SPEAKER_00: remember right after uh this all collapsed and then he did like 10 interviews on good morning america

SPEAKER_01: and yes uh 60 minutes and everybody's like why is he's making himself look so bad i think somebody

SPEAKER_04: was i said that oh was it yeah you thought that this is the defense argument like i'm a lunatic i have absolutely no judgment and i'm i won't even listen to my lawyers and shut up yeah i

David Friedberg: literally said that i was like i think that this is part of his i am deranged i don't i do impulsive things and i don't think things through and i wouldn't even listen to my lawyers and then when the judge tells me hey don't use a computer and don't talk to the press i'm gonna get a vpn i'm gonna use my computer all day long and i'm gonna talk to the press i mean not only did he do it before he was indicted after he was given house arrest yeah using a vpn this kid didn't know where

SPEAKER_11: the lines are or when he realized he had committed all these crimes he just said you know what i'm

SPEAKER_14: gonna lean into i'm a lunatic this week in startups is brought to you by house of macadamias is the next big health trend get a free month supply of macadamia milk with any order at house of macadamias dot com slash twist by using code twist 20 roots invest in the only real estate investment trust that creates wealth for you and its residents at invest with roots dot com slash twist and in broker startup insurance program helps startups secure the most important types of insurance at a lower cost and with less hassle save up to 20 off of traditional insurance today at a broker dot com slash twist while you're there get an extra 10 off using offer code twist all right everybody welcome to friday it's

SPEAKER_18: friday and we're gonna do a little jason unplugged producer nick is with us and i wanted you know i

SPEAKER_20: have such a busy week this week i've been raising uh our fourth venture fund you can read about that at launch.co slash memo and uh i've just been in a ton of meetings and that's been amazing uh but i

SPEAKER_21: am falling behind on the news and i need to catch up on this sbf stuff i started listening to the michael

SPEAKER_22: lewis podcast nick uh michael lewis is doing like the trial of sbf but he's not doing it himself i saw him on 60 minutes he's sending somebody to the report and they were talking about the

SPEAKER_23: jury selection process which i believe started this week everybody knows sbf is um in all likelihood a deranged sociopathic lunatic and michael lewis's book just came out going infinite where

SPEAKER_00: he covered it and he's created a little bit of controversy because he's one of the only people that doesn't think that sbf is a uh deranged sociopath he's sort of gotten roasted a little bit because he's kind of he's sort of defended sbf oh no he's definitely defended sbf he said um on 60

SPEAKER_22: minutes that sbf had a real business he was the casino and that the ftx exchange was printing money it was a very real business and he said if it wasn't for alameda which he should have shut down

SPEAKER_21: there would have been no problem here um of course that's like saying like you know al capone would have been fine if it wasn't for the murder anybody and yeah

SPEAKER_30: if it wasn't for the murder and the rum running and the gambling and this ring extortion extortion loan sharking whatever uh so sure yeah he wasn't a criminal if he didn't do the criminal stuff but

SPEAKER_21: obviously um you know listen he's got to have his day in court and here we are it's his day in court but yeah bad look for michael lewis but i'm a huge fan of michael lewis so i'll give him the benefit

SPEAKER_00: of the doubt i understand michael lewis is like one of those artists that you know like sort of like kanye west right kanye can say a lot of crazy things still made some of the best music i've

SPEAKER_36: ever heard yeah so you know like michael lewis i don't even care i could separate the art from the artist a little bit yes he can say whatever he wants i can't wait to read the book yeah short

SPEAKER_34: moneyball come on moneyball is such a great film uh i mean that's one of the things about michael

SPEAKER_22: louis is such a good storyteller that the films turn out great this film is going to be amazing i'm not sure who's going to play sbf in this but apple bought the rights to it i believe before the book even came out yeah yeah makes sense um i'm sure he got five or ten million dollars for it because that's going to be a huge hit there's gonna be a lot of interest in it but let's um let's get started

SPEAKER_00: here um what is happening in the trial uh yeah so the trial of sbf just kicked off this week and we'll just give you a little update on how it's going so a quick refresher on the ftx collapse if anybody forgot just some of the major players and what happened so the big issue was that sam

SPEAKER_17: backman freed controlled both ftx which is the crypto exchange where users could buy and sell crypto like a coinbase or a binance but he also controlled alameda research which was a crypto trading firm that

SPEAKER_00: actively was almost like a crypto hedge fund you can think of it as basically so he owned the casino

David Friedberg: and then he had a bunch of and then he had a bunch of players in the casino yes which is like

SPEAKER_00: rule number one of what you don't do but okay yeah uh he allegedly told investors that alameda received no special treatment from ftx um that's actually what one of the investors uh of ftx testified one of the paradigm founders ftx now this is where it gets really gnarly and where all of the alleged fraud and crime um oh no i don't know if we have to say alleged because some of the uh his co-founders already admitted to fraud and flipped on him so i don't know if you have to say

SPEAKER_33: alleged there but yeah you know that's um it's alleged he did it and i guess for those folks

