By Hayes: How America's Caste Winner, White Kid SBF, Confused People
Original title: "White Boy"
Original author: Arthur Hayes, founder of BitMEX
Original compilation: Wang Eryu, PANews
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In the previous article, I said that Sam Bankman-Fried (SBF) was at least A "rare trading genius". I was slapped in the face again. I thought the Alameda team were brilliant traders, but it turns out they're just another firm that excels at playing tailwinds in a bull market, and when a bear market comes, they get beaten like all overleveraged Su Zhu-style cycle believers. Back to the original shape. We now know how poorly SBF has managed risk - both for the crypto market and for the financial market as a whole. Still, I believe he has demonstrated a knack for the trading game that is unrivaled in the industry. That is to say, SBF is playing this game at the Meta (yuan) level. By trading social currency, he has played with Western financial institutions and the encryption industry in the palm of his hand.
SBF offered a lullaby to two groups at the same time: believers in Satoshi Nakamoto, who believe that Bitcoin will become the greatest revolution in human history one; and the TradFi (traditional finance) diehards who see cryptocurrencies as a huge threat to the status quo and make them rich. In the face of Satoshi Nakamoto's believers, he spread the gospel like us, as if he could successfully cross the power corridor of TradFi on behalf of us, and in the face of the fat-headed TradFi diehards, he promised a way to let them sit firmly on the side of the financial system. Throne, while harvesting new sources of wealth. This is his Sunflower Collection. The FTX/Alamada ecosystem (hereafter referred to as the Death Star) plays with both groups.
This scandal, tragedy, and even blatant fraud touches on so many geopolitical and racial issues in the American Empire that I will dedicate a few Lessons learned from this saga.
Today’s article will be divided into two parts, mainly introducing how SBF uses its inherent advantages and superb social skills to confuse all beings and make everyone think He is a crypto prodigy and the future star of a Western-dominated financial system.
White Boys Can't Jump Black and White Swimming Dragon
I think America is divided by race The social caste system contributed to the rise of SBF and the eventual collapse of FTX. In order to illustrate this point more clearly, some historical knowledge is introduced first.
A few clarifications:
Every nation-state or society has a culture based on different social classes and has a "other By". The "other" has a different color, race, religion and/or accent. There will always be economic exploitation of the "other" below by the upper classes in society, and the upper classes will always find excuses for their cruel and inhuman behavior. The labels white and black are misleading, even sinister, but for the sake of discussion, let's use them. White refers to people of European descent and black refers to people of African descent. In the context of the American Empire, the caste system does not exist and does not exist. If you also believe in the fairy tale that the United States is always an exception, you don’t need to read this article.
Now the real chapter.
What is taught in the school is a romanticized history of the founding of the United States: a group of "patriots" were fed up with exorbitant taxes with no rights but obligations, so they rose up and created the A United States of America where all are created equal and all have a voice.
Good story. But there is another story like this.
A group of wealthy men who did not want to pay taxes initiated what today would be called domestic terrorism and persuaded the poor and landless white colonists to fight with them, To get rid of King George's rule. After Independence, most of the United States was non-voting, including all women and all proletarian men. The law stipulates that blacks are only counted as three-fifths of men and belong to the property of slave owners. Aboriginal people were expelled or lost their ancestral lands through unequal treaties. What a great way to build a nation.
The so-called "land of the free" is not born with you. In 1870, nearly a century after the founding of the United States, all white males, rich and poor, were granted the right to vote for the first time under the 15th Amendment. Fifty years later, in 1919, women finally gained the right to vote through the 19th Amendment. It wasn't until 1964, when the 24th Amendment and the Voting Rights Act came into effect, that black people gained the right to vote, nearly 200 years after the founding of the United States.
These intersecting and lengthy timelines reflect the timelines of the acceptance of various groups as "equal" in American society, where years of systemic discrimination have given rise to a Built-in unequal institutions. But why, over the centuries, did those who were treated as equals fail to rise up, as the "Founders" did, to launch acts of domestic terrorism against the newly formed nation? How on earth did those in power keep poor white men, all white women, all black African slaves, and all indigenous peoples in their place?
Pre-industrial America was not a place of wealth. Cold in winter and hot in summer, lack of food, far away from their homeland (except for the aborigines), there is nothing to say. At this time, the geopolitical situation in the United States is also perilous. The British are waiting for an opportunity to regain their lost land, the Spaniards are lurking in the south, and the French are temporary allies, but they may turn their guns on themselves at any time.
