I read this unfortunate book so you don't have to. Readers looking at the cover art might assume they're in for a tell-all about Sam Bankman-Fried and the criminal scandal at FTX. In reality, most of the book is about stablecoin issuer Tether, and the author's futile attempts to prove it's a scam. This disorganized book breaks no new ground on either subject.
It gets much, much worse, however. If you're already familiar with Bitcoin, blockchains and decentralized finance, you will be appalled by how little author Zeke Faux (a Bloomberg Business reporter!) actually knows about these subjects. In fact, if you're reading this book to learn about Bitcoin, this book will actually make you dumber, as Faux embarrassingly recycles 2017-era cryptocurrency FUD throughout the book. Someone please send him a set of FUD dice!
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Of the various, substantial weaknesses in this book, some are appalling, some saddening. I'll start with the sad. Throughout all of Faux's failed attempts to expose Tether as a fraud, there is a strange, mournful, waiting for Godot vibe: he writes repeatedly about how hard he tries to get sources to talk to him, he keeps waiting for sources to return his calls, he keeps traveling to different cities and different conferences, trying to get access to somebody, anybody, who might be willing to talk to him. As hard as it is to believe, much of this book's content is about how he can't get anyone to talk to him. The author waits in vain; Godot never arrives.
Now to the appalling. Zeke Faux claims he interviewed more than 300 people for this book, but not once did he speak to a well-known genuine Bitcoin expert like Lyn Alden, Nic Carter, Muneeb Ali, Brandon Quittem, Jeff Booth, all extremely accessible and open people who would undoubtedly be happy to share Bitcoin expertise with this Bloomberg reporter. Nic Carter frequently appears on Bloomberg TV for goodness' sake! Had Faux talked with just one--just one!--of these people, he would have written a far less ignorant book.
Most appalling of all, the author never once talked to Marc Cohodes, who famously broke the SBF/FTX fraud wide open. Those of us who actually followed these events in real time know that Cohodes actually handed the entire SBF/FTX fraud story, gift-wrapped, to Bloomberg News.
Bloomberg refused to cover it.[1]
Finally, go though the books sourcenotes with a fine-toothed comb (again, I did it so you don't have to), and you will find that Faux couldn't even bring himself to read important basic works like Saifedean Ammous' The Bitcoin Standard or Nathaniel Popper's wonderful Digital Gold, nor did he read or source well-known and foundational early articles like The Bullish Case for Bitcoin, all of which would have taught him obvious, obvious use cases for Bitcoin, almost none of which he seems to grasp.[2]
Again, this author may have talked to 300 people, but he never talked to the right person. Had Faux just spoken to Cohodes[3], he could have written a far more robust (not to mention more predictive) book, and he might even have published it before FTX's collapse happened. And so, instead of a Pulitzer Prize-grade work of investigative journalism, his readers get a disorganized, regurgitated, after-the-fact history, heavily sprinkled with snark.
Footnotes:
[1] I'm running low on discriptors here, but astoundingly Bloomberg was "too busy" (yes, you read that right) to cover the as-yet unknown SBF/FTX fraud at the time Cohodes brought it to them. This "too busy" drama was widely discussed on social media, and Cohodes was on several podcasts talking about this, all long before Number Go Up was published. It beggars the imagination. Keep in mind: I am an absolute nobody. If I knew about it, how could this author not know?
[2] The author recently did an "AMA" on Reddit: he's still a no-coiner, and he still appears to believe there's no reason for Bitcoin to exist. We all buy Bitcoin at the price we deserve.
[3] I actually asked Zeke Faux directly over Twitter why he never talked to Cohodes. No response. I guess I'm now the one waiting for Godot.
[Readers, as always, I recommend reading no further. Below are my notes and reactions to the book, which are just to help me order and remember what I read. It might be worth skimming the bolded parts. Life remains short.]
Notes:
Prologue:
3 "I had flown in on assignment from Bloomberg, where I worked as an investigative reporter, to see the man at the center of the cryptocurrency frenzy that was sweeping the globe." [Everyone, everyone who reads this should know that Marc Cohodes handed over the entire SPF scandal, gift-wrapped, to Bloomberg, they buried the story and never covered it. There was too much advertising revenue at stake.]
4 "I'd like to tell you that I was the person who exposed at all, the heroic investigator who saw through one of history's greatest frauds. But I got tricked like everyone else." And then barely a paragraph or two later: "I did have my suspicions. From the day I started digging into the crypto world, I had seen nothing but red flags."
Chapter 1: "I Am Freaking Nostradamus!"
10 One of the author's friends makes a few thousand dollars on Dogecoin and the author gets jealous and can't let it go. "Even after he moved on, I didn't. I started seeing crypto bros everywhere."
