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Twitter, SBF and the Golden Age of Conspiratorial Thinking
Radiohead is one of the best bands of all time. The group rose to popularity during the late 1990s / early 2000s and made its mark on millions of music lovers who came of age during that period. The 1997 release of its album OK Computer left a huge impression on me and served as the soundtrack of my younger adult years.
One of my favorite Radiohead songs - Paranoid Android - was on that album. It presented for me an entirely new sound that manages to feel current to this day. In keeping with the experimental nature of the band itself, Paranoid Android is a masterful demonstration of sectional arrangement, with the light droning of Thom Yorke’s angelic voice violently punctuated by one of the best offset guitar riffs ever.
(Note: I encourage readers to listen to this masterpiece often and at volume. Preferably under the influence of some foreign substance for maximum effect.)
The song is named after Marvin the Paranoid Android from The Hitchhiker’s Guide to the Galaxy. Marvin is the robot who services the starship that shuttles the story’s protagonist around the galaxy. Gifted with a “brain the size of a planet”, Marvin suffers from boredom and depression by being tasked with mundane chores that fail to utilize his intelligence.
When kidnapped by a warring group of robots and tied to their mainframe interface, Marvin manages to solve "all of the major mathematical, physical, chemical, biological, sociological, philosophical, etymological, meteorological and psychological problems of the Universe, except his own, three times over".
According to the band, Paranoid Android is a patchwork piece, so there isn’t a unifying concept to it. This allows us to bring our own interpretations to it. I’ve been thinking about the conspiratorial nature that dominates much of our online discourse today and found myself coming back to this song while contemplating a framework to tackle this phenomenon.
In my way of thinking, the swirling information vortex that is Twitter forms a metaphorical “brain the size of the planet”. Armed with the superficial knowledge we glean from the app, we don’t hesitate to flex our pseudo-intellectual muscles in solving mankind’s myriad dilemmas while often neglecting our own. And our society’s collective boredom and depression has given rise to all manner of conspiratorial thinking in pursuit of some combination of creative and inebriant escape.
Foul Whisperings are Abroad
Please, could you stop the noise?
I'm trying to get some rest
From all the unborn chicken voices
In my head
One can be forgiven for thinking we live in a golden age for conspiracies. From QAnon to Russiagate to Pizzagate to the January 6 riots to COVID origins and vaccines, there’s been plenty of fodder for us to chew on.
It turns out this is a widely-studied phenomenon whose research suggests we are no more conspiratorial today than in years past. My own anecdotal contribution to the literature is that damn near every third tweet I see has the feel of absurdist theorizing.
But conspiratorial thinking has been with us forever. In fact, there are evolutionary reasons behind our desire to connect certain dots, real or otherwise. As a species, our brains have been hardwired for pattern recognition and circumspection about rival coalitions. This helps form part of our innate threat detection capabilities.
There’s also a narrative component, which appeals to another part of our animal brains. As skeptic Michael Shermer observed, “Humans are, by nature, pattern-seeking, storytelling animals, and we are quite adept at telling stories about patterns whether they exist or not.”
Our modern age brings new impetus for such thinking, including cognitive dissonance, anxiety and randomness. “Big effects need big causes”. Surely JFK, a towering figure of his time, couldn’t be killed by a nutty lone gunman! When people experience anxiety that comes with a loss of control, they often see “illusory patterns in random noise and look to conspiracies as explanations for ordinary events”. Then there’s the idea that our minds “abhor randomness” and struggle to accept that sometimes things occur simply out of chance. That indeed, when presented with a novel or fretful experience, “this is something that happens”.
Despite the apparent prevalence of conspiracies, it’s actually uncommon for people to believe them to be true. For example, only 13% of Americans believe that 9/11 was an inside job. The same percentage believe COVID vaccines do more harm than good. And only 36% believe that Donald Trump colluded with the Russians to win the 2016 presidential election.
