.

6:25

The second explanation for this moment is and I’ve given this story before in the podcast it’s the interest rate Theory of Everything, when interest rates were low investors were willing to plow their money and hold their money in companies.

6:41

That had great stories about the future companies like Tesla or Peloton, or Robin Hood, or even meta an alphabet.

But when interest rates started Rising stock started falling, and you saw investment flowing from Tech, which was the future.

All sorts of companies, like, CVS or United that were just, you know, sort of service companies that had healthy margins and that adjustment in the markets Force, these companies Netflix Uber Tesla to change the way they did business to lay off a lot of people as we’re about to see in a second.

7:14

I think those layoffs sort of made it safer for other CEOs, to lay off their workers to eke out higher margins, in their businesses, third explanation.

I want to quickly glossed Is that it’s become a joke in Tech that over the long run, every company becomes an advertising company.

7:35

So obviously Google is an advertising company and obviously, Instagram and Facebook are advertising platforms for a while, something like 80 to 90% of every single marginal Dollar.

In the digital media was being earned by either Facebook or Google, they were the two-headed monster.

7:51

The Hydra they were the duopolists, but in the last few years other companies have Essentially become more try to become advertising companies.

Amazon is the fastest-growing advertising company in the world.

You’ve seen Netflix say, we want to get it on Advertising.

You’ve seen Uber start to show ads in their platform when you hail a car.

8:10

And I think maybe is more of these companies have become advertising companies.

They become more sensitive to slowdowns in advertising and that’s what we’re already starting to see.

And I think you’re going to see more of in 2023, is a Slowdown in the ad Market as a lot of companies say Say, maybe a recession is coming, we don’t know.

8:28

But the first thing that is easy for us to cut is AD and marketing dollars, because that’s not spending on the core product, its spending on future branding and revenue.

So I do think that in possibly a subtle way, the slowdown in advertising is metastatic in the tech industry right now because so many different companies now are sensitive to slowdowns in advertising.

8:52

Final explanation.

Number four.

Is human nature, Chief executives?

Are people Chief executives?

Are people and people navigate uncertainty by copying each other.

When you don’t know what to do, you copy people.

9:08

Like imagine being at like you’re at a park and you see every you don’t know like what ride to take next and you see that suddenly there’s like a massive people that are moving toward like 11.

I’d or one attraction.

9:26

Like where’s that crowd going?

You’re more likely to copy behavior when you’re in certain about the future.

I think that’s what’s happening right now that this is that these layoffs are essentially an active social contagion or mimicry.

Like when all your competitors are laying off, 10% of their staff.

9:41

And their being in many cases rewarded by investors for doing.

So the head count goes down, the expectation of future earnings future profits goes up more people invest in that company.

Not saying it’s good that it works out that way.

I’m just saying it often does work out that way.

9:58

That makes it easier for the next marginal company to say we’re going to call ten percent of our staff and expect that we’re not going to get dinged for it because everyone else is doing it.

And a final note, this obviously clicks back into the first podcast, who did this here about whether or not a recession is coming.

10:19

I said, in early January, I do not think a recession is inevitable and I would bet gun to my head.

We are not going to have an official reception in 2023 and IP wrong on it.

But I said, no, I think it’s more useful to see these layoffs as a lagging indicator of mistakes made by corporate leadership in the last three years, in Silicon Valley, more than a leading indicator of economic conditions to come.

10:45

Does that make sense?

This is more about hiring mistakes from 2020, then it is about the US economy in late 2023.

And that is today’s economic analysis.

I’m Derek Thompson.

11:02

This is plain English.

11:26

Bill Cohen is back with us Financial journalists.

It Puck news.

Bill, welcome back to the show.

Hey Derek, thank you for having me back.

Great to be here.

I want to catch people up really quickly in case they have not been following the FTX Scandal or perhaps just forgot the basics.

11:41

This is my general understanding of where we are and then I’m going to give you an opportunity to edit my general understanding, but FTX is /, was a trading platform affiliated with a hedge fund, called Alameda research, both Run by crypto.