10 "Whenever anyone asks would ask me whether they should invest, I'd tell them I thought it was risky... The worst part was, I was supposed to be the expert on this kind of thing." [Note for metareaders: it's ironically really, really good to have a few friends and peers like this in your life: they can be highly profitable contra-indicators, just do the opposite of what they say.]
11ff He finds himself now turning into a Tether truther: "So I set out to look for Tether's money." [I'll be very curious to see whether he attempted to look at Canter Fitzgerald which custodies Tether's assets, or if it even never occurred to him to look there, the firm is not mentioned once in the book and not in the index which is astonishing; this is not looking good so far, it's awfully uninvestigative for an investigative book. Later we'll find that he never talks to anyone at Cantor.]
Chapter 2: Number Go Up Technology
15 The author goes to the Miami Bitcoin conference in 2021. "Almost no one was wearing a mask. I took mine off to fit in."
18 He doesn't understand the double-spend problem. He's unaware of any nuances of Bitcoin energy use, he simply parrots the FUD dice "boiling oceans" arguments.
21 The author mocks "number go up" as an idea; he appears to not know what a Veblen good or a Giffen good is, nor does he realize that if you have a non-debasable asset that goes up enough in price it starts to become conceivable for genuinely huge applications, like as a nation state reserve asset.
25ff Mocking Jack Mallers,the founder of Strike; mocking El Salvador's Nayib Bukele and the country's BTC purchases [which are now massively in the money]. Unknowingly he's mocking a country trying to escape dollar neocolonialism, a serious problem that many countries suffer under.
26 "I didn't get it." This is something the author says frequently in the first two chapters. [Heuristic: when you don't get something, don't be a solipsist and assume the fault is in the thing; it's rather more likely the fault is in your understanding.]
Chapter 3: Doula for Creation
28ff On Brock Pierce, involved with Tether, but the first third of this chapter was how the author couldn't get any access to him at all, it should be cut. Next is a long story about Marc Collins-Rector, a sex scandal, basically, having nothing to do with Pierce. It should also be cut.
34 Pierce learns about EverQuest, starts a company brokering game items, makes a leap to Bitcoin.
35 Rehash of the "criminals use it" FUD here. The author doesn't know that stablecoins (and Bitcoin) are far more surveillable, seizable and controllable than physical cash.
37 The author is scratching here at possibly grasping how stablecoins could be a tremendous new driver that will help preserve the dollar's global status [which they likely will], but he doesn't quite see it, he can't quite get there. See for example his snotty comment as one of his sources actually tries to teach him this concept, and the author remarks, "as he droned on..." [Also, a secondary point that is extremely important: snark and sarcasm is always an obstacle to understanding.]
38-9 Basically there's a new generation of ownership at Tether that bought out the original startup/creators, and now the author is left totally empty-handed, his original founders have moved on, and now he doesn't have any valid contacts at Tether anymore.
Chapter 4: The Plastic Surgeon
40ff This chapter covers about all the dirt the author couldn't really dig up on Giancarlo Devasini; the author literally can't find anything about him and he is forced to rely on other reporters, and yet he still comes up empty. The alleged "great reveal" in this chapter was when the author finds Devasini's old blog and makes prurient comments about one of its photos along with snarky comments about some of Devasini's old writings. Much of this chapter is unrigorous innuendo, as the author psychoanalyzes Devasini via his blog posts.
Chapter 5: Getting Hilariously Rich
48ff Backstory on Mt. Gox; the author uses it to illustrate that crypto exchanges are unsafe. [The author does not understand the ethos of Bitcoiners at all. Not your keys not your coins!!] On the Bitfinex hack and how it made depositors whole.
49ff On the ICO era; note that the author offhandedly mocks tokenizing RWA here: "None of this stuff ever advanced beyond the testing phases, if anyone bothered to even do that." Interspersed anecdotes of ICO pump-and-dumps with South Sea bubble anecdotes. [Note also that ICO PnDs are not Bitcoin.]
Chapter 6: Cat and Mouse Tricks
54ff An the anon Bitfinex'ed, who posts multiple times a day about Tether; the author meets up with him; then has a meeting with the owner of a failed Puerto Rican pseudobank, Noble Bank, that briefly held Tether deposits. [Note that we are six chapters into a book that is supposed to be about SBF and the FTX collapse, but we are instead mostly talking about Tether--and yet the author still has not yet talked to anybody of substance from the organization.]
Chapter 7: A Thin Crust of Ice
59ff On John Castiglione, NYAG attorney, who investigated Bitfinex as well as other crypto exchanges. The allegation far in this chapter is that Tether was used to prop up the price of Bitcoin, somehow. The author doesn't really walk through the mechanics of how this would work.
60 The author discusses how crypto exchanges like Bitfinex as well as stablecoin issuers like Tether "had trouble with banks" but the author appears to have no idea about Operation Chokepoint 2.0, the United States banking system's deliberate and unlawful effort to debank both crypto firms and individuals using crypto exchanges.