But it certainly doesn’t feel that way. That’s because social media makes it easy for us to fall victim to availability bias. It’s not so much that more conspiratorial thinking is taking hold, it’s just we have such ready access to it today so we see it more often. “Rather than an explosion of new belief, technology may instead be driving greater awareness of fringe beliefs that have been with us all along.”
Social media cultivates a sort of tyranny of the minority, where an insignificant number of users have their voices amplified by the online bullhorn. Small voices can sometimes seem the loudest when reality is often quite different. While tens of thousands of users tune in for Spaces discussions featuring non-experts sharing anecdotal stories about the dangers of COVID vaccines, many more of us are paying the discussion no mind or listening with incredulity. That those sessions are being hosted by characters who profit from gullibility makes them all the more maddening to observe.
Conspiracies are of course sometimes proven true. It’s therefore understandable why their popularity persists with the occasional confirmation. And given the government’s long track record of deceit, it’s entirely logical to assign some degree of skepticism to its dealings. This is made all the more rational since the politicians in charge are among the most dishonest people on the planet. But the vast majority of conspiracies fail to materialize in the fantastical ways their adherents predict.
Which brings us to the story of Sam Bankman-Fried (SBF) and the failed cryptocurrency exchange he founded, FTX. I’ll assume readers are familiar with the state of affairs here so will refrain from rehashing the timeline of events surrounding the exchange’s failure and its purported mis-dealings with Alameda Research, whose CEO, Caroline Ellison, will feature later.
What’s more interesting to consider is the response from social media to the FTX implosion. Almost immediately following its bankruptcy announcement, speculation began to swirl about what really happened, which players were involved, who was responsible and whether anyone would be punished.
To be sure, suspicions regarding FTX existed even prior to its demise. For example, famed short-seller Marc Cohodes caught wind of something fishy in the months leading up to the exchange’s collapse. It appears his skepticism stemmed from questions about the company’s origins and confusion regarding its legal structure. I didn’t see much meat on the bone with Cohodes’ commentary - the FTX origin story is well-documented and most global financial institutions have complicated legal structures - but it’s certainly clear that his Spidey-sense was on point.
It’s easy to see why SBF/FTX makes for good material when it comes to manufactured storylines: Crypto was born of rebellion and has a checkered history of bad actors; the rise of FTX seemed inexplicably meteoric; and SBF did a great job of ingratiating himself with the popular psyche given his aggressive marketing initiatives (e.g., Tom Brady, FTX Arena, etc.). There were also the group’s heavy lobbying efforts that included large contributions to various political campaigns to go along with SBF’s tendency to rub elbows with the global elite.
This all combines to present multiple attack vectors for those looking to theorize about what is really happening here. Kinda like a choose your own adventure version of conspiratorial thinking. It couldn’t possibly be that this is a boring case of old-fashioned fraud that involved the misappropriation of client assets. And that the lead perpetrator will be prosecuted to the fullest extent of the law despite his attempts to curry favor in DC. No, no. Surely it’s not that!
Instead, we are presented with a mess of conspiratorial hogwash that I reckon is instigated by a psychological concept known as motivated reasoning. This is the “tendency to find arguments in favor of conclusions we want to believe to be stronger than arguments for conclusions we do not want to believe.” It’s similar to how anti-vaxxers view any “premature” death these days with suspicion, despite the fact that people die unexpectedly all the time regardless of their vaccination status.
For crypto advocates, the FTX collapse is of course not a sign of depravation within the broader ecosystem but more a function of the rot that sometimes grows within centralized entities. This is among the more reasonable takes I’ve seen. It is certainly true that fraudulent activities occur within all sorts of groups, crypto and otherwise.
Less reasonable are assertions involving a secretive cabal of politicians, journalists, financiers and professors who conspired to create FTX out of thin air as a trojan horse for the crypto industry. It’s not us, it’s “them”. Them being the global elite, the powers that be who wish to destroy crypto from within so an era of central bank digital currencies (CBDC) can be ushered in.