King former crypto King sandbank manfried AKA SBF after he series of chaotic Revelations about the company.

12:03

There was a run on the bank with customers demanding funds.

The money was not there FTX filed for bankruptcy, and it seems very likely that customer funds were not at the bank because banquet freed moved client cache to his hedge fund from FTX to Alameda to cover losses and he deposited magic bean tokens ftts.

12:25

Instead in @tx when the tokens were revealed to be worthless or a liquid, there were simply no funds to make customers whole and thus, we have a bankruptcy that brings us to you Bill.

First question, this is going to be a movie or a miniseries.

12:41

The truth is, I think it’s going to be both a movie and a miniseries.

And I think like when I see this movie or miniseries, what’s the dark turn?

What’s the point of no return?

The moment that seals spfs fate.

I am persuaded.

It by your reporting that that dark turn very well.

12:58

Might be a meeting that SPF took with Anthony scare.

Muchi aka the mooch in Saudi Arabia.

Take us inside that meeting.

Well, you know, first of all, I mean, I can’t even believe that the sort of arrogance of SBF thinking that, you know, he could he in the music could go over to Saudi Arabia, have a meeting with MBS the, you know, all-powerful ruler of Saudi Arabia and somehow walk away with a commitment for a billion dollars of new.

13:39

Cash Equity at the same thirty, two billion dollar valuation.

But but that’s what they did and, you know, I get it because, you know, in September, I mean the music and SBF had known each other for quite a while when I interviewed SBF.

14:03

In December of twenty Twenty-One for 90 minutes for this documentary film.

I’ve been working on about cryptocurrencies and crypto generally that whole meeting with him was arranged by the music for me, you know.

14:22

He introduced me to an executive at F DX and then one thing led to another and SBF agreed to meet me you know in In a hotel in New York City.

So they’ve known each other a long time.

14:38

And then in September of 2022, the SBF invested in the mooches, hedge fund bought a stake in it and an option to buy more.

And then the MU choose some of that money to buy ftt tokens, which is sort of interesting and, and other cryptocurrencies that SBF wanted him to buy.

15:01

And then he took like five million It didn’t, you know, put it in his own bank account and or his hedge funds bank account then.

So they knew each other and they were Partners now.

And so the mooch wanted to, you know, open up his real Rolodex to SPF and next thing you know they’re in the Middle East you know in Qatar there there there in Saudi Arabia meeting with MBS you know who’s obviously notorious to put it mildly. oddly, and it was at that meeting where SBF, you started shit-talking CZ, the CEO of Finance which you know, not surprisingly got back to see Z and then led to CZ tweeting about SBF, and that he was going to sell some of the 500 million dollars worth of ftt tokens that he got in exchange for his Ownership stake is early on ownership stake in ft x because you wanted to be paid out and he got paid out in these ftt tokens.

16:11

Just the thought that he might be starting to sell those ftt tokens led to the series of events that we’re now talking about.

It’s really interesting because CZ in a way is kind of The Godfather of crypto.

This is a guy who in many ways, that’s by the way, the letters c z and finances.

16:30

I believe the largest crypto platform crypto trading platform In the world when CZ takes a stake in FTX he has paid in ftt.

This is a token that essentially is invented by a SPF and by FTX it’s a token that isn’t necessarily worth anything.

16:50

It’s like it’s almost like a like a made-up stock token in the company of ft x and its value is not particularly liquid so it’s not like a typical stock.

They like when they like a stock in Microsoft or In many ways, anyone who holds a lot of tokens can be kind of a market maker and determine the value of it.

17:09

So, in a way in, correct me if this is wrong like by giving CZ, a competitor a bunch of ftt tokens, he’s kind of like, handing his competitor, the weapon that can be used to destroy his own company and then goes to Saudi Arabia, talking to all these people that might have back channels to his competitors easy and starts to shit-talk him.

17:32

So it’s like, You’ve sold a bunch of bombs to your adversary and then you go to some Diplomat and start shit talking your adversary I was daring them to use the bombs on you, which is absolutely what happened in November and seems to be the event.