61 The author appears to conflate the relationship between Noble Bank and Tether (discussed in the last chapter, see 54ff above) with the relationship between Noble Bank and Bitfinex. Ultimately all the NYAG could manage to get from Tether was a consent decree and an $18.5 million fine, with no admission of wrongdoing. [Note that this minor and procedural settlement, which was all one of the most aggressive prosecutorial institutions in the world was able to get, is a long way from "Tether is a fraud."]
Chapter 8: The Name's Chalopin. Jean Chalopin
66ff Now Tether works with Deltec Bank & Trust in the Bahamas ("the only financial institution I could find that was willing to say it was working with Tether") and the author goes to meet with their chairman; the chairman actually vouches for both Tether's legitimacy and deposits.
68 The author gets his hands on a document from an anonymous source that reveals certain information about Tether's reserves; he finds mostly standard short-term bonds, although also some small hedge fund positions, some minor bets on commodities, and minor Chinese short-term debtholdings; he tries digging into it to see if he can verify or figure out much about it; he also writes an article on Tether for BusinessWeek, talking about the outlandish backgrounds of the founders and their misleading disclosures.
70 The author harms his credibility here by quoting Fraser Perring, an ethically challenged and shady "smash-and-grab" style short seller. The author, unfortunately, quotes him on shorting Tether: "'I'm betting a shit-ton of money on them being a crook,' Fraser Perring, co-founder of Viceroy Research, told me. 'Worst case is, I can't hardly lose anything. I'm already rich, but I'm going to be fucking rich when Tether collapses." [Please note: there is enough scuttlebutt out there on Fraser Perring to conclude that he is not only not rich, but he certainly never got rich shorting Tether. The author sadly does not know he is a non-credible source.]
72 Now quoting Nate Anderson, yet another smash-and-grab short seller who just shut down his firm Hindenburg Research under odd and suspicious circumstances. The author says "I'd know Anderson for almost a decade." [How can this author talk to both Perring and Anderson, and not have talked to Marc Cohodes???? Cohodes is an entirely different class of short seller; it is astounding to me that he never mentions him at all, not once in this book.]
73 Discussion of how the author nobly turned down a million dollars from Nate Anderson for information on Tether.
74 November 8th 2021: Bitcoin hits 68,000 and collectively crypto reaches an aggregate value of $3 trillion [I think these numbers are off, but I might be mistaken: I remember them to be $2T in aggregate value at that time]. The author uses some good--albeit unethical--rhetoric here. "Could an industry this large really rest on a foundation of Tethers?" The rhetoric is good in the sense that he frames "rest on a foundation of Tethers" as if it's true, when self-evidently it was not true then and never was true. The author then returns to talking about Sam Bankman-Fried, pitching his editors a story idea to profile him.
Chapter 9: Crypto Pirates
77 On how Barbados was a haven for pirates, this is how the author sets the stage for modern crypto piracy on Barbados.
78ff The author arrives to FTX headquarters and shadows Sam Bankman-Fried for a full day, observing him play video games while on a Zoom call with the Economic Club of New York; he reads a message from his top Washington strategist saying "that senator Cory Booker would sign on to his preferred approach to regulation." [Booker was one of many senators who got badly fooled by SBF.]
80 One can see how SBF was essentially a puppet: he gets shuttled to Super Bowl parties on a private jet; and "he didn't even know how or why he got invited to them."
81ff Discussion of the philosophical school of utilitarianism [note that Nic Carter has written up a beautiful takedown of this pseudo-ethical framework], but Sam Bankman-Fried and his parents were big believers in it; on SBF's time at MIT; on being a nerd; on developing the idea of "effective altruism" and the notion of "earning to give" or getting rich so you can give it all away; he gets an internship at Jane Street Capital; the author attempts to explain the concept of expected value.
84 Here the author regurgitated the company's propaganda story on how SBF got connected to Gary Wang, Nishad Singh and Caroline Ellison; how FTX was started; further regurgitating claims that the company made its first big money arbitraging inefficiencies in crypto prices at different global exchanges; it is extremely unlikely that it made its starting capital that way. [I wouldn't be surprised if the real truth of this entire company goes way, way deeper, but it's beyond my competence except to speculate.]
87 SBF relocates to Hong Kong, a friendlier jurisdiction then the US; also on the implicit conflict of interest of having both a trading firm and an exchange owned by the same entity [it's too easy to trade against your customers!]; then in September 2021, the firm relocates to the Bahamas, allegedly because of Hong Kong's COVID quarantine rules. [It is deeply unfortunate that the author simply regurgitates the party line narrative here for this whole period from 2017 to 2021; this was the period of growth and gestation of FTX, in many ways the clues to the real crime and real money behind FTX will be found in this period. But the author just barfs out the consensus story: he never digs into it to uncover what really happened, which certainly wasn't this consensus narrative. Zeke Faux could have done a far better job but didn't.]