SPEAKER_22: they have admitted guilt so that would be i think the proper hygiene as a journalist he has denied it his co-founders or his compatriots have admitted it so we're in process um it would be as if you know somebody the accountant working for al capone says we committed crimes but al capone is still saying he's innocent right or in the trump case you know like people are starting to flip on trump and they said we committed crimes but trump is saying i'm being railroaded right so you got to give people the benefit of the doubt i believe in that um although it's not looking good here

SPEAKER_00: so ftx had its own native token which was called ftp it's like a platform token so if you wanted to transfer funds from your ftx account into the ftp token just to hold it um and then transfer it back into another crypto that's sort of what the token was it was basically buying that token was a bet on

SPEAKER_22: ftx's platform right but it was not just so we're clear ftp was not a stable coin no it's not tether which has its own reputation issues and it's not usd c uh it was not pegged against any dollar yeah

SPEAKER_17: okay great ftp was majority owned by alameda nftx itself so only a small percentage of ftp actually was traded publicly it had a very small float as we just talked about actually recently with arm and

SPEAKER_00: instacart um and clavio they all had a very small float a small percentage of the company that's actively

SPEAKER_17: trading publicly and what this did allegedly was allow ftx to manipulate the price of ftp thus

David Friedberg: increasing its holdings on paper then so if you are 99 of ftp and the public owns one percent and you

SPEAKER_22: start trading between your own accounts you could paint the tape create a bunch of trades fake trades wash trades whatever you want to call them and then you know have alameda or ftx or whoever individuals buy ftp from each other at increasingly high prices and then the public gets some benefit from it but they only own one percent so if it goes up ten percent the majority of that value accrues to the 99 hold i'm making numbers up here but yes that is a classic technique so their ftp would increase

SPEAKER_00: in value as they inflated it allegedly then ftx and alameda would use these inflated tokens as collateral for loans between the two of them so allegedly alameda would acquire ftx customer deposits to trade by loaning ftx its worthless ftp tokens as collateral if that makes sense i know there's a lot of letters and numbers and nonsense there but the two entities would use the ftp tokens

SPEAKER_22: um as collateral which would be like you know if you and i were like hey i've got this imaginary exactly you know paper over here this magic paper that's worth a billion dollars and we would give

SPEAKER_71: each other loans based on it or you i would say to you oh i'll give you a loan against your house that's worth a hundred million dollars you're like okay i'll give you a loan against your house that's worth a billion dollars which is exactly what they're trying to get trumped for in this new york

SPEAKER_22: case inflating the asset values so if you inflate the asset values and take a loan against it right which is a fancy collateral is a fancy way of saying that that you know it's what you get if the loans don't get paid back but if the loans don't are not forced to be paid back between these two parties then you know the it never becomes due basically so uh feels like we're getting towards

SPEAKER_00: the ponzi allegations yeah so then it all came crashing down starting in ftx somehow withstood all the crazy uh block fi going out of business three hours capital they withstood all that right and everyone was like wow how are they doing this and then finally in november of 2022 someone at coindesk got a leaked uh basically balance sheet of alameda and it saw that a ton of alameda's holdings were ftt they reported that and then cz from binance uh who was the big rival of spf tweeted that binance was

SPEAKER_17: liquidating all of their ftt tokens that caused the sell-off of the public ftt tokens which crashed the

SPEAKER_00: value and then that eventually caused ftx to go and solve it so that was basically in sort of a high

David Friedberg: level way what happened and cz cleared some large amount of selling like he was the winner in all

SPEAKER_22: this he owned some percentage of ftx i believe and he sold it yes he sold it before though i think like a year before this all earlier but he owed some ftt tokens he started selling them and uh he basically gets to make money and kill a rival so it's like a double joy for him yes okay i got a funny story to

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SPEAKER_00: let's get to the argument so the prosecution which are federal prosecutors by the way their general

SPEAKER_17: argument is that sbf and his rise to fame as ceo of ftx were built on lies they're alleging that he stole customer deposits through a secret backdoor to alameda research which was sbf's trading firm and then with these stolen customer deposits sbf was able to make investments buy property in the bahamas and rich himself get stuff for his parents and all that stuff allegedly this is how he would

SPEAKER_22: have potentially either from the profits of ftx which did have some profits because they were taking a piece of air trade or from this stolen money or some combination allegedly possibly that's how he

SPEAKER_21: signed up all these celebrities mr wonderful and you know whatever uh giselle and everybody they gave

SPEAKER_22: money to uh to uh super bowl ads tom brady etc all that money was probably some combination of customer

SPEAKER_20: deposits or maybe the profits of ftx and then a ton of donations to politicians and then a ton of investments he was investing in a ton of stuff and i think some of those investments obviously since he was a trader might work out so that's another interesting wrinkle to all this

SPEAKER_34: and some in some of their investments gave the money back right semaphore was that one of the

