More on the FTX/Alameda Collapse

The Other McCain has this (not so) small gem. The CEO Was a Tumblrina? How Did Somebody Overlook This Gigantic Red Flag in the FTX Catastrophe?

Suppose that you’re a major Silicon Valley venture capitalist, someone entrusted to invest vast sums of other people’s money in new enterprises. Don’t you have an obligation, as due diligence, to research the people running the companies you’re funding? Because now I’m imagining a courtroom trial in a lawsuit brought by people who entrusted their savings to whatever VC funders decided that investing money in a company run by Sam Bankman-Fried‘s girlfriend was a good idea.

** (Spoiler alert: It was not a good idea.) ***

The story of how Caroline Ellison ended up as CEO of Alameda Research, the company from which Bankman-Fried (known as “SBF”) spun off the cryptocurrency exchange FTX, is eventually going to be a major motion picture, the “happy ending” of which is going to be these people going to prison (if they don’t conveniently commit suicide, as sometimes happens to people who become “problematic” to the Democratic Party).

The debacle that is the FTX collapse never ceases to amaze.

Regulatory chaos. Banks that were leery. And a desire to finance all things related to the Democratic Party. What could possibly go wrong?

Going from obscure nerd to Fortune magazine cover boy in just five years was, it must be admitted, a remarkable feat. His “effective altruism” shtick was a major factor in SBF’s celebrity, as was the fact that he became the second-largest contributor of campaign cash to the Democratic Party. Nobody seems to have thought this was suspicious and, similarly, the connection between the currency exchange FTX and the trading firm Alameda Research also failed to raise concerns. Is putting your girlfriend in charge of a multibillion enterprise really a good idea? What ultimately crashed SBF’s empire was the fact — which both Bankman-Fried and Ellison have admitted — that SBF “loaned” funds from FTX customers to Alameda, to the tune of $10 billion. But if Alameda was successful, why would it need such a “loan”?

I could quote the whole thing, but that would be stealing Robert Stacy McCain's thunder. Click thru; it's worth your time.