Chapter 10: Imagine a Robin Hood Thing
89 It's now 2022, and FTX is huge: naming the Miami Heat arena, FTX recruits endorsements and sponsorships from Shaq, Tom Brady, the company does a Super Bowl ad with Larry David, etc.
90 "Bankman-Fried was a sophisticated trader." [Again here is another assumed truth that if the author really did real digging he would uncover it as an untruth.]
91 SBF becomes one of Washington's biggest political donors.
93ff The author never sees and never gets access to Gary Wang; he never sits down with Caroline Ellison; he "spotted" Nishad Singh (sitting at the desk to the right of SBF) and "pulled him aside for an interview." He speaks to him for an hour, finding him "grounded and humble." Note also this telling quote: "And he really won me over when, after I asked him about his favorite crypto stories, he pulled out his phone and read out loud from something I'd written." [Note that ultimately, somehow!, Singh managed to escape this whole morass without prison time, getting only 3 years of supervised release.]
Chapter 11: "Let's Get Weird"
96ff This chapter covers the Bitfinex heist and the two clowns that pulled it off, Heather Morgan and Ilya Liechtenstein, one of the most unbelievable stories of the early days of cryptocurrency. [One very striking notion about this story is that it is proof that Bitcoin is not a good tool for crime because the blockchain is fully and permanently surveillable, and that the authorities can freeze or seize the funds when they are moved them to an exchange, the author does not appear to grasp this critically important principle. Note also that almost all of the Bitfinex funds were ultimately recovered.]
97ff Readers are told far more than they need to hear about Heather Morgan's rapping skills.
101 [I also don't think the author is aware of another possible narrative for this heist: that the people that got caught, in particular Heather Morgan, had nowhere near the competence to actually pull it off; instead they were falls guys for it. Again, I don't know the whole story here, but this is a narrative that is out there. The author could have discussed it.]
104ff The stolen bitcoins were moved to AlphaBay, a sort of Silk Road successor; about 22,000 were sent there (the site acts as a sort of a mixer), but then the coins were sent to different crypto exchanges, one of which was run under the name of "Liechtenstein" one of the hackers. [Note here how important it is to understand how easy it is to surveil a public blockchain like Bitcoin! All the exchanges in most of the world now are fully KYC, and so you can be easily identified by the wallet that you send a Bitcoin from to that exchange, and that exchange can then be forced to seize or freeze those coins once you try to sell them. I wish the author could put the implications of these facts together, it might change his views on Bitcoin.]
107 The author doesn't say this, but as I recall these two incompetents actually stored their private keys on a Google doc.
108 Our intrepid reporter can't get a response from Heather Morgan either, he tries valiantly.
109ff Discussing once again here Adam Mashinski and Celsius, and the connections between Tether and Tether's loans to Celsius; Then on a conversation with Jason Stone, who once worked at Celsius but left after discovering "shady dealings at the company."
Chapter 12: "Click, Click, Click, Make Money, Make Money"
113 The author uses a mocking tone here to criticize some of the nascent or proto-decentralized finance apps and mechanisms that were being developed in the early days, he makes snarky comments like "don't ask" or "Pretty much no one understood it" in the context of interviewing a genuine kook of a source who worked with the soon-to-collapse Celsius. The author is doing his best to frame the entire DeFi ecosystem to sound as inane and retarded as possible. "As Stone explained yield farming to me, he ground up some weed, rolled a blunt as fat as a dry-erase marker, grabbed my pen to pack it, and puffed away." Again this is competent rhetoric but it misrepresents what is being built here and what is possible now. [Always remember the first attempts at things tend to look dumb and at first they typically don't work as well as the things they are eventually going to replace, e.g.: digital cameras, the first TVs, the first computers, the first online commerce sites, etc.]
115ff On Puerto Rico and its tax policy to attract wealthy people from the mainland; comments about parties that Jason Stone from Celsius used to throw, and the ketamine and cocaine everybody would take, etc. Celsius was collecting deposits and then handing the money over to Stone to throw it at various defy projects. Stone leaves Celsius in March 2021, later it devolves into acrimonious lawsuits.
119 "It seems so obvious to me the dollars were safer than crypto." [Again the author reveals his ignorance (as well as his time preferences) here. When your money is infinitely debasable, is it "safe"? It's also worth nothing that in the 2-3 years during the pandemic response, the period in which this author was writing this very book, the US central bank engaged in massive money-printing, devaluing the dollar substantially. What happened to Bitcoin's price?]
Chapter 13: Play To Earn
121ff This chapter discusses the Smooth Love Potion token from the game Axie Infinity which was played as a money-making scheme by people in the Philippines. The cryptocurrency collapsed from 36c to below a penny (amazingly this thing still trades, priced now at a fraction of a penny). The game caught fire in a range of low income countries and became like a version of World of Warcraft gold farmers. [Note that a rigorous author would take great care to distinguish this shitcoin (a token with infinite supply) and the non-debasable finite supply Bitcoin.]