At that time, most Americans were poor white people. So simply mobilizing these poor whites is enough to start a destiny-changing and equalizing uprising.
In fact, such an uprising almost happened. For details, please refer to "Whiskey Riot" and how the famous Alexander Hamilton "quelled" the chaos. In fact, Hamilton did not fully believe in democracy, but more respected meritocracy. He believes that too much equality will put the country in danger.
Recognizing the risk of revolt by poor whites, the establishment believes that as long as it makes them feel that they are not at the bottom of the pyramid, they will support the current system. Thus, to unite poor whites, the state sponsored the systematic denigration of blacks, while slavery provided free labor to the agrarian South (killing two birds with one stone).
Hatred of black people makes white people at the bottom of the white economic structure feel better about themselves.
As the American economy boomed, especially after blacks were "liberated" in the 1860s, the country desperately needed more cheap labor. Therefore, in the middle and late 19th century, the Chinese came to the United States to build railways. In the late 19th and early 20th centuries, more poor whites from depressed parts of Europe immigrated to the United States. Including Italians and Eastern Europeans. They flooded into the manufacturing base of the Northeast. On the other side, a steady stream of Central and South Americans poured in from the Mexican border.
At this point, the racial caste system needs some adjustments. It is no longer enough to compare with slaves and Chinese coolies in the past, and the hierarchical order within the white people has also begun to fission. Movies such as "Gangs of New York" and "The Godfather" vividly depict this. At the same time, almost all white subgroups, with the exception of Anglo-Saxon Protestants, faced stigma of all kinds related to their home country and religion.
During the 20th century, the class lines between white subgroups began to blur in the American melting pot. The white caste system began to be reordered more around educational background, wealth, and geographic location.
But a major white rift, dating back to the Civil War, did not disappear. It was an economic conflict between the North and the South, dominated by manufacturing (the equivalent of the current "tech" industry) and the South, dominated by the agricultural plantation economy. As we all know, the North won in the end. President Lincoln's genius strategy was to "liberate" the slaves and allow them to join the Union Army. According to the 1860 census, "colored people" made up 41 percent of the total population of the South. In one fell swoop, Lincoln reaped a corps of morale-struck soldiers while crippling the Southern workforce as blacks sought refuge in the North.
Although the war was won, the tribalism that caused it still lingers. Today, some southern whites still like to wave the Confederate flag in the parade, which reflects that although the war has passed for a century and a half, some white groups still have not accepted the defeat and their anger has not subsided.
The North has always been considered more progressive, more educated, more cultured and richer than the South. Stupid farmers. Hillary Clinton called them "deplorables" when she ran for president in 2016. Basically, as long as you're not from the west coast with Los Angeles and San Francisco as the cultural and financial centers, or the east coast with New York and Boston as the cultural and financial centers, then you're an ignorant white trash.
The most prestigious high schools, universities, financial centers, technology centers, cultural and entertainment centers, and mainstream media centers in the United States are all located on the east and west coasts without exception.
Here's an example, when I first arrived in Hong Kong, some middle class family restaurants would play dirty American gangster rap music from The bottom of the American caste system was originally a protest against the American ruling class, but it was proudly labeled by the latter and became a stereotype that further suppressed the lower caste. At the same time, the ruling class also exported this culture to Hong Kong and other places, thereby promoting the United States as the pinnacle of the international caste system. It perfectly captures the overwhelming influence of America's caste ruling class.
In short, although the caste system in the United States has been baptized over the years, it still stands today. If you can be born at the top of the East and West coasts and become the so-called "right kind of white person", your chances of success in the workplace will be much better.
What does all this have to do with SBF? Yes, he was just the right kind of white guy. Read a few paragraphs of SBF's biography, and you'll understand why the people and institutions that run the financial, tech, media, and culture of the American empire swoon when SBF comes on stage and talks about cryptocurrencies.
Bankman-Fried was born in California in 1992 to parents who were professors at Stanford Law School. His parents embraced the pragmatic philosophy that an action is right when it works or benefits the majority. This moral philosophy provided the foundation for Bankman-Fried's philanthropy.
Bankman-Fried grew up hating school, thinking it was boring and rigid. He attended Canada/US Math Camp during his high school summer to receive the required intellectual challenge. He attended MIT, graduating in 2014 with a degree in physics and a minor in mathematics. Still, he dismissed formal education, saying that what he learned there would not help him in his career.
As a sophomore in college, Bankman-Fried attended a lecture by Effective Altruism founder Will MacAskill. He sees this as a turning point in his life.
