Crypto Twitter Found SBF's Fraud

The establishment did nothing until the internet revealed everything.

Ever seen those superhero movies where Batman hunts down the villain and leaves him hogtied in cables for the police to mop up? That’s what happened with Sam Bankman-Fried. The internet hunted down the fraud, collected indisputable evidence, and delivered him gift-wrapped to the government. Then everyone from Elon to India yelled online for a full month till the state finally, grudgingly picked him up.

Now that he’s been convicted, we’ve been treated to a bizarre rewriting of history in which obviously the system worked because it was shamed by Twitter¹ into pursuing an obvious crook. And yes, it was Twitter that drove the government to act. How do we know? Because the entire case was broken on crypto Twitter, from beginning to end!

• It was Ian Allison revealing that SBF had no money, not Dan Primack asking whether SBF could cure world hunger

• It was Erik Voorhees playing hardball with SBF on Bankless, not Joe Weisenthal throwing him softballs on Odd Lots

• It was David Z. Morris calling FTX a crime, not David Yaffe-Bellany claiming SBF was a philanthropist

• It was Crypto Twitter proving SBF was a fraud, not NYT Dealbook clapping for that fraud

• And it was Twitter posting about SBF’s donations to Democrat politicians, even as those same politicians were welcoming him to Congress

NYT, Congress, Bloomberg, Axios — all these establishment organs failed where Coindesk, Bankless, and Crypto Twitter succeeded. Not a single corporate journalist, politician, regulator, or policeman thought to investigate SBF until Erik Voorhees smelled a rat and Ian Allison found the rat. In fact, even the least self-aware corporate journalist in modern history admitted that citizen journalists “outshine traditional media on coverage of FTX implosion.”

So: yes, the only reason SBF was even exposed, let alone convicted was because of people posting on Twitter. Twitter is important! That’s why the regime didn’t want Trump to post on there, doesn’t want you to post on there, and doesn’t want Elon to let you post on there. As far back as the Arab Spring, it was clear that Twitter could topple regimes. And in this case, it toppled the regime’s #2 donor, “one of the people who is among the most responsible for [Biden] being in office.” Needless to say, this was not an outcome any establishment figure sought before the events of Nov 2022.

Ok. With that out of the way, let’s do the long version, just to make sure the actual history of this wretched episode is properly recorded somewhere.

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THE LONG VERSION

AN F ON SBF

No, the system did not work.

If you get the last question right on a test after failing everything else, you get an F. And that’s what happened here. The system we pay trillions of dollars for failed in almost every respect but the very last. The politicians failed, the journalists failed, and the regulators failed. The criminal justice system eventually succeeded, but only after failing everywhere else — and then too only after the Internet built the entire case for them.

Why do we say the system failed?

• Let me know when the politicians SBF helped elect with stolen funds² tender their resignations, starting with Biden.

• Let me know when the journos who flacked for SBF publish lengthy retractions.

• Let me know when the regulators who attacked Bitcoin ETFs while meeting with SBF admit they’re incapable of regulation.

• And let me know when the state admits they only pursued the case after the Internet assembled unambiguous evidence of his guilt, slicing through his many deceptions.

Obviously, none of this will ever happen. SBF’s stolen money helped swing elections across the country. These actions will never be unwound, which means SBF in essence took one for the team — and the bad guys got away with it again.

Point: the entire sordid SBF saga isn’t some great triumph for the US establishment! It’s as much an indictment of them as it is of him. Fortunately, we do have the internet. And as we’ll detail, it was that decentralized network that really caught SBF — not the centralized state.

Let’s take a quick trip down memory lane, shall we?

POLITICIANS FAILED

Recall that SBF was the #2 donor to Democrats after Soros himself. It’s admitted that he was one of the people most responsible for putting Joe Biden in the White House, with what is now admitted to be stolen money. Democrats like Maxine Waters praised him for being “candid” and “welcomed” him to testify to Congress even after his fraud was public, and literally blew him kisses at Congressional hearings.