I recently participated in a Spaces discussion where a woman spoke at length about this idea. In her imagining of things, this is a conspiracy that reaches as far back as the Clintons. She had a hodgepodge of circumstantial evidence to support her claims and got so worked up in her retelling that she was shaking as she spoke.
Her ramblings included the usual game of relational six degrees as well as the fulcrum role played by Ukraine as a laundering center for American politicians. This is not surprising given the partisan flashpoint that Ukraine has become and the largesse that SBF and his colleagues demonstrated by contributing to politicians on both sides of the aisle (nearly $65 million in total).
But this all falls to pieces with even the lightest application of basic logic. For starters, it all assumes that the global elite actually care about crypto. At its peak, the asset class totaled just shy of $3 trillion in total market capitalization, about $1 trillion of which was represented by bitcoin. Set against total global wealth of over $450 trillion, crypto was a pimple on the ass of financial markets even at its strongest.
At its current market capitalization of $325 billion, bitcoin is about half the size of the value that Meta has shed this year. So while far from representing any systemic threat, bitcoin isn’t much of a functional threat either, which is largely a product of authoritarian design. Governments already make things hard enough on bitcoin by constraining one’s ability to transact in it, notably through taxation, which is one reason why it’s rarely used beyond purposes of speculation.
The reality is that governments require no excuse whatsoever to introduce a CBDC. They can literally do anything they want when it comes to their money supply and financial infrastructure. The idea that they would incur unnecessary brain damage by orchestrating a sophisticated crypto conspiracy for CBDC cover only makes sense to those who believe “big effects require big causes”.
“Yeah but SBF graduated from MIT, which is where Caroline’s father teaches - and where the U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler once taught about blockchain - and SBF’s parents are law professors at Stanford, and they are known to support liberal causes - and don’t forget all those political donations - so of course the Democrats are in cahoots to save him!”
This game can be played with every single successful business enterprise on the planet. Birds of a feather tend to flock together, so key executives will often share common educational and professional DNA. And there isn’t a successful business in existence that hasn’t leveraged connections to gain some advantage. Conducting a similar exercise with Blackstone or Apple would likely stoke similar curiosities.
And, of course, there is zero evidence that Ukraine factors into any of this.
Then we have the anti-crypto crowd. These folks have always objected to the idea of this new asset class and the FTX fiasco is the cherry on top of what has already been a fun year for those who cheer crypto’s downfall. Unsurprisingly, watching the space’s self-engineered collapse has been met with copious amounts of schadenfreude. And the more sensationalist the theory behind it all, the more delightful it is to entertain.
The conspiratorial strain that appears to unite the two camps is the idea that SBF’s political connections will enable him to avoid not just prosecution but any investigation altogether. This idea is clearly premature but that hasn’t stopped such theorizing from a lot of people who should know better.
Even Elon has gotten into the mix:
The commonality we see in such thinking derives from the crypto camp’s desire to place blame at the feet of institutional power structures and the anti-crypto camp’s more general distrust of all things establishment. It certainly doesn’t help that this is all occurring at a moment of vulnerability for public trust, with flames of suspicion being fanned by the slow drip of Twitterfile releases.
So rather than do the responsible thing and let this all play out before rendering judgment, some feel compelled to make conspiratorial claims out of real ignorance about how the world works or - even worse - through disingenuous attempts at engagement farming. Sometimes it’s a serendipitous combination of the two.
Twitter power user and Spaces cohost extraordinaire TaraBull (@TaraBull808) captures well the dissonance and/or opportunism on display throughout this episode.
Tara has been a regular participant on a series of marathon Spaces sessions started by Mario Nawfal (@MarioNawfal) soon after the FTX collapse. Mario brings his own baggage to these proceedings but that hasn’t stopped him from hosting extraordinarily popular discussions that have included guests as high profile as Elon Musk and…Hunter Biden(?).