SPEAKER_22: investments that before i think got 15 million from him the the journalists and i think they agreed to give it back so this is going to be one of these crazy things um you know if he gave you money to buy shares in your company are you obligated to give it back or not you know some courts will say if it's ill if it's stolen money you do have to give it back now what if you spent some of it i don't actually know technically what's supposed to happen you know if he invested in a startup if he invested in airbnb in the early days and they spent his money i guess then they would own

SPEAKER_20: shares and those shares would have to move from you know um sam bankman frauds um personal account or ftx's account and they would be owned by you know whoever the bankruptcy judge was going to give them to

David Friedberg: right the creditors so i think that would be the process so i think semaphore could have uh just kept the money and given the shares to this bankruptcy but maybe it's just cleaner for them to give it

SPEAKER_00: back was probably right so that's the prosecution's argument how do you feel about that do you think that's a good strategy i mean that's really the only strategy right that's what they're going after

SPEAKER_22: yeah i mean they have information we don't have this is the thing i've learned about these cases over the

David Friedberg: years um these um very savvy da's uh when they do these kind of things they don't show you all their cards for obvious reasons they don't want you know uh people to get to the witnesses they don't want any tampering um and i think they give out to the public uh you know the least bit of information they

SPEAKER_21: can just enough to kind of let people know what's going on and then they want to tell their story in

SPEAKER_20: court so i i think that's what you're seeing whether it's the trump cases or ftx's cases or uh in the case of daranos whenever they have these things they'll drop certain specific pieces of information during the trial and they'll give just enough narrative i think up front to make sure the public feels that there's nothing fugazi going on right and so we're seeing that in um i hate to keep bringing up trump because i know that's polarizing people that's also happening at the same time the information new information is coming out in all those cases you may have seen like in the documents case different information came out after they filed the initial one right and there are these superseding indictments which are additional indictments that come later because once you start

SPEAKER_22: having people roll over and people are rolling on sbf immediately right and there's no loyalty there whereas trump has some deep loyalty people who've worked with him for decades these people are rolling on

SPEAKER_64: sbf and so you will see more indictments probably emerge over time do you feel like people are so

SPEAKER_00: quick to flip on sbf because a lot of it is younger professionals who were really really smart and went to mit and were amazing in their fields and they did and they were working in crypto which is finance but it's sort of outside of finance and they kind of knew that they were doing something wrong but

SPEAKER_43: they didn't know how illegal it actually was do you think that's why people are flipping so quick and they're like i'm sorry i i just got caught up in something crazy i don't want to go to jail

David Friedberg: yeah you know i think that these individuals were this is like a total guess but um the there are a lot of claims that they were on speed uh all different types of speed and i'm using speed as

SPEAKER_20: a general catch-all term because i don't know all the different prescriptions they had these things i i believe have some use cases that are valid adhd etc um but i think they also have some impulsiveness that can come out of them or poor decision making um and so that combined with a very smart person in a low moral compass and a weird environment you know people can just get crazy if you saw the wolf of

SPEAKER_22: wall street you know just you know you could you can substitute cocaine the speed of the 80s to this the speed that these kids are taking i think it results in the same thing which is this feeling of

SPEAKER_20: invincibility um and that you're a genius and hey listen if you were buying whatever bitcoin or nfts you

SPEAKER_109: felt invincible because every year your you your book went up two three acts especially in 2021

David Friedberg: yes and so if the world's telling you you're a genius and this super drug is making you feel like a

SPEAKER_20: genius and you know you're you know on eight trading you're on a trading turret with eight other people on their trading turrets man you you can just get deranged i think and i i think that's a big part of

SPEAKER_21: this i have to be totally honest and i think the flipping is they all came down off of the high of this and were like wow um we were out of control there were no controls in place and so for somebody from

SPEAKER_18: mit with parents who teach at stanford uh and people who are this smart to claim that they don't

SPEAKER_20: understand like basic finance they don't understand controls they don't understand cfos boards and all this stuff they could have very easily understood it if they were doing all the sophisticated trading if they were making their own tokens if they were running a hedge fund and they built an exchange and they understood how the political uh infrastructure worked to make donations on both sides of the aisle to protect because they understood so many different systems yeah to make to make dark donations

David Friedberg: right like come on these these were you know really smart uh kids who knew how to manipulate systems and

SPEAKER_20: so um yeah i don't believe anything they say i think they were just straight up criminals and then what happened was they got ahead of themselves and then when things collapsed they panicked and they started doing all kinds of unnatural acts to try to keep the fraud up um and and that's typically what

SPEAKER_22: happens you you watch the elizabeth holmes story it starts with small lies small exaggerations then you're covering up you're covering up you're covering up cover up becomes much worse than the initial crime uh that's almost universally what happens it's like any like a gambler chasing it if you've ever had one of your friends like lose at a game and they they double the bat in the next game then they double the bat and they they lose three games in their own like that's not possible and it's like okay flip a coin you know three times and cf heads comes up three times in a row like it's

SPEAKER_94: completely probable actually it's gonna happen i just wonder how much of it was like since it was