In fact, Waters — the sitting Chair of House Financial Services — was “surprised” that SBF was arrested before he had the prestigious opportunity to make his case before Congress. Why was she surprised? Perhaps because SBF had been working closely with her and others on capturing the regulatory state, through a bill that would have criminalized decentralized finance but benefited SBF’s personal finances.

So, the politicians failed in their nominal job of passing laws that are in the best interests of the public. SBF legally bribed them into pushing legislation that would favor his centralized business over everyone else’s, much like what’s now happened in AI. And Bankman-Fried would have succeeded too, but for those nosy kids on the Internet.

JOURNALISTS FAILED

Next, remember that SBF was the toast of the town in mainstream media. Corporate journalists like NYT’s David Yaffe-Bellany tirelessly flacked for SBF before, during, and even after his monstrous swindle came into public view. In fact, the New York Times not only platformed SBF after millions knew he’d stolen billions, they even gave him a loud round of applause!

The contrast to other crypto coverage couldn’t be starker. For years, the media’s message was that Bitcoin was a fraud, but Bankman-Fried was a friend. He showered stolen money on NGOs and media outlets like Semafor and ProPublica³, and in return they anointed him “JP Morgan of crypto.”

So, the journalists completely failed in their nominal job of informing the public. SBF played the "dumb game we woke westerners play where we say all the right shibboleths and so everyone likes us”, and made sure the journos believed he was their ideological tribesman. Thus they wrote nice things about him, and would have continued to — again, if not for those nosy kids on the Internet.

REGULATORS FAILED

Also remember that the regulators failed. Gary Gensler met with SBF privately, an audience given to very few, all while attacking countless other projects publicly in cases they’ve now lost. The meeting mentions “conditional no action relief”, which in regulatorese translates to “we will not pursue enforcement against FTX.”

Source: SEC.gov

So, the regulators also failed in their nominal job of (a) flagging bad projects and (b) passing good projects. Instead they spent their time meeting with SBF while attacking Bitcoin ETFs. And why? Probably because SBF pushed for more regulatory power and greased the hands of the right politicians. So the regulators granted him special favors like private meetings, and Congress steered crypto regulation to his preferences — all of which he would have gotten away with, if not for those nosy kids on the Internet.

THE INTERNET SUCCEEDED

And what exactly did those nosy kids on the Internet do? Well, they blew the case wide open.

It started with crypto investor Nick Tomaino tweeting that FTX was suspect in both its trading activity and its policy advocacy. It continued with crypto CEO Erik Voorhees politely confronting SBF on the Bankless crypto podcast. And it culminated in crypto outlet Coindesk publishing an article by Ian Allison on SBF’s shenanigans that blew the fraud wide open.

Again: none of this was driven by legacy media, politicians, regulators, or police — which is why even WaPo admitted that citizen journalists “outshine traditional media on coverage of FTX implosion.”

SATOSHI > SBF

After Coindesk’s revelations, things moved quickly. Binance CEO Changpeng Zhao sold his stake, SBF claimed assets were fine, and the community immediately tested his claims. And this is the decentralized “fact check” that actually did him in. You see, because of Satoshi’s invention, Samuel Bankman-Fried couldn’t continue the fraud by minting fake funds on his centralized server, as he did for his trading firm. Once millions of people found that they couldn’t move their money to a decentralized blockchain, the illusion collapsed, and so did his exchange.

This truly cannot be emphasized enough: no legacy journalist, politician, regulator, or policeman caught Bankman-Fried’s fraud! Only the blockchain did. Up to the very end, SBF was saying that “FTX is fine, assets are fine”. But because of what the blockchain represents, millions of people around the world were able to independently fact check him by testing their ability to withdraw and then viewing the results on chain. SBF could deceive a failed State, but he met his match in the decentralized Network. He couldn’t enable withdrawals because he wasn’t good for the money.

In short: the Network succeeded where the State failed. It was Crypto Twitter that asked the hard questions, that did the actual citizen journalism, that found the unambiguous smoking gun proof in the form of insufficient onchain balances, and that published that proof on the internet. It was the Network that was able to come to a firm decentralized consensus that he didn’t have the money, even while State loyalists kept portraying SBF as a “billionaire”. All the police did from that point on was a slow, grudging mop-up.