His regular lineup features a murderer’s row of charlatans, grifters and criminals, all of whom are here to help us navigate FTX, COVID, the Deep State, Twitterfiles, etc. No conspiracy goes untouched in these Spaces and thank goodness we have international fugitive Kim Dotcom to help guide us on this precarious journey.
Mario is clearly engaged in a form of engagement farming with these Spaces, and quite successfully so. In reviewing her timeline, it would appear Tara’s embrace of conspiratorial thinking has been with her for a while. This in my mind is quite fortunate as it allows her to remain intellectually honest while also engaging in a savvy marketing campaign of her own.
Indeed, her follower count has exploded since joining Mario’s Spaces and, to her credit, she doesn’t hide her desire to mine this group for followers.
Make sure to follow!
As an aside, I got a kick out of a poll Tara recently conducted about trustworthiness in the government:
“Hey Google - Provide an example of a social media echo chamber.”
This would be like if Dallas Mavericks season ticket holders were asked if Luka Doncic should be a frontrunner for NBA MVP (which he should, to be clear).
Do you see it yet?
We’re All Mad Here
Ambition makes you look pretty ugly
Kicking, squealing, Gucci little piggy
You don't remember, you don't remember
Why don't you remember my name?
Off with his head, man, off with his head, man
Why don't you remember my name?
I guess he does
In Alice in Wonderland, the Cheshire Cat warns Alice of the madness that awaits as she begins her journey down the rabbit hole. A similar thing occurs when one begins to objectively investigate the FTX situation, and the madness one encounters applies to both temper as well as lunacy.
Just like Alice’s queen settled every dispute with the knee-jerk refrain, “Off with his head!”, many on Twitter worked themselves into a tizzy at the idea that SBF was allowed to remain free in the weeks immediately following the FTX collapse. This was, of course, made possible because he had bought himself powerful friends. Not because, you know, these things take time, especially when they involve complex assets and multiple jurisdictions.
Even professional investors and FinTwit talking heads have gotten into the conspiratorial mix. It’s as if some sort of mass psychosis has afflicted Twitter that causes everyone to adopt mob rule and abandon any notion of due process.
Some context is required when contemplating all of this. First, the losses associated with FTX are relatively small in the grand scheme. I’ve seen estimates range from $4 billion to $10 billion in customer assets lost. In comparison, the Bernie Madoff ponzi scheme resulted in $20 billion worth of cash losses and $65 billion in paper losses. The Enron fraud resulted in shareholders losing $74 billion to go along with billions worth of losses for the company’s pensioners.
Second, FTX was mostly an international entity that had limited direct impact on American users (where much of the handwringing occurs on Twitter). Its business largely operated beyond the purview of American regulators, which is interesting to consider given all the heat the SEC and Commodities Futures Trading Commission (CFTC) have taken during this ordeal.
To be fair, crypto prices did collapse about 25% amid the FTX fallout. So plenty of investors lost money indirectly as a result of the exchange’s failure. This would speak to the anxiety that might motivate some to embrace conspiratorial views on the topic.
Some have speculated that shenanigans are afoot since the CFTC met with SBF nearly a dozen times in the past year. But that makes total sense when you consider SBF’s objectives. FTX stands for “futures exchange”. Nearly $13 billion of its $15 billion average daily trading volume was driven by crypto derivatives (specifically in a pioneering product called a perpetual swap, also referred to as perps). Trading of such instruments was not open to U.S. citizens, hence the need for FTX to block American users from its site while operating as an offshore entity.
The U.S. arm of FTX was a spot exchange and averaged just $300 million in average daily trading volume prior to the group’s bankruptcy. As part of his expansion plans, SBF wanted the U.S. to allow for more substantial trading of perps onshore, hence his desire to repeatedly meet with the CFTC to convince them of such wisdom. The important thing to note here is that the CFTC never acquiesced to his requests.
Let’s now return to the notion that investigations and prosecutions take time.