SPEAKER_00: crypto it it just felt like almost not real you know it felt like pixie dust and that you couldn't do anything wrong with it like i remember there were so many people at the end of 2020 when everybody started going crazy and even like people that i know in my life are like oh what do you think about this token and you're like what are you doing and then they're like wait we have to pay taxes on this and you're like oh so i wonder how much that played into it like if this was traditional finance

David Friedberg: with this could this have ever happened yeah you know there is a thing in technology i've talked

SPEAKER_18: about it before here on the show uh many times where people believe if i can technologically figure out how to do something then it's legal because i technically figured it out and so you know somebody technically figured out how to build napster would be like the big example yeah and it's like

SPEAKER_20: i technically figured out how to let people share mp3s but i'm not sharing them i just figured out the technology to do it and it's like okay you know that that's a fine fine reasoning if you want to have it but no you still have to follow the law and this idea that you know like these tokens are

SPEAKER_21: not securities okay you know the sec gets to decide that not you yeah um and so that's why you've seen a

SPEAKER_20: lot of people lose their cases um and you know like wash trading and you know the front running of markets which happened at open sea coinbase and at the nft um open sea open sea both of those places didn't have tight enough controls in place apparently uh allegedly well not allegedly i think it's it's pretty clear they didn't have the tight enough controls and people front front run the market or did wash trading on on those sites so you know i do think you know people can get caught flat-footed in the case of coinbase and open sea it might have been getting caught flat-footed and yeah they just didn't respond fast enough or build the stuff quick enough or they just had a bad actor the

SPEAKER_00: funny thing about those two was on the coinbase side it was uh someone working there who's telling his brother i believe what coins were going to be listed soon so that he could buy them off exchange and then they could sell them in profit on open sea it was there i think head of product nate chastain was the guy's name i think he got a couple months in jail just a couple weeks ago i remember it was on the ticker um he was actually bragging about front routing on twitter there was like a famous

SPEAKER_118: tweet and it was like oh he didn't even like he didn't even know that it was wrong that's sort of what i'm getting at like yeah people didn't even think it was real yeah this is why regulations exist

SPEAKER_20: you know when you are raising a venture capital fund when you're investing in companies you know i i was

SPEAKER_22: aware of a situation where somebody was uh asking their friends you know telling their friends hey i'm

SPEAKER_20: investing in you know this vehicle i won't say what type of vehicle but an investment vehicle and um you know i i just had to tell the person listen i know you don't think that you're a promoter here but you are acting as an agent because you're going to your friends with an opportunity and then you're

SPEAKER_22: telling them you're investing and how much you think you're going to make and how great this is

SPEAKER_20: like you just got to be a little bit careful because you might be acting as an unregistered agent they're like what's that yeah okay you know just type in unregistered agent and you know there's been many instances of this people try to do something creative in venture capital you got to be very careful you know syndicates were one where you know um angel list and naval did a really buttoned

SPEAKER_22: up job explaining every step of the way how spvs work and we had to get a little lesson in them and

David Friedberg: how they don't work and how you have to be careful because people's money is that stay uh and i think

SPEAKER_20: that you know my understanding of with all the spvs that have occurred on angel list

SPEAKER_22: there was one instance of somebody who was upset um and you know they had made like a 10k investment and they lost their money in it or whatever and they wanted their money back and they just created a huge stink and wrote some legal letters and obviously they didn't win but you know it was like one out of tens of thousands of people in the history of angel list and um it was because they

SPEAKER_20: were so buttoned up you know and they put investing in startups is high risk only invest what you can afford to lose majority of startups fail and i in to this day in my deal members i put the majority of startups fail only invest what you can afford to lose these are high risk investments not that you really need to say that but why not say it an extra two or three times hey everybody today i'm joined

SPEAKER_146: by roots ceo dan dorfman dan welcome to the show thanks for having me jason tell everybody here in the audience what is roots and what makes it different than the other real estate investing platforms i'm

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Chamath Palihapitiya: equity do they put in 100 bucks just like i might as an investor or is it blended into their rent what we

SPEAKER_148: do is we do not take security deposits at roots instead our residents fund a roots wealth building account and invest in the reap and so from day one when they move into one of our homes they're actually an investor just like me or you would be an investor the second step of our program is what we call living it like you own it and so if they pay rent on time for three months in a row and then they'd be a good neighbor so like no noise complaints and then the last thing we want them to do is a quick walkthrough video of the inside and outside of their unit we're actually going to give them a rebate of rent of usually around 150 into their investment account so just for being a great partner with us they're going to make 600 extra on top of the growth of the fund for helping us take care of

SPEAKER_151: the asset head to invest with roots.com twist to sign up and start investing today that's invest with roots no spaces no dashes dot com twist to sign up today all right you want to get on to the defense

SPEAKER_00: argument yeah sure so uh i know it's tough defense argument is tough when you already have like four people that have flipped right it's like crazy yeah um odds are stacked against them so the defense is conceding that many facts that the government stated were true so they're already saying that like a lot