That triggered the downfall of ft x because who knows how long this seemingly Ponzi scheme could have run without that particular sale by CZ.

17:54

And am I am I getting that analogy wrong here?

No, no, your he is perfectly right here.

He absolutely gave again, what happened was CZ, hit was an early investor in FTX and wanted to get, you know, either he wanted to get the value out.

18:18

Given how fast and far the valuation of FTX said, you know, increased in January of twenty, twenty two a month after I spoke to SPF the valuation was Of course, 32 billion dollars and and that’s when a lot of the 1.8 billion of equity that he raised for was raised and was raised at thirty two billion dollar valuation.

18:45

So I think it’s some points.

Easy said, look okay, I was an early investor.

I want my money out.

And in exchange for that Equity stake that CeCe had taken early on in FDX.

He got these five hundred million dollars quote worth of ftt tokens.

19:03

And so I don’t know whether I suspect that for all of, you know, SBS Brilliance, you know, MIT physics grad.

He didn’t realize that he had given the weapons of mass destruction to his rival and hadn’t figured that out.

19:22

But you are absolutely right.

F TT token, which is like, many of these tokens that these exchanges create.

And for reasons that I’m not in, tireli Be sure of why they do it other than to sort of create some sort of scheme that, you know, this token was spun up and was very thinly, traded was very liquid.

19:47

So, you know, like sort of I don’t know if you ever followed the whole Saga and scheme of the, you know, a hundred million dollar, New Jersey Delhi, that was a thinly traded stock that got pushed up through, you know, my stock manipulation and I’m worth a hundred million dollars, even though it barely made any money and made, you know, salami sandwiches.

20:10

You know, the same thing happens when you are able to, you know, sort of buy and sell a thinly traded asset.

I mean, I don’t even know what you call it token and create value.

That’s not really there.

But if you look at the chart of ftt, you know, it obviously got up to be worth like, you know, $50 a token.

20:33

And when the whole thing collapsed, it was worth less than a dollar.

Now it’s actually bounce back again to like 250 a token but the idea was that he gave to CZ a huge amount of of ftt tokens.

20:50

So that at any time that’s easy wanted to he could like crater the token by saying he was going to sell it.

He didn’t even sell any.

I don’t think Derek I think he just said he might sell it, that’s right.

That was enough to Spook everybody and the reason that he I assume he did that.

21:09

Of course I haven’t spoken to see Z is that he obviously heard that he’d been shit-talking SPF had been shit-talking him.

You know, while he was trying to raise money and he also was probably not pleased, that SBF was kind of leading the charge trying to regulate crypto in the halls of Congress between you know, giving 40 Million dollars of donations to Congress, people, and meeting with the head of the SEC and, you know, trying to influence the way.

21:42

Crypto would be regulated in this country and I think, you know, in the world of cryptocurrencies and crypto exchanges, you know, you don’t want any regulation, even if it might turn out to be favorable relatively speaking or better than it would be without trying to influence it.

21:59

I think CZ was like, you know, what the hell you doing here as?

SPF trying to, you know, influence regulation, pushing for regulation, we don’t want regulation, we like no regulation you’re in the Bahamas where there’s no regulation what the hell you doing?

And so I think the combination of those two things, you know, said, okay.

22:16

All right, if that’s what you gotta do SPF, then I’m going to sell these tokens for pretend to sell these tokens.

So putting all of this together.

Alameda and FTX are giving financial statements to their investors.

And those statements have numbers in them that are making these investors.

22:35

Think this is a good place for them to put tens if not hundreds of millions of dollars.

But there are other people looking at different financial statements coming out of FTX and Alameda that are saying this is completely unworkable.

22:50

Like, you basically have a bunch of assets listed, In tokens that you invented for which there’s no liquid Market, that one person can entirely crash and bring down like, you know, a third of the represented value of this company 20.

How did this happen?

Like, do you have any insight into whether the the in institutional investors, the venture capitalist where they just lied to do?

23:13

You think they just mislead or were they sort of experiencing some kind of collective hallucination?

That got them to believe that this document That was on its face, a representation of a Ponzi scheme.