124ff Discussion here of the initial economics: for about a $91 investment, players could earn some $7 per day, obviously this was a function of more and more people playing the game. [One takeaway, which the author quite understandably makes, is this kind of daily return is unsustainable, way too good to be true; note also that you had to recognize that the tokenomics here were infinite (again, the author could have discussed this and thus seen the unique advantages of Bitcoin, but he fails to.)] The players would turn their additional smooth love potions into Tether which they would swap for dollars; something very understandable for someone in a low-income country like the Philippines.
127 Ever seeking the high moral ground, the author here asks at a conference of the type of people who've been promoting pay-to-play games "if they were chastened by [Axie Infinity's] failure." [This is rather odd, because the actual people involved in Axie Infinity weren't even at this conference, and so none of them could be "chastened" by its failure because they weren't there. This is a strange, emotionally incontinent part of the book.]
Chapter 14: Ponzinomics
130 At least the author here can see through Michael Lewis tossing softball questions to SBF at a Bahamas crypto conference [note that Lewis would sadly go on to write a disgustingly tone-deaf and willingly blind hagiography of SBF, destroying an entire career of credibility with one short book].
132 [A meta-takeaway here, as the author moves his editorial camera from grifter to grifter in this conference, citing Giselle Bundchen, Tom Brady, Bill Clinton, Anthony Scaramucci, Kevin O'Leary, etc.: Whenever there's something new, there's always going to be hangers-on, grifters, scam companies and all sorts of people trying to make a buck; this happens in every investment cycle: the railroad boom in the 1800s, the electrification boom in the early 20th century, the automobile, the internet, there's no shortage of examples of cycles of greed/despair, booms/busts, and then, eventually, lasting change to society. The author could make some valuable comments--and put cryptocurrency and blockchains in proper context--if he knew more about these topics. He would see a surprising amount of "rhyme" across various cycles of invention, across the history of booms and busts, and in the cultural and economic impact of each of these innovation cycles.]
134, 136 The author returns to his sad refrain, writing about how he is unable to meet with, or even find, the people he wants to talk to. On page 134 he can't find Caroline Ellison or Gary Wang; on page 136 he can't find Tether's Giancarlo Devasini. What a strange way to narrate a tell-all book, to repeatedly tell your readers how you couldn't find anybody to talk to! He finally meets with Jean-Louis van der Velde at Tether, he's supposed to be Tether's CEO, although the author is far from clear what his title or responsibilities are; van der Velde "seemed out of his depth" to the author.
139 The author is told by an NFT marketing guy that he does not understand a huge part of crypto. "How do you expect to write a book about crypto if you have only dedicated $600 to crypto?" [An excellent question!]
140 The marketing guy drops some unintended wisdom on our author here, explaining what it's like owning the most highly volatile assets in crypto: "Invest heavily in crypto, lose your ass, come back for more, make insane money, learn about monetary policy and tech in the process, make incredible friends who share the same experiences." Unfortunately, the author can't really grasp what an NFT is either; he only sees the marketing, glitz, consumerism and influencer behavior, while thinking it is nothing more than spending "thousands of dollars on a JPEG." [Many people who come into contact with the idea of an NFT say the same at first: "why would I pay money for a JPEG I could easily copy-paste?"]
Chapter 15: All My Apes Gone
141 On the "badly disguised bleakness" of Jimmy Fallon and Paris Hilton talking about their Apes NFTs [note that Apes prices peaked in 2022 in the $300,000 price range, they are now down some 90%. I have a sinking feeling that the author is going to show his ignorance even more and put money he can ill afford into buying one of these things.]
142ff Snotty and superficial explanation of NFTs here.
145 Yep, I was right: he decides to buy a Bored Ape NFT so he can get access to an influencer party.
146ff Ironically in the pages to follow the author actually learns quite a bit! He learns how to wire sums greater than $10,000 to Coinbase and has to deal with bank representative calling him as a result [this could be an opportunity for him to grasp the value of trustless, self-custodied finance without intermediaries], he has to purchase enough ETH in order to make the trade, he then has to go to OpenSea's site to buy the NFT, then he has to save the NFT in a digital wallet from Metamask; he has to learn what a seedphrase, is how to keep one safe, etc., he has to convert to wrapped ETH, he learns what a gas fee is... he has to learn all these things and he actually starts to grasp, a little, the realities involved in self-custody. For once the author really is learning things! He even asks himself the ultimate meta-question, a question that saves more people from blowing up than any other: "What if I'm this industry's final sucker?"