How many establishment favorite labels are there:
East and west coasts are well educated of white parents are professionals who graduated from "top" colleges. The industry is full of people who want to be great and want to be right white.
So, when the young SBF starts talking, you're all ears. You don't question why he got in. You don't question his mystification. You don't question anything because you've been preconceived by centuries of ingrained racial and social caste systems, and you take every word that SBF spits out.
In short, you can't mobilize the rational thinking of your brain, because when faced with a huge amount of information and a world full of uncertainty, we will resort to various We need to use empirical shortcuts and stereotypes to make decisions more easily, otherwise we would not be able to function normally in society.
SBF knows this and takes advantage of this "right white kid" quality. It is also relying on this that he was able to develop this Death Star from a modest proprietary trading company Alameda to a global financial giant (emphasis added) FTX.
What is the Death Star
The blog Milky Eggs provides an excellent dissection of the Death Star's history , their conclusions are roughly consistent with my speculation. I will quote from it below.
SBF was a successful quantitative trader with Chicago-based Jane Street. Jane Street is one of the top proprietary trading firms in the world. In 2017, SBF entered the cryptocurrency space through arbitrage trading and other high and high frequency forecast trading.
As the crypto industry matures, it becomes increasingly difficult for so-called market-neutral traders to make money. The reason is that the big companies that dominate the global stock and foreign exchange markets are starting to allow small internal teams to experiment with trading cryptocurrencies. Their skills and intellect have been perfectly honed in the ultra-competitive TradFi market, where they can easily challenge slower, less agile crypto trading firms.
I guess Alameda is finding their trade advantage is getting smaller and smaller. SBF knew Alameda needed better market information to overwhelm other big trading firms. And the best way to get the best information is to own a trading platform and trade with its clients. Later, they decided to abandon strict market neutrality and small time scale trading, and degenerated into altcoin bulls.
The Alameda team's social media posts make it clear that staying on top of the flow and being a full-on gambler is their core trading strategy. Take for example the following tweets from Sam Trabuco and Caroline Ellison who manage Alameda.
Sam Trabuco on information-driven investment decisions
Sam Trabuco talks betting on Dogecoin
Caroline Ellison on the Most Profitable Long Strategy
Sam Trabuco brags about information flow + gambler spirit making it good for investing Opportunity is more than chance
(Sam's right, it's not chance because all kinds of shit is going up with the Fed's balance sheet record high. From 2018 to the end of 2021, everyone feels like a genius. )
FTX has been transparent from the beginning, and everyone knows that its founder's offshoot trading firm, Alameda Research, is the main market maker for FTX. Assuming FTX didn't give Alameda any privileges, this arrangement seems understandable. Alameda provides an invaluable service by providing liquidity to FTX clients 24/7 with impressive spreads.
Alameda is able to offer extremely tight pricing on FTX, which is one of the reasons why FTX was able to steal the market quickly from more established exchanges. Another reason is that FTX offers features that are extremely difficult to implement securely, such as multi-currency collateral leverage in record time. We now know that they were able to provide such functionality not because of superior technical prowess, but because Alameda took the risk and counted on market volatility to be their golden bell, rather than specifically creating a safe technical solution .
With FTX and Alameda growing side by side, everyone is starting to think SBF is one of the best traders ever, as Alameda seems to be paying off amazingly. Year after year, I often hear how many billions of dollars this trading firm has made. But based on recent revelations, Alameda seems to have some secret weapons. One of them could be their ability to borrow money directly from the pool of client deposits through FTX. Regardless of whether collateral is provided, it is at least unethical to lend client funds to Alameda without the client's express consent. Another secret sauce is that they might be able to get faster transaction speeds on FTX than their competitors. If it does have this latency advantage, Alameda's trading signals can be super profitable. To achieve this, FTX can allow Alameda to call more of FTX's trading engine API. The more calls you make, the more frequently you can submit, update or cancel orders and the faster your transactions will be than your competitors.
After the product takes off, FTX may aim to attract as many retail and institutional clients as possible in order to increase trading volume and deposit base. Alameda can then borrow these deposits and transact with FTX clients. If these assumptions are true, it’s pretty much the equivalent of FTX customers getting their own hanging ropes by depositing money at FTX, and slowly tightening that rope by trading with Alameda.
Alameda could be making money before the Fed starts raising rates in early 2022. But with the crypto market peaking in November 2021, Alameda became the liquidity provider of last resort. When the market started to run all the way to the bottom, the other side of all the huge liquidation sheets was Alameda.
