“You either die a hero, or live long enough to become the villain.”
This quote has stood the test of time in crypto, and Sam Bankman-Fried is undoubtedly living it. With FTX and Alameda Research potentially going under, Bankman-Fried is the latest in a series of crypto personalities to be brutally shoved into the spotlight.
As the events unravel, Do Kwon, founder of Terra, and infamous former hedge fund manager Martin Shkrelli appeared on a podcast to talk about it.
Here’s some tips they gave Bankman-Fried on risk management.
Learning From Terra’s Collapse
Jokingly, he quipped that he was “on the run”, in light of recent rumors that he fled to Europe following a “red notice” by Interpol, and an arrest warrant issued by the South Korean government.
He also stated that he didn’t “understand how a hole was created, when just hours ago they said they don’t invest user funds.”
Drawing on his experience with the Luna crash, he highlighted the stress of running a large-scale operation like FTX.
“Doing effective crisis management is not easy”, especially when billions are at stake. This was especially true in the Luna collapse, as on-chain governance proposals take 7 days to pass.
However, Do believes that Bankman-Fried will be fine, especially if Binance steps in. Should that happen, “there would be no reason why he would be in any meaningful distress”.
Regarding his whereabouts post-Luna, Do says he has a lot more free time on his hands.
“It’s given me a lot of time and headspace to think of interesting things to do … just picking up on projects that look interesting”.
He also maintains that both him and the Terra team have shown good character to their counterparties, possibly opening up avenues for future endavours.
In fact, prior to Luna crashing, Terra was close to raising $2B in order to maintain the peg. Unfortunately, news leaked and the deal fell through.
Apparently, FTX was attempting a similar raise for $6B, which also fell through.
Shkreli Says Jail isn’t So Bad
Martin Shkreli, the infamous ex-hedge fund manager who was sentenced to 7 years in prison for securities fraud, also appeared on the podcast.
“I’m not shocked [by FTX] but the hole is a lot bigger than people think … there’s a good chance that Binance walks away”
Shkreli also tapped into his TradFi knowledge, mirroring FTX to the Lehman Brother’s collapse.
“It was really reckless for FTX to leave deals like Aptos and Sui … there’s a reason banks don’t do that”
He also pointed out the irony of FTX going from bailing out companies to needing a bail-out in such a short span, and that SBF apparently asked Tesla CEO Elon Musk for funds prior to the Binance acquisition announcement.
Regarding Do Kwon’s arrest warrant, he also said that “Jail’s not that bad”, adding that Bankman-Fried will likely see time as well if investors are not made whole.
As for the crypto industry as a whole, Shkreli likens it to “an entire banking system” that got drunk or high.
While the crypto industry is still in its nascent stages, he also believes in its long-term value. With DeFi transparency an on-chain protocols still working, he believes that a few projects will make it out, while the rest goes to zero.
The Need For Ethics in Crypto
The collapse of FTX and Alameda is a reflection of the greed that pervades Web3.0.
From 3AC to Celsius, the pursuit of yield has collapsed some of the largest institutions in crypto.
“There’s no honest actor in crypto, every time we pull the mask off of somebody, there’s another mask to pull off, then another.”Martin Shkreli on UpOnly
Despite FTX making millions, if not billions, in trading fees, the need to outpace competitors eventually took a toll.
Alameda Research, which was supposedly delta-neutral at the start, likely got caught up in the bull market with risky trades as well.
On-chain, ethics have become shady as well. The on-going debate of “code is law” vs “law is law” has taken the spotlight, given the many exploits.
While those who exploit protocols are undoubtedly gifted or hardworking, there is no net benefit other than to them. The “code is law” paradigm, therefore, needs to be relooked.
Also Read: CZ And SBF Make Love Not War
[Editor’s Note: This article does not represent financial advice. Please do your research before investing.]
Featured Image Credit: Chaindebrief