149 [Once again, the author scratches at things, but he can't quite get there: he attempts to draw a parallel between buying an NFT to online shopping, comparing his "terrifying ordeal" buying an NFT to the "seamless and fun" experience of online shopping, making it into a negative comparison: "This was supposed to be the future of the internet and art and commerce." But he can't see the much more helpful "temporal" parallel at all: the early days of online shopping sucked too! Those days were just like today's early days of token-based commerce: more "ordeal" than fun. He can't quite put it together, he can't conceive that this is what it looks like now, but the kinks will eventually get smoothed out just like they were smoothed out with online commerce.]
Chapter 16: It's the Community, Bro
151ff The author goes to a Bored Ape party: it's a sausage fest, almost all men, many of them high, "A nineteen-year-old shamed me by displaying a gold ape he said was worth $1 million."
154 The author profiles the two founders of Yuga Labs, Wylie Aronow and Greg Solano, this is the team who developed the Bored Apes NFT series. The author couldn't get an interview with them either, the best he could do was spot them from a distance.
159 The author sells his Ape NFT back for a small loss and then converts the Ethereum into dollars; ironically he left a double on the table (at a minimum) by selling his ETH at this point back in 2022.
Chapter 17: Blorps and Fleezels
160ff Celsius freezes withdrawals; their infamous "pausing all withdrawals" announcement; the FBI starts investigating the company and its owners. The author still assumes that it's going to bring down Tether, that there will be a run on Tether's stablecoin; he remains wrong. Brief comments here on Do Kwon and Terra/Luna, which actually was a scam stablecoin.
163 Tether actually sells down to 95 cents, briefly, in the wake of the Terra/Luna scandal in May 2022; Tether defends its $1 peg; Celsius gets into trouble shortly after.
164ff While Adam Machinsky claims "Celsius is stronger than ever" the company was trying to prop up the price of its CEL token while Machinsky was dumping his own CEL holdings. Celsius approaches Tether for more investment money and is rebuffed. [The author says something od here that doesn't make sense: "In fact, instead of bailing Celsius out, Tether liquidated its loan to Celsius, further depleting Machinsky's reserves." I think the author might mean here that Tether "called in their loan," in other words forced Celsius to pay them back; it doesn't make sense here that they would "liquidate" it, as in sell it to a third party. It isn't clear what the author means here.] Celsius then goes to Sam Bankman-Fried, looking for a buyout, he and Caroline Ellison passed. It was at this point, a few hours later that Celsius did its famous withdrawal pause. "It would prove permanent."
165ff Next Three Arrows Capital blows up; discussion here of Su Zhu, including his yacht "Much Wow"; it turned out that Three Arrows had offered high interest rates to Celsius and other companies to get funds with which they levered up their investments, much of this capital they funneled into Terra/Luna which collapsed.
167 [A grossly misleading claim from the author here on MicroStrategy: "The losses hit everyone in crypto. Michael Saylor, the laser-eyed crypto prophet who was the star of the Bitcoin conference in Miami, stepped down as CEO of his company, MicroStrategy, after it lost almost $1 billion on its Bitcoin bet." This is a deeply misleading statement. First, MicroStrategy has obviously seen fluctuations in the valuation of its Bitcoin holdings, but it remains way, way, way up on its average cost basis: it "lost" money on Bitcoin as much as I "lost" money buying a stock that went down in price after I bought it, but before I bought much more. Further, Saylor didn't step down because of any of this: not because of the imaginary "losses" the author somehow dreams up, not because of losses at Terra/Luna, Three Arrows or anywhere else. He simply delegated management of the software side of his company to another executive to focus on the Bitcoin/treasury strategy side of his company. This is either a really poorly worded sentence (best case), or a credibility-destroying sentence--if the author worded it this way on purpose in order to produce these misleading implications.]
168 [More factually incorrect statements about the Celsius bankruptcy: the author writes "the money was gone, gambled away by Mashinsky." In reality 79% of the assets were fully recovered. It grows increasingly frustrating to read a book where the author not only can't get anybody to talk to him, but he can't even get basic information right about a story, information that is easily accessible from other published sources.]
169 FTX bails out BlockFi and Voyager; Voyager still falls into bankruptcy; the author mentions Jim Cramer comparing SBF to J.P. Morgan. And then: "I couldn't believe it, but even as crypto company after crypto company failed, Tether survived. It was more than a little frustrating." [If this guy's thesis on Tether were a stock, it would have gone to $0 and wiped him out by now, and he'd have to admit he was wrong. But in punditry there isn't any scoreboard. Rarely do pundits ever admit to being wrong.]
Chapter 18: Pig Butchering
172ff He receives a strange text addressing him as "David"; the author at first thinks it's a "pig butchering" scam; he plays along with the scammer, who sends him a link to an exchange app that transacts in tether as well as other cryptocurrencies, he concludes that scammers are moving money via Tether.
175ff Next the author looks into organizations that claim to defend people from scams as well as raise money for victims, he finds one called Global Anti-Scam, the author actually thinks it's a scam too; he does a zoom call this org, one of its team members says that "it always starts with Tether," claiming that Tether facilitates money laundering.