Enron went bankrupt on December 2, 2001, which at the time was the largest corporate insolvency in U.S. history. The DOJ began a criminal investigation on January 9, 2002. A cadre of executives was hauled before Congress two months later, with most invoking their Fifth Amendment rights.
Enron’s auditor, Arthur Andersen, was indicted for obstruction of justice on March 14, 2002 and eventually convicted on June 15th. Former Enron CFO, Andrew Fastow, was charged with 98 counts of fraud and conspiracy on October 2, 2002 and fought those charges for sixteen months before agreeing a plea deal.
Former Enron CEO Jeff Skilling pleaded not guilty to a 35-count indictment on February 19, 2004, which was followed by former Chairman Ken Lay pleading the same to a 15-count indictment on July 8th. Their trials did not begin until January 30, 2006 - over five years after Enron declared Chapter 11 and two years after they were formally charged.
Both executives were found guilty on multiple charges on May 25, 2006 (meaning their trial lasted four months) and Skilling was sentenced that July to 24 years in jail (Lay passed away prior to his sentencing). Noting further that Lay and Skilling were free on bail the entire time up until their sentencing. That’s because it is standard procedure for those accused of committing white collar crimes to be granted bail since they do not represent a risk to the public.
Madoff is a different bird given how quickly he rolled over. He confessed to his sons on December 10, 2008 that his business was “one big lie”. He surrendered to authorities the very next day, saying “there is no innocent explanation.” Madoff was granted bail and confined to his Manhattan apartment on December 17th. He was arraigned on March 18, 2009, where he pleaded guilty to all eleven counts of fraud and conspiracy. A jail sentence of 150 years was handed down on June 29th.
The Madoff affair unfolded in rapid fashion given his willingness to come clean on everything and therefore avoid a drawn-out legal fight. The evidence thus far seems to suggest that SBF’s timeline will track closer to Enron than Madoff.
Happiness is a Warm Gun
When I am king
You will be first against the wall
With your opinion
Which is of no consequence at all
After an excruciating wait of five whole weeks, the U.S. Department of Justice (DOJ) threw the proverbial kitchen sink at SBF. The unsealed indictment includes eight counts of financial and election fraud. SBF was quickly arrested by Bahamian authorities at the request of the DOJ, where days later his team negotiated his extradition to the U.S. for prosecution.
Rather than rejoice at the development, some couldn’t help but wonder why he wasn’t first allowed to testify before Congress. Rather than the usual political grandstanding one typically witnesses during such affairs, surely we were going to be treated to groundbreaking insight into the inner-workings of FTX. SBF was instead let off the hook by Congressional committee members trying to help him avoid prosecution…which was already happening at the behest of the DOJ.
But everything is a nail to those only armed with a hammer. Conspiracists among us will continue to find things to hyperventilate about as this ordeal unfolds. We’ve now moved on to misunderstanding and questioning the $250 million bond SBF posted at his arraignment as well as complaining about where he was sitting and what he was drinking while on the flight to his parents’ home (where he’ll serve out his house arrest under strict electronic surveillance). And instead of viewing the plea deal struck by Caroline as evidence the walls are closing in, she is instead just a scapegoat.
This is all completely absurd. “The wheels of justice turn slowly but grind exceedingly fine.” Everything that is happening procedurally with SBF is entirely normal. Nothing about the process thus far is in the least bit controversial.
For those of us not infected by any conspiratorial mind virus, what we see is a man in the midst of a comeuppance. Instead of getting away with anything, SBF is beginning a long walk down the plank of justice. And rather than see politicians and other power brokers come rushing to his aid, what he’s experiencing instead is a quick turning of the worm. SBF is completely fucked. And he’s going to face this music alone. A sad reminder that one is indeed the loneliest number.
It is in the humble opinion of this narrator that this is not just ‘something that happens’. This cannot be ‘one of those things’. This, please, cannot be that. And for what I would like to say, I can’t. This was not just a matter of chance. These strange things happen all the time.