SPEAKER_17: of this is true including that ftx customers deposited funds in accounts that alameda research controlled but the defense is arguing that sbf operated in good faith and never meant to defraud

SPEAKER_00: anyone they're saying that ftx was a startup and they were figuring things out along the way okay and it was growing and things were crazy i'm paraphrasing here um and they claimed that alameda was not an

SPEAKER_17: ordinary customer on the exchange but a market maker that was really important to generate supply and demand in the early days of ftx so that's why that relationship was important early on okay and the defense also is placing some blame on caroline ellison who is sbs girlfriend who is the ceo of alameda she was she was the head trader at alameda she's also going to testify at some point i think she also pleaded guilty and flipped on spf and they're blaming her for failing to properly hedge alameda's exposure after sbf had asked her to which they are claiming led to the collapse in the first place got it do

SPEAKER_21: you think that is a good defense i mean it's finger pointing um and if they've cut a deal with her which it appears they have i don't know if they've been public about that or not if um she has officially cut a deal but you know um it does seem like it takes two to tango and that they were both involved in this and then there was a back door that somebody wrote so it sounds like a lot of nice words it doesn't sound like um you did your fiduciary duty and yeah so no i don't think you get to say like we're

SPEAKER_71: figuring it out in finance that'd be like if i did surgery on you i did plastic surgery on you and i'm like yeah you know you said you wanted the surgery and we're figuring it out like you don't get to

SPEAKER_18: figure it out in finance you don't get to figure it out in the medical field or health care there's some areas you don't get to figure it out because the cost is too high

SPEAKER_22: they knew that if he knows she should have hedged these things properly it was his duty to make

SPEAKER_20: sure she had as well right because they're the market maker so they should have had control space he didn't have a cfo he didn't have a board that tells you everything you need to know and supposedly he talked about not having a cfo and was like what is even what what is a cfo you know he was like questioning like the existence and nature of cfos like they thumb their nose at regulation it seems at every step of the way and i think my gut tells me they did that because they

SPEAKER_22: knew that they would not pass any kind of formal audits etc and so and then the venture community

SPEAKER_20: failed to uh put the controls in place so you know the the penalty the venture community gets is

SPEAKER_22: losing their money um and because they're part of the equity stack you know they're going to lose

SPEAKER_23: uh probably all of it or most of it and uh you know the people with the deposits will get their

SPEAKER_22: money out first of course and um they get a reputation hit and so this has made everybody i

SPEAKER_20: can tell you in venture especially as late stage investors they are no longer doing this like founder friendly to the point of absurdity like we have to invest now because the deal's gonna close and a train's leaving the station i always said you know if the train's leaving the station we'll meet

SPEAKER_22: you at the next stop you know like we don't need to chase the train down the tracks train will come back there'll be another train we'll get on the next train we don't it's absurd to be like i'm going to just do something dangerous like jump on the side of the train because it's leaving the station like

SPEAKER_95: you don't do that in on the investor side can you sort of bring people to because i don't think a lot

SPEAKER_00: of people really understand this what it was like at the end of 2020 and throughout 2021 and how investors looked at sam bankman freed and was he looked at as like this you know next steve jobs kind of figure you were at a couple of events with him you saw him walking around right you saw him

SPEAKER_25: famously you interviewed him then got squashed or something um a friend of mine uh you know was a

SPEAKER_22: small investor and ftx was considered by most as the most legit of all of the exchanges even more so than coinbase right i think it was considered on the same level as coinbase so those were considered like these are the two legit ones this kid's parents are stanford professors right he dropped out of mit this is what we call broadly signaling in the industry and then you know these politicians he's meeting with them he's got pictures of himself you know uh meeting with these folks he's flying to washington he's trying to do it right he's trying to create a framework he's in lockstep with these

SPEAKER_21: politicians so check box check box check box and then his eccentric weirdness also is kind of a check box right okay he's a little weird yeah you know he he maybe he's on the spectrum because he shakes constantly maybe that's speed i don't know uh all of that put together a lot of the really good ones are weird sure and so you you put all that together you know that's the signaling that i think led to people saying okay i'll take a leap of faith and then you see that all the previous investors are amazing and this guy was doing it this is where i find it completely insincere he was buying uh this

SPEAKER_20: influence whether it was celebrity influence uh or making investments in companies he very famously like tried to get himself inserted into the twitter uh you know takeover by elon and you know he was making all these claims and you know elon obviously saw right through it and was like this kid i mean i

SPEAKER_64: think he's been very public yeah they had like a famous meeting right where elon was just like i i

SPEAKER_22: just don't want to talk to this person again yeah like literally this crypto stuff is nonsense um you

SPEAKER_20: you cannot build a database on the blockchain that's going to serve up you know a billion tweets you know every x number of hours and so you know elon's got actual engineering signaling and and there's different types of signaling you know my signaling um you know is can this person build a great product that's what i always look at and they understand their customers and so you know i would have