23:29

Was in fact, the representation of a multibillion-dollar business, is such a great, such a great question.

And I think, you know, is usual in these situations, there is an element of mass delusion.

Okay, and I think there’s also when it comes to people whose job, it is to invest other people’s money, and they get paid.

23:53

To invest other people’s money.

Okay, which is what Venture capitals capitalists get paid to do?

Its what?

Pension fund managers, get paid to do, its what private Equity investors get paid to do.

Its what has it management?

Investors get paid management, get paid to do, they get paid to invest other people’s money, including In fairness some of their own money?

24:17

That’s what they get paid to do, they get paid fees usually two to three percent of the The money that they have under management and of course, they’re always anxious to get more money under management.

So they can get those, two to three percent fees and they get 20% of The Upside or something like that 2, + 23, + 30, whatever it is 2 and 15.

24:37

Whatever it is.

That’s the what they get rewarded to do.

They don’t get rewarded to not put the money to work.

So you know, venture capitalist, especially in Silicon Valley, you know, they have a fear of missing out you know the only live once It’s they have a portfolio Theory as far as this goes which is you know, they get paid to put the money out, they know that not everything is going to hit like you know, a grand slam, let alone.

25:04

Maybe a ten bagger or whatever it is 10 times their money 15 times your money, 20 times their money.

But, you know, at some point you know, you’ve got to put the money out there.

You’ve got to take chances, that’s what they get paid to do and, you know, SPF was Perfect.

25:22

Right.

He was like the perfect Exemplar of the kind of entrepreneur that these guys feel they have to back.

What does that mean?

What is it?

What made him perfect in your mind to these investors?

Look at that resume.

25:39

Okay, let’s just start there.

The resume the son of to Stanford law.

Professors.

Okay.

A guy who, you know, Ooh, up in their backyard who decides he wants to, you know, break out of the family mold by the going to MIT, where he’s a physics, major.

26:04

Okay.

Decides that, you know, he is, he told me, you know, when I interviewed him in December, that of 2021, that, you know, and this I found very hard to believe that.

26:20

You know, he what he really wanted to do was go into the world of nonprofits but what you know this is part of the whole effective altruism, you know, bullshit that what the nonprofit’s told him was that.

Well, Sam, you know, we could hire you, we might like to hire you your possibly somebody we might hire but you know, higher and best use for you.

26:41

Sam would be to go make a lot of money and then give us that money that would be the best thing that you can do for us.

And so, That sort of with that Insight in his mind, you know, that’s why he convinced himself.

Oh, where can I make a lot of money fast so that I can give it away.

26:59

And he’s tried telling me all this and I’m thinking, okay, this sounds like a load of bullshit to me.

I’ve never heard of any nonprofit who wouldn’t, you know, want to hire a recent MIT grad and it would instead tell them to go make money and give us the money instead.

27:15

But you know, that was his story sticking to and that’s what brought him to Jane Street Capital.

You know, this hedge fund in downtown Manhattan and you know, according to him, this is where he realized that there was an Arbitrage opportunity between the way.

Bitcoin was traded in New York and the way it was traded in Japan and all these around the world and he just, you know, made coin big time on arbitraging.

27:40

The difference is between the way Bitcoin was trading on these various exchanges and of course after making bank, then he decided Well, I’m going to create this Exchange.

JH to make, you know, to to, you know, trade out to eliminate that Arbitrage opportunity for others.

27:58

And so, of course, that was his story and he’s spinning it like, you know, in front of all these Venture capitalists, and of course, it’s working beautifully.

And the valuation is spiraling out of control and so, you know, he got all these people to invest in the early rounds at lower valuations.

28:16

Now, come January, 2020 to its Thirty two billion dollar valuation.

You know, how could it not just keep going up and he sort of even insults the Sequoia people who are on the call, the investors who are supposedly fiduciaries for all sorts of other people’s money by playing video games during the isn’t even meet with them in person.

28:40

He, you know, he meets with him over zoom and he’s playing video games at the same time.

He’s taking and or he’s taking a meeting with the largest venture capitalist or one of the most famous venture capital.