177 Sidebar here on the "Big Store" con game popular in the early 1900s; also the "Nigerian prince" scams of the 1990s; this section is largely innuendo, implying that Tether is only used for scam-like things without any actual proof, just quoting hearsay from unnamed people that the author happened to talk to. [Obviously this is not to say that cryptocurrencies or stablecoins can't be used for money laundering, it's just that they are not that good at the job because of they sit on a permanently visible and surveillable blockchain.]
179 Discussion here of "pig butchering" scams run by organized gangsters in places like Cambodia or Myanmar, where workers are actually trapped and forced to send spam messages to work these online scams.
180ff The author talks to crypto-security firms, including CipherBlade, with a representative from that firm, the author and he work out a flowchart of transfers from the author's phone number to track Tethers the author sent to this scammer; other deposits were also made to this wallet address and then they were sent to yet another wallet with some $9.4 million dollars of Tether on it, then they were sent to exchanges like Binance or FTX.
182ff More discussion of online fraud; some of which has nothing to do with Tether; some which are only tenuously connected to Tether. Discussion also of the so-called "Chinatown," a mob-controlled compound in Cambodia where people are essentially imprisoned and enslaved to conduct online scams; the author concludes that "such a scam complex would not be able to operate without crypto... Crypto bros routinely claimed that anonymous, untraceable payments on the blockchain would somehow help the world's poor. But it seemed like none of them had bothered to look into what their technology was actually being used for." [A few things here: first of all, for the millionth time, a public blockchain like Bitcoin is neither anonymous nor untraceable, you'd have to be fully ignorant about Bitcoin (and cryptocurrency in general) in order to make such an assertion. And then a second problem, which is more of a fallacy than pure ignorance: blaming evil behavior on the tools allegedly used for that behavior is like blaming the hammer instead of the guy hitting you in the head with a hammer.]
Chapter 19: "We Have Freedom"
187ff Discussion here of Thuy, a Vietnames guy, his experiences imprisoned at the Chinatown compound, his escape, etc.
191ff Very interesting discussion here of a money-changing shop that exchanged Tether tokens for cash; [this makes you think about how large the eurodollar market might be that would be anchored to this product, there are zillions of money-changing shops in cities all over the world that do just this. It makes you think about the implications for future dollar dominance far more than it makes you think about money laundering to be honest!]
194ff The author visits Bokor Mountain, a national tourist attraction, but also the site of one of these Mafia scam trafficking organizations. Also on a visit to see Sihanoukville, the "Chinatown" of Cambodia. The visit, as well as much of his experience in Vietnam, is "eerie but inconclusive." [He's still confused about the fact that Tether doesn't require KYC for users of a stablecoin, but this is the whole point! You can use it without identifying yourself.]
Chapter 20: No Acceptamos Bitcoin
200ff [This is a chapter on El Salvador, the country's adoption of Bitcoin as a Treasury reserve asset, and president Nayib Bukele, and it did not age well. The negative framework the author puts on everything here looks extremely anti-predictive and anti-prescient a year and a half later. The author's take on Bukele is sadly typical and predictable regime narrative: he thinks Bukele is a dictator, etc. Had the author looked beyond regime narrative coverage of El Salvador, had he looked outside his pre-fab/pre-decided framework, he could have easily found plenty of information even before his book's publication date to show that El Salvador had made tremendous changes in its country's formerly desperate situation. The author only addresses the story in the 2021-2022 time period, leaving off the improvements that happened thereafter (this book was published in late 2023).]
203ff Bukele refuses to speak with the author, joining what is becoming an extremely long list of "sources." Most of this chapter contains dopey quotes from outre Bitcoin podcasters like Max Keiser, someone who isn't taken particularly seriously inside the Bitcoin movement. [This chapter is so weak and so uninsightful it shouldn't even be in the book.]
Chapter 21: Honey Is Better
207ff The Bitcoin art fair in Lugano, Switzerland; our author again can't get access to anyone he wants to talk to. He waits in vain, hoping to see Devasini as well as other interview targets. He can't: "I returned to Brooklyn, feeling like a failure."
209 "You can't buy coffee with Bitcoin" FUD here as the author tries to buy a Big Mac.
209 He talks to a Swiss lawyer here who (also) fails to understand that Bitcoin is fully surveillable.
210ff More waiting for Godot moments here: he can't get access to Stacy Herbert, who pretends to ignore him; Devasini also brushes him off. Several more people won't talk to the author in the following pages. "I was disappointed. I'd come all the way to Switzerland--twice--for an interview that was not going to happen." The book is really losing its way here, the author actually wrote an entire chapter here about not being able to talk to anyone.
Chapter 22: Assets Are Not Fine
213ff This chapter is about CZ from Binance, and also the FTT token that FTX launched (and dumped) in late 2022; as well as on the acceleration of withdrawals from FTX during this period. [Once again, the author doesn't know that true Bitcoiners, celebrating an ethos of self-custody, never leave their coins on an exchange. "Not your keys, not your coins."]