David Friedberg: discounted everything but the product and the actual performance and i would have had my people

SPEAKER_20: in there looking at the actual performance asking about and i also think governance is super important and people's approach to governance nick is super important so when somebody says i don't want to have a board i'm like hmm that's interesting uh why no it's too early i was told it was too early uh we want to stay focused on the product i'm like oh okay have you built a billion dollar company before no it's first time um if i could have three people meet with you every 90 days who have built billion dollar companies in finance would you have lunch with them for two hours and they'll say yeah of course i'm like okay that's a board so why don't we set that up and if if i frame it to you as you

David Friedberg: get to have lunch with three people who have been involved in building a billion dollar business in

SPEAKER_04: your vertical before you and you don't want to have lunch with them for two hours every three months four times a year that's a gift who wouldn't take that deal and why wouldn't you take that and why do you need control or controlling shares of your company you know why don't you want to have investors

SPEAKER_20: keeping you accountable um you know if you want their money and you don't want to be accountable to them that's like just major red flags like red flags all over the place so i i would have snipped this out immediately and that's why i didn't do any crypto investments because when i ask questions like the ones i'm asking now or how i frame things none of them pass the snippet no product no customers no governance um and then all kinds of shady weird stuff yeah i would say you were a very product and

SPEAKER_25: customer focused investor and there was very little like a lot of times from what i remember you saying

SPEAKER_00: you would meet with these companies and you'd be like so who's the end customer and they'd be like

SPEAKER_174: you yeah and you'd be like an investor and they'd be like yes by the token what yeah don't make any

SPEAKER_22: sense yeah i think we had maybe of 400 companies in the history of my investing maybe less than 10 of them had any kind of crypto angle to them and i'd say if i pick number eight six or seven of them added the crypto during that phase and one or two of them we invested in knowing

SPEAKER_20: they were crypto and so it's really that simple and those are founders i had known previously um and i don't make two small bets on founders i know who have done great things before and in both cases i think one's one didn't work out and one is still in play yeah so we'll see and that one has pivoted away from crypto so there you have it folks all right listen we work with startups and they are

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SPEAKER_109: single application helps startups get four quotes for four lines of coverage in just 15 minutes broker they'll connect you with one of their expert brokers for unmatched service and it goes beyond your policy they'll make the process painless and transparent especially when you compare them to the incumbents which are slow so try in broker today with the code twist and get 10 off they're already amazing prices their startup package in broker.com twist e-m-b-r-o-k-e-r.com twist and use the code twist for 10 off we love and broker thank you for all the amazing support over the years both on this program and the love and care you give to our startups there were four witnesses so far in the

SPEAKER_00: trial um one of them was an investor uh matt huang the co-founder and managing partner of paradigm i hope i'm announcing his last name correctly um he mentioned paradigm had invested 278 million dollars into ftx over two rounds in 2021 and 2022 all of which has been marked to zero yeah he mentioned that he was told in diligence that alameda received no preferential treatment on ftx which was a lie and he also mentioned that he would have likely not invested if he had known about ftx's red flags like their alameda relationship and how they were giving them customer allowing them to access customer funds but the real testimony that i think is interesting so far was gary wang who was sam's co-founder and the former cto of ftx and reportedly built the whole site and was actually like the one who was doing all of the coding yep yes so wang has already flipped on spf he's already pleaded guilty to fraud and what i thought was really really interesting is that one thing he said basically lends itself to all being sort of a grift from the start so he said when they were creating alameda ns and ftx wang said spf name the firm alameda research because it makes it easier to do business if the name doesn't mention trading or cryptocurrency f uh spf told him prosecutors oh sorry in the in the um uh from the one of the articles prosecutors then played the jury a recording of an interview in which spf said he knew banks would not work with alameda if it were called coin day traders inc but no one doesn't

SPEAKER_22: like research this is where you get exactly spf's premeditation and thoughtfulness clever you know

SPEAKER_21: premeditated you could frame it however you want but expertise he knew what he was doing yeah right he had a strategy this i mean this is he had a strategy to trick the banks right into working with

SPEAKER_20: him so that tells you everything you need to know about this individual and i think these moments is a great moment uh will build and build and build so uh wang will continue to testify on friday uh from what i understand and uh this thing's going to take six weeks i think they have six or ten weeks i think for this trial it's interesting with these trials they have a specific timeline they give everybody for trials um and so i think this is either six or ten weeks so this is going to be going on we'll we'll talk about it here on the show every week um you have a guess on the verdict

SPEAKER_198: uh yeah he's going to be guilty and i think he will um i could see him pleading you know

SPEAKER_20: at some point during this process uh they could come to terms because i think it's going to go really bad for him uh and i think we've only seen the tip of the iceberg of these kind of you know really bad moments uh there'll be all kinds of interesting things we're two days in i think yeah it's going to get much worse i think he will get a bernie madoff like sentence which was you know multiple life sentences i think it'd be closer to bernie madoff than theranos theranos got like nine to eleven years each of them i think it was nine and eleven if i remember correctly i think he's going to be more towards the life in prison so i would say if i have to pick a number i'm going to go with like 30 years