Options in the world and he basically has them on a second screen while he plays video games and Screen one and they come away from that meeting saying, my government intellectual bandwidth to be able to play, you know, Call of Duty while also impressing us with your resume.

29:03

And it’s one of these things where, in the moment I can understand how people were sort of charm and by just how I think last time we spoke I said he had a kind of like anti Elizabeth Holmes Miss to him, like where’s Elizabeth was so clearly modeling yourself off of Steve Jobs like she’s dressed like Steve Jobs.

She the turtleneck, the black turtleneck.

29:18

She try to talk more like Steve Jobs here you have SPF is like the opposite.

He he dresses like a slob, his hair looks like a slob, he seems to give no shit about anything.

Except theoretically, I guess video games, the bottom line of his company and people are Charmed by its.

They give him a bunch of money and they Overlook the financial statements.

29:35

It’s going to be an incredible story and incredible miniseries.

We arrived, I think, at this point, and probably the most important question facing not only this episode, but also SPF as a person, which is how much of this was one massive mistake, and how much of it was deliberate fraud.

29:56

And of course, you know, these things can exist simultaneously.

It could be, it could be it started off as a mistake where, you know, he lost money at Alameda research and he try to find some way to fill the gaps and then And that those attempts to fill the gaps became, essentially stolen customer funds, which is the equivalent to fraud.

30:17

But based on all the things that SPF is saying on his sub stack and in his blogs and in his interviews with your colleagues and what we know from the data, where do you stand on the big fat mistake versus fraud Spectrum?

30:33

You know, if it looks like a duck and quacks like a duck and sounds like a duck, you know, it’s a This this some sorry to say, look, you know, we’ll see what happens in the court of law.

30:49

People are innocent until proven guilty.

He’s pleaded not guilty, but you know, this looks like a major league fraud to me.

Although, you know, again when I interviewed him, I was sort of Charmed by him like everybody else.

31:08

I was Charmed by the resume.

I mean, As much as anything.

And I guess that’s my my fault my blind spot.

But you know, when you’ve got, you know, at least two or three of his former Executives, who have now pleaded guilty and top Executives, you know who pleaded guilty and have are now helping the feds prove this case, As Tim and what they hope will be in exchange for a lighter sentence.

31:46

You know, you’ve got John Ray, who’s now the new CEO of the bankrupt estate saying, this is like the largest fraud that he’s ever seen.

And it’s the guy who worked in radio contact, the greatest act of corporate malfeasance or incompetence that I’ve ever seen.

32:06

This is the energy from the guy who was the CEO of Enron when it was in bankruptcy.

So, I mean to me this is worse even than what Bernie Madoff did.

If I could explain that for a while and it has we know Bernie Madoff.

Got 150 years in Butner prison in North Carolina in any course.

32:27

He died there.

You know, Madoff is you recall, Derek had had a legitimate business on the 19th floor of the lipstick building, which was his Market making business, and it was Former head of the NASDAQ and he actually was, you know, making, you know, markets and that’s where his two sons worked.

32:48

And that was so that was a legitimate business, you know?

So we’ve still believe and on the 17th and 18th floor, he had his Ponzi scheme where he would, you know, take money from clients and, you know, literally rob Peter to pay Paul and after promising them, what 10 or 11 percent annualized returns and it was fine, and he kept doing that for many.

33:11

Years, he enhanced it by making it difficult for people to get in.

And so, you know, people wanted something they couldn’t have, which was to be have access to the Madoff funds and that all worked, you know, pretty much fine with some majorly bumps in the road until 2008 in the financial crisis of 2008, where you know, people again wanted their money back and he couldn’t give it to them and he didn’t have new people coming in so that he could rob Peter to pay Paul but he didn’t.

33:41

Basically take the money for himself.

He took some money too, so make it look like you must have some money for himself and I did take money for himself.

Yes.

But and that was so he could have his, you know, apartments in Manhattan.

33:57

Is it?

It’s house in Palm Beach is Yachts, excetera do to make it look like he was too successful, you know, businessman and investor.