If Alameda does use FTX client funds to buy a large number of altcoins, when the altcoins plummet, Alameda will be unable to repay FTX's loan. We don’t know exactly what happened, but we do know that Alameda did use FTX’s native token, FTT, as collateral for borrowing from FTX customers’ deposit pools. It is not difficult to guess that Alameda may also involve circular lending, that is, borrowing funds to buy altcoins, and then pledging altcoins to borrow more funds. We know that Alameda was a major participant in the FTT ICO. Did Alameda receive funds to participate in the subscription through FTX customer deposits?
The New York Times reveals how money-losing Alameda stole FTX client funds:
Ellison said around the time the crypto market crashed this spring, lenders started calling in their loans. But it was hard to get back the money Alameda spent, so the company tapped FTX's client funds to pay off the debt. She said that besides her and SBF, there were two other people who knew about it: Mr Singh and Mr Wang.
Assuming that Alameda has revolving lending behavior, when altcoins fall, Alameda will be unable to repay its debts. When LUNA/TerraUSD crashes, Alameda may be in the red, or barely in the black. LUNA is the governance token of the Terra ecosystem, and UST is a stablecoin pegged to the US dollar. Both LUNA and UST have huge trading volumes on FTX.
Clients scramble to sell what they have as LUNA and UST enter a mathematically determined death spiral. And Alameda can only bear it all in silence. SBF may be too lazy to read or understand Terra's white paper. Of course, with all his supposed mathematical aptitude, he should understand that once Terra starts to decouple, the entire ecosystem will be doomed to zero. Still, the SBF can't stop the car. Alameda has to continue to provide liquidity, otherwise it will jeopardize the value of FTX. There would be no FTX without Alameda providing 24/7 liquidity. Because without the possible perks of Alameda, no other company is serious about providing this level of liquidity, especially when trouble strikes.
Milky Eggs rounds up the Death Star's list of losses, most of which can be traced back to the Terra debacle and the cascading damage it did to the industry.
Voyager/BlockFi Acquisition: $1.5B LUNA Exposure: $1B KCG-Style Algorithm Crash: $1B FTT/SRM Collateral Maintenance: $2B Risk Investments: $2 billion Real estate, branding and other miscellaneous expenses: $2 billion FTT fell from $22 to $4: $4 billion Discretionary long fund crash: $2 billion Total: $15.5 billion
Also point out that Alameda likely used its altcoin portfolio (including the altcoin in which Alameda is the largest holder, which is key) as collateral for the loan. After the Terra/Three Arrows/Celsius/Voyager crash, all cryptoassets fell 50-75% and Alameda got a double whammy. Alameda lost billions of dollars trying to provide liquidity to the altcoins held heavily on FTX, and the company owes FTX and others money that was also funded by the same worthless altcoin portfolio mortgaged.
And don't forget that due to Alameda's dominance on the FTX platform, it is difficult for other large trading houses to provide liquidity to FTX under adverse conditions, which does not have financial viability. So once Alameda falls, no other company can step up and provide FTX with the liquidity it needs to keep going.
At this point, the SBF may have no choice but to go its own way. He may have to borrow most of FTX's client deposits to cover Alameda's huge shortfall.
This is how lending crises always end. When a lender stops lending, past loans are never collected. It was not financially viable to begin with, and as a result, these loans remained non-performing. The only reason we consider Alameda to be a solid entity is because FTX's customer deposits provide it with a steady flow of credit.
Don't get too complicated, the story is actually very simple: Alameda lost money, SBF and other management did not choose to accept the loss, but decided to use FTX's customers deposit. This is what led to the death star's demise.
Before I jump to conclusions, please read the words of John Ray, the successor CEO of the bankrupt Death Star:
John Ray first mentioned that he had participated in a large number of corporate bankruptcy work, and then changed the subject, saying that the situation of FTX was unprecedented, the corporate governance was full of loopholes, and the young boy held the power.
To be continued
This article introduces my theory of the caste system in imperial American society, and The construction process of the Death Star. I should have made clear why SBF needed to use his social skills to coax the entire western dominated financial elite into falling into his and FTX's trap and how he did it.
In the next article, I will show how SBF has constructed a fake life and characters, and concealed its true colors and original intentions from everyone . What he wears, where he lives, what he eats, and his beliefs are all staged. He created the character SBF to fool everyone. He succeeded for a while, but in the end, his blatant contempt for risk management ran into the ruthless market iron plate.
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