David Friedberg: to life um i don't think he gets less than 20. so i'll put it at you know 20 30 years plus do you think he's a genius nah i don't i think if he was a genius he would have seen that ftx was a real business he would have seen coinbiz he would have said okay anything that's fugazi we got to

SPEAKER_21: stop doing uh we need to clean this mess up and uh alameda you're on your own um i'm shutting it down i'm selling my shares to you i'm out of that business i'm only going to focus on ftx ftx is going to be on the up and up we're going to put a cfo in place we're going to clean everything up if we've made mistakes we'll pay our penalties we'll come clean with it but uh that would be what a genius would do yeah uh this was just sloppy and i i honestly think the kid was on and and maybe this will wind up being his defense uh that he was in a drug-induced haze and he was losing his mind uh on speed i literally think he'll probably come to that like i wasn't thinking straight i have adhd i'm severely on the spectrum i didn't understand what i was doing i don't want to say it's like uh the pleading insanity but i think he's going to plead on the spectrum which i don't think is a

SPEAKER_20: an actual defense but i think that's where this all winds up is that he was not thinking straight he made super crazy risks because he was under uh the influence of you know really serious narcotics

SPEAKER_01: uh i saw people speculating that remember right after uh this all collapsed and then he did like

SPEAKER_00: 10 interviews on good morning america and yes uh 60 minutes and everybody's like why is he's making

SPEAKER_01: himself look so bad i think somebody was i said that oh was it yeah you thought that this is

SPEAKER_04: going to be part of his defense argument this is the defense argument like i'm a lunatic i have absolutely no judgment and i'm i won't even listen to my lawyers and shut up

David Friedberg: yeah i literally said that i was like i think that this is part of his i am deranged i don't i do impulsive things and i don't think things through and i won't even listen to my lawyers and then when the judge tells me hey don't use a computer and don't talk to the press i'm going to get a vp and i'm going to use my computer all day long and i'm going to talk to the press i mean not only did he do it before he was indicted after he was given house arrest yeah he was on house arrest using a vpn yeah using a vpn you want to know who's a genius trump's a genius because trump knows like exactly where the line is he walks right up to it and he's like i'm going to dance right along the line you know these prosecutors are you know horrible in these ways it's terrible that america is doing

SPEAKER_21: this it would be terrible if something happened i don't think people should stand up for this and then he can be like i didn't tell anybody i didn't cite any to violence i just said it would be terrible and america's going dang i have freedom of speech he knows exactly he has that level of genius oh yeah no i mean uh now his defense for his apartments being overpriced is well i lived in them and you know it's a tradition like you know in real estate to talk up your assets of course yes the view may not be as great as i make it out to be like he knows exactly where the lines

SPEAKER_11: are this kid didn't know where the lines are or when he realized he had committed all these crimes

SPEAKER_21: he just said you know what i'm going to lean into i'm a lunatic with no filter no self-control he just went full lunacy i mean that was so weird he was he did that like andrew ror sorkin interview where

SPEAKER_04: andrew ror sorkin gave him like all those softball questions and that was bizarre it was like why would he even show up for that and everybody's like is he going to show up for that really

SPEAKER_219: he was doing like everything he was doing everything he was doing everything he was

David Friedberg: george stephanopoulos like you don't you don't want to go up against a greek guy that greek guy you

SPEAKER_20: know he fellayed him like a spartan ridiculous all right listen this is great reporting uh everybody uh we'll we'll keep this up but we won't obsess over it we'll just give it to you when it's really important there's a lot of insights like we'll let it build up and then we'll give you the debrief

SPEAKER_225: and jason will fire off some takes we'll fire off some takes it'll be like every two weeks or

SPEAKER_20: every week or every three weeks depending on you know how important it is okay so we'll take a

SPEAKER_198: couple of questions can be about anything thank you everybody this isn't a question this is a

SPEAKER_00: comment that i think is interesting to reflect on though it's from uh sweet spot 909 uh the venture community really has a lot takes a lot of blame most regular people invested because they saw all

SPEAKER_209: those big time name plates venture funds investing regular joe said if they invested then it means it's

SPEAKER_71: legit how do you feel about that yeah i mean i've been a little bit outspoken about this i think

SPEAKER_20: i think venture firms that invested in tokens and then sold the tokens or enabled these startups to you know dance along the lines of what the sec would allow knowing how um offerings work

David Friedberg: i think there's going to be some explaining to do uh now i don't know that they did anything criminal but i do think they might have uh bent the rules and used uh yeah they they might have used um their

SPEAKER_20: knowledge of the system to profit in a way that i would consider immoral or unethical which is flipping

David Friedberg: tokens like if you if you're backing a startup you're buying the tokens and then you flip them and you know normally when a company goes public you know and you've been involved in ipos that you have

SPEAKER_20: a six month holding period and you know how secondary market works and you know what an accredited investor is versus a qualified purchaser and you know what a registered offering is and you've