What seems to be happening or was alleged happened with SPF is You know, people would send the money to The Exchange and he just siphoned it off for his own hedge fund which he own 90% of.

34:19

And then made all these, you know, crappy Investments as well as took out a billion dollar loan according to John Ray, where’s that billion dollar loan?

Where’s that money?

Why isn’t that been paid back?

Where’s the 500 million dollar loan to the other FDX, executive Alameda and fds executive?

34:37

Where is this money?

And what Y is an s?

F explaining where this money is that you know you got to get a billion dollar loan and all of a sudden you don’t have to pay it back.

What’s that all about?

I get a ten thousand dollar loan.

I have to pay it back.

34:52

I get a mortgage, I have to pay it back or I’m going to lose my house.

I really interesting difference between Madoff an SPF in terms of what happened.

After the Ponzi scheme was discovered is that you go back to the Madoff store.

And once in this remarkable about it is that this guy has spent decades lying to everybody in his life, not just his best friends.

35:11

Just Eli.

Why sell.

And but also his sons and his wife and at the moment that it all comes crashing down, stop me.

If I get this wrong, the FBI knocking on his door and says your Bernie Madoff.

Yes, he says, yes, is there any innocent explanation for this?

And he says, no, he confesses on the spot.

35:28

Like the lawyer has no work left to do, he has already confessed to the Ponzi scheme.

With SBI restore can has nothing to do.

Yes, right with SPF.

He is confessed.

Going to a mistake, right?

He keeps saying I fucked up.

35:44

I fucked up.

He’s confessing time.

Just labeled right but he still equating what is transparently a Ponzi scheme?

To an Excel labeling error.

Like the mistake that an intern at Morgan Stanley.

36:00

Makes it 3 a.m. in the morning and then gets berated by his or her boss at, you know, at 10 a.m. the following day and then fired this hat.

We have to bring in the parents here.

Because his relationship with his parents.

You mentioned at the top, these are not just, you know, beloved parents.

36:17

These are Stanford law.

Professors that appear to be paying for their son’s defense with money.

They got by selling these ftt tokens.

These magic being tokens at a moment of higher value.

36:33

So they have several million dollars at their disposal and they are defending their son in a way that leads us to believe he’s he’s going to plead not guilty.

I mean take us into the relationship between the father Joe Venkman and Sam brankwyn freed his son.

36:51

I want to be careful here to not accused your bank been of anything because we’d he’s not been indicted.

He’s not being officially accused of anything but how how close was the father and the son at the moment that everything was falling apart.

37:09

Yeah.

So let’s first of all I think a lot of this is explained as a father of two sons myself.

Just like you know, Sam Joe Blankman is the father of two sons, you know, there’s pretty much nothing you won’t do for your son’s, especially our kids, especially when they, they find themselves into trouble.

37:31

So, I think we have to stipulate that and I think, you know, that’s definitely what it seems like was Going on here at the moment.

Could be more than that.

He did just tile a criminal defense attorney.

So there’s no in Sam and Joe Blankman is a tax lawyer and a law professor at Stanford law school.

37:56

And so, you know, you have to be pretty credentialed to get that position.

You know what kind of tax advice he was giving to his son?

I mean, we don’t know.

Yet.

But we know that there were a lot of loans taken out and and you know, loans are very effective tax Dodge because instead of, you know, taking profits out and paying tax on the profits or selling stock and take paying tax capital gains tax on the sale of the stock.

38:27

If you take a loan, sort of like a margin loan, that our buddy Elon Musk takes out to, you know, pay for his equity in Twitter.

You know, you Margin loan, you don’t have you can take all this money out and not have to pay tax on.

38:44

You just have to pay it back with interest so that’s not nothing but you know, you’re not paying tax on it.

So there were a lot of loans and maybe that was advice as father give him, I don’t know.

But according to and we know that you know from my story on the mooch that it was Joe bank man who called up the mooch in early November and said can you know help here?

39:09

In potentially, raise more Equity here where we got a stressful situation and the music went down to the Bahamas for a day before the bankruptcy filing on November 9th and quickly realized that the situation was well beyond him and far out of control.