215 [The author doesn't quite frame it this way, but as he's watching FTX unravel, he comes to a semi-realization that he hasn't been watching the right target--Tether was the wrong target! Once again, remember that Marc Cohodes had already supplied his employer with all the dirt necessary on FTX but they buried the story; media don't want to lose access to their darlings. One can't also help noticing that this author never had anything to lose on this front: he can't seem to get access to anyone.]
215ff FTX tries to sell itself to Binance, but Binance walks, after learning that FTX was misappropriating funds; five days later FTX files for bankruptcy.
218 Here we have, given the unbelievable difficulties this author has getting access to anyone, a big plot twist, as this author goes to Nassau to try to get an interview with Sam Bankman-Friend, and actually succeeds!
Chapter 23: Inside The Orchid
220ff We learn SBF gives the author access thanks to puff pieces he had written about him before. Readers who have followed the SBF/FTX story will be disappointed however: SBF basically mostly lies and confabulates about the firm's failure here. "One reason he might have been willing to speak with me was that I was one of the reporters who helped build him up... It wasn't the most embarrassingly puffy of the many puff pieces that came out about him." The author here realizes he was fooled and that, all along, he was asking all the wrong questions. [Once again it's borderline criminal that Faux never talked to Marc Cohodes, never mentions him in the book, and seems to have no idea that the whole story was already teed up all along... all he had to do was just look a little harder.]
221ff [Now that the jig is up and everybody, even the author, knows that FTX a scam, the author still doesn't go deep enough, he doesn't ask about SBF's parents, their properties in the Bahamas, he doesn't ask about SBF and his family's connections with Gary Gensler at the SEC, he doesn't ask about Gensler's oddly the undisclosed calendar where he held repeated private meetings with SBF. [For people who aren't psychotic geeks like I am: both Gensler and the SEC are legally required to release their calendar as a matter of public transparency, but Gensler never released his calendar for the specific time periods that included these meetings.] The author lost a big opportunity to explore these things, there are many aspects of this entire story that stink to high heaven and the author never gets into it at all. He's too busy working foolish checkers-level theories ("I still didn't think the talk about charity was all made up") when this conspiracy goes much, much deeper.]
222 Astounding here that the author gets 11 full hours with SBF at this time, and yet he doesn't understand a thing about what's going on. Amazing.
223ff The author learns about the connections with Alameda Research from other news sources; he's just discovering it now.
226ff Now the author discusses, retrospectively, what really happened: when Terra/Luna collapsed, Alameda's lenders called in their loans (which the fund didn't have the ability to pay back), and so the Alameda raided FTX, using client funds to meet the shortfall; SBF "remembered" this differently, lying to the author by claiming that the FTX team were just "kibbutzing" on that idea; he claims instead that Alameda was just heavily margined; there's a page or two here of SBF gobbledygook on mis-accounting for $8 billion in cash, without an explanation on where it went. Later he would try to deflect blame to Binance and CZ.
231 Here, in a sort of weird epistemic climax to the book, the author asks SBF if he had turned to Tether for help, specifically Giancarlo Devasini. You can feel the author really really wanting this to be true, but it isn't; in fact SBF actually tells the author that there aren't problems at Tether! Once again, the author was going after the wrong target the whole time.
Epilogue
233ff Context here on SBF's arrest, extradition, the cooperation deals with Singh, Wang and Caroline Ellison; some editorial commentary from the author about how nobody was saying "WAGMI" anymore; the author also writes that he didn't think crypto would have another cycle; that Bitcoin still had never shown any use case; he mistakenly and cluelessly compares Bitcoin to a Visa card [again, only someone clueless about Bitcoin would make the rookie error of confusing a base-layer, final-settlement asset with a layer 3 credit instrument that settles monthly: somebody needs to send the author a copy of Nik Bhatia's Layered Money!], and then makes a strange and logically incontinent claim about Bitcoin: "The one coin I especially wouldn't bet against is Bitcoin. It's not that it's useful--if anything, it's more unwieldy than the others. But Bitcoin's true believers are so convinced that it's hard to imagine anything will change their minds." [What a very strange, strange quote. It is "on the one hand/on the other hand" word salad like this that is why Nassim Taleb frequently will say "I don't care about your opinion, tell me what's in your portfolio." This refreshingly cuts away all the bullshit doesn't it?]
238 The author mourns that founder of the Mango token is arrested, but no one tried to come after Chinese gangsters "facilitating human trafficking in Cambodia."
238ff The author still can't believe it but tether is still alive [and astute readers now will know that it is far bigger and far more profitable than ever today]. "Tether had won, at least for now."
To Read:
Novels of Carl Hiaasen
Mae Charles: Misplaced Trust
David Maurer: The Big Con