David Friedberg: raised different funds and you know what a hedge fund is and you're an lp and these things and you've got the best lawyers in the world when you start stacking all that stuff up and then you start playing in this like imaginary crypto world and you're like oh well the rules don't apply here but we can profit off this non-rule based place it would be the equivalent of like you know somebody who operates a casino in vegas being like you know what i'm gonna do i'm gonna open up an illegal card room in my garage in you know texas and it's like you can't do that i know maybe in texas you can well you're gonna do it in california i'm gonna do it in new york and i know you can't do it in new york it's like you know that you own a casino in vegas you you're you're regulated you you go in and you take tests and you have insurance and you run a casino properly and you opened up a bunch of illegal casinos in brooklyn what with rigged you know um slot machines in the back too like you know better

SPEAKER_21: and so i think that's going to be the issue do i think anybody winds up getting prosecuted

SPEAKER_22: you know it depends like i will see if prosecutors you know keep winning these cases and it seems like they've got a pretty good track record of catching people doing things uh maybe the vcs knew how to

SPEAKER_21: not do things that were illegal and so maybe they just held their tokens and you know they really didn't sell too many of them or they sold equity in the company so we'll see uh but vcs could have shown better leadership here i think yeah i think some vcs kind of just drank the kool-aid and was like yeah let's let's do what airbnb did or uber let's reinterpret the rules around ride sharing and renting a room as i've said before you know that's there are some areas where you don't get to

SPEAKER_20: reinterpret the rules healthcare and uh you know finance are places where it's customer deposits like

SPEAKER_234: you put you don't want to be too innovative there yeah yeah and a quote from jason in 2022 last year

SPEAKER_00: uh i think this was from odd lots but i'm not positive i believe the overwhelming majority of tokens are securities but they're being dumped onto retail investors and this is being done explicitly by venture firms calacanis said this is going to blow up in the faces of the venture community

David Friedberg: yeah i i believe that that's still a a big possibility now the question is you know to what

SPEAKER_20: extent did people dump these things right and um you know if you were in a venture fund and they sold the tokens and you got a return okay well you're kind of abstracted from it um but if you were on the board of the company and then you personally bought tokens and the company bought tokens and your firm bought tokens or you had a token side fund it all just gets really murky it gets really murky really quick and so yeah i i it's the whole thing is just a total uh side quest gone wrong

SPEAKER_01: here's a good question from keith okay are there going to be any more software unicorns in a world where increasingly software is going to be created by faster and smaller teams and i'd add to

SPEAKER_00: that question what do you think happens to the series cde and after that rounds of you know 250 million dollars kind of pre-ipo venture rounds i think that still exists in 10 years i think uh okay

David Friedberg: so i'll take the first question i think there'll be more unicorns um because i think if you can get to if you get to 100 million in revenue but you only have 10 million expense and you got a 90 margin

SPEAKER_20: okay you know uh that's really easy to do to become a unicorn now if today you had to spend 200 million to make 100 million your money losing maybe people don't want to give you the unicorn moniker so i

David Friedberg: think the efficiency will then make the companies worth more 20 times earnings means anybody with 50 million in earnings is a unicorn uh as opposed to top line revenue and so 50 million in earnings in a software company that may take 250 million in revenue you got a 20 margin at the end of the day and you get 50 million ebitda it's gonna be completely possible to have a 50 margin and get there you know much quicker so that's that's what i think and then i do think the people who dip down into the really

SPEAKER_246: late stages masa tiger koto whatever the the late stage players were yeah yeah maybe they maybe we

SPEAKER_221: don't need that dst dst like we might not need those later rounds and so those folks will either go

SPEAKER_20: early well they'll take them public right so that that weird window that emerged where people just started overvaluing private companies i think that's gone for yeah a decade or two yeah now if

David Friedberg: things start going really well again yeah maybe people will dip down there but i think generally

SPEAKER_20: speaking startups will need less funding and they'll be more profitable the successful ones will

SPEAKER_221: need less funding and they'll be more profitable that'll be the trend and you know that's a healthy trend that's the trend that could get out of us get us out of this mess and when you see

SPEAKER_20: 20 000 people leave facebook 85 of the people leave twitter 20 000 people leave microsoft 20 000 people leave google 30 000 people whatever it is and the companies are doing just as well they're taking the medicine they're using software and ai to get more efficient get more fit as uh you know our friend says brad gerstner so if everybody's just getting more fit and getting you know running faster and being leaner that's great for the economy it's great for the economy it means these companies

David Friedberg: are stronger so great question all right everybody we'll see you next time on this week and uh this

SPEAKER_11: week in startups and fridays uh what are you calling jason unplugged i like jason jason unplugged on

SPEAKER_200: fridays and mondays casual vibes just just some takes just talk it out live come join us on youtube if

SPEAKER_11: you want yeah go to this week in startups and then uh click the subscribe and the bell okay talk to you

SPEAKER_198: you soon everybody