So you know, Joe Bank been was down there.

39:26

They had a whatever 16 million dollar apartment that Sam supposedly had paid for or FTX somehow it was paid for for them and they said they don’t they claim they I didn’t know how that happened and yet their name was signed on the deed.

39:43

So that was a little dodgy and then my reporting has been that about a year ago.

Sam either gave them a gift or a loan of 10 million dollars worth of ftt tokens that they sold.

40:02

When the ftt tokens were sold 70 percent of when the ftt tokens were trading at around 50 generated seven million of cash and are using that 7 million of cash now to pay for Sam’s legal costs until that money runs out.

40:17

And in fact what they’ve been telling potential professionals who may consider working for Sam in this matter is that you don’t worry we have money to pay you even though Sam is said, he only has a hundred thousand dollars left in his bank accounts and so they’ve tapping into this.

40:38

Seven million to pay professionals lawyers and other professionals, you know, until that money runs out.

And in fact, taking it one step further.

I’m told they’ve told lawyers that, you know, they were trying to find lawyers, who would be happy to be paid for a while until the money ran out and then would take the case on without being paid.

41:02

Fairly for the notoriety of having worked for same bank, when freed in this matter, which does not Inspire confidence in terms.

The long-term solvency of this particular fund, I mean, it’s just to be a close advisor of your son to have a property listed in the Bahamas.

41:18

Sixteen point four million dollars in their names.

The parents are just in an absolutely incredible situation here that really just boggles the mind.

And the brother might be too, by the way, the brother who was, you know, in charge of had some role in distributing the funds in Congress to the Congress people.

41:38

I’m told or is this has been reporting on that.

So you know, svf may have, you know, inadvertently screwed his brother and his parents here.

And you know, depending on whether, you know, the whole family was involved in this remains to be seen what the timeline when are we going to get to the trial?

41:54

When do you think is the earliest that we get a plea?

Well, the trials not till October has been scheduled for October.

You know, people change their please.

That is not unheard of especially when the evidence mounts and so So I would you know I’d you know when I was a banker on Wall Street, I did a lot of restructuring work.

42:15

A lot of advisory work in bankruptcy and out-of-court restructuring and of course I’ve never seen a situation like this which was like the Lehman bankruptcy with a Twist of criminality involved and so I think the next thing that really needs to happen here during his four is an examiner needs to be appointed.

42:33

Everybody has made motions for an examiner to be appointed.

So the judge needs to appoint Examiner in the same way that Hinton baluchistan was appointed The Examiner in the Lehman bankruptcy and you know he spent you know many millions of dollars and many months you know like six months or whatever searching for searching through everything and writing up an amazing.

42:55

Six hundred page report about what happened in the Lehman bankruptcy, we need that here because once that gets laid out once and for all and we see exactly how all of these things were interconnected and what spfs roll.

All in all of this was, I think at that point is when F SB, f is going to want to think about changing his plea to guilty in, you know, obviously depending on how it comes up, but it’s going to change, you know, probably change his plea and until then, he’ll probably stick with the not guilty, unless he loses his lawyers, because they don’t aren’t getting paid.

43:28

And they decide they want to get paid and there’s no money to pay them.

The other big mystery, of course is who stepped up and provided.

They Collide this going to quote a On this quote-unquote, 250 million dollar Bond.

There are two unnamed people or unread that whose names have been redacted, who a bunch of news organizations have asked for those names to be unredacted.

43:50

That would be interesting to know is who SPF sugar daddies are at this point.

So until then, I think, you know, it’s kind of like status quo and he’s going to keep, you know, pleading his case.

He’s obviously Off Script when it comes to the pr strategy and the legal.

44:08

Adage.

He’s just going to apparently do what he wants to do at this point.

Bill Cullen.

Talk to me is.

Thank you very much, sir.

We will talk to you.

Certainly hopefully before October but certainly an actuary Windows when the trial begins.

Thanks again, thank you for having me.

It’s been great.

Thank you for listening.

44:26

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