Why Did Smart People Fall For The FTX Scam? Uh, Maybe Greed?

November 29, 2022

When we hear how people fall for scams, we tell ourselves that we are too smart and will never become a victim of one. Despite our intelligence, we all become scam victims at some point in our lives. Hopefully, the aftermath is no more devastating than broken pride and a well-learned lesson. Unfortunately, investors in the FTX crypto currency have lost everything like people in the 1930s Depression. The Guardian expresses why FTX lured so many people: “Why Were So Many Smart People So Dumb About FTX? Did They Seriously Just Like Sam Bankman-Fried’s Vibe?”

Area Mahdawi wrote the editorial about crypto currencies and she immediately rips into Sam Bankman-Fried’s unprofessionalism. The FTX inventor played videogames during business meetings. That does not inspire confidence. Large investors threw money at him and he was described as the “next Warren Buffett” and it was believed he could become the world’s first trillionaire.

Behind the proverbial curtain, Bankman-Fried was pulling a typical scam: shifting funds from FTX to his other company, Alameda Research. He then made risky risky trades and lost billions! His net worth fell from $16.2 billion to $3. Bankman-Fried lived a luxurious life a lá Anna Delvey in the Bahamas with his nine employees and they all had various romantic relationships with each other.

Mahdawi thinks people fell for Bankman-Fried for two reasons:

  1. They didn’t understand what he was selling, so that meant he was a genius.
  2. They liked his charisma.

Some investors were impressed that Bankman-Fried played videogames during meetings. Why? Maybe he conveyed an autistic savant vibe that appeared he could crunch the numbers and do magic tricks. Mahdawi said this would not have happened to other people, especially women:

“I don’t know about you, but I’m having one of those want-to-tear-my-hair-out-with-frustration moments right now. Can you imagine a woman playing video games in a meeting and being handed billions by investors? That would never happen. Last year, female founders secured only 2% of venture capital in the US and I’ll bet you everything I have that those founders were as buttoned-up as you can get. I’ll bet you they didn’t get a billion dollars because people “just liked their vibe”.”

She’s right, but also wrong. It depends on the person handing out the loans and the office politics. As to why the people invested their money with the scam artist, they wanted to make more money. Chalk it up to simple greed. Greed is good too.

Whitey Grace, November 30, 2022


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