THE CRIMINAL JUSTICE SYSTEM SUCCEEDED, ONLY AFTER THEY FAILED

As mentioned, the internet had cryptographic proof that SBF was a criminal on a historical scale by Nov 11, 2022 when FTX paused withdrawals and its onchain balance of BTC dropped from 20,000 to 1. SBF and his cronies lied to the public continuously during this period about having plenty of funds, but the reason he couldn’t enable withdrawals is because he couldn’t lie to the Bitcoin blockchain.

Millions of witnesses could independently confirm the fact that SBF had stolen their money by monitoring the Bitcoin and Ethereum blockchains. Like Batman, internet volunteers had delivered SBF to the police hogtied and with indisputable evidence stapled to his chest.

And then…nothing. For weeks, SBF went on his Good Morning America tour. He got fawning coverage from Yaffe-Bellany at the New York Times, which even other journos were appalled by at the time. He got to make his case at Dealbook to a rousing round of applause. He was “welcome” to testify before Congress by the chair of House Financial Services, a privilege that (to say the least) isn’t typically how white collar prosecutions begin. And he was left free to roam around, tweet, and otherwise spread uncertainty for weeks.

Why?

We need to drill into this point because one of the core lies being circulated online right now is that of course the state is completely trustworthy, and only a paranoid lunatic would think it was internally conflicted about arresting SBF during this period. To address this, we’ll need to first discuss (a) trust in the police, then (b) the timeline of the pickup, and finally (c) the tension in the party.

ABOLISH THE POLICE, THEN TRUST THE POLICE

The first question is: should we have simply assumed it’d all turn out fine? No. Remember, Democrats spent much of 2020 screaming about abolishing the police. Then, with SBF suddenly they pivoted⁴ to “lol, can’t believe you didn’t trust the police!”

But we don’t trust the police. Because the SBF case didn’t happen in a vacuum. Faith has legitimately been lost in America’s once-admirable legal system.

After all, thanks to Soros prosecutors, crime is de facto legal in major American cities. Hard drugs are sold in public. Supermarkets and trains are looted in broad daylight. Car windows are smashed, and everything is grabbed. Mobs block roads and swarm passerby at BLM/Hamas meetups. And the police do nothing.

Meanwhile, as the prosecution of actual crimes winds down, the prosecution of political crimes ramps up. The Republican Douglas Mackey is spending almost as much time in jail for tweeting a joke as the Democrat Colinford Mattis is for firebombing a police car. We’re in the era of show trials, where the Russiagate charges are slowly admitted to be false and the Hunter Biden allegations are gradually acknowledged to be true — but only after the elections when it doesn’t matter anymore.

None of this is justice. So, no, we don’t trust the police. And the fact that the criminal justice system eventually, grudgingly got the right outcome after massive international public pressure on an obvious fraud who stole ten billion dollars in broad daylight is not something to brag about. It’s like the (NSFW) Chris Rock clip: this is the bare minimum of what the state is supposed to do! It doesn’t get a cookie.

JUSTICE DELAYED IS JUSTICE DENIED

Now to the second point: could SBF have been picked up faster? Because for weeks after millions of people could publicly prove he’d stolen their money, SBF was invited to speak at NYT’s conferences, testify before America’s Congress, and generally arouse significant uncertainty in whether justice would ever be served.

Countless state apologists took to Twitter to claim that this was simply the fastest it could be done, and the poor unwashed masses just didn’t understand legal procedures. Against this we’ll make just three points.

1. Alexey Pertsev was jailed without charges in days

First, a genuine freedom fighter like Tornado Cash founder Alexey Pertsev was picked up within two days of OFAC summarily inventing a controversial new interpretation of an existing law. He was held without charges for writing code. And that kind of swift action isn’t an isolated case. In 2020, the FBI arrived at NASCAR to investigate a fake noose within 24 hours. And in 2012, after Hillary Clinton condemned him for making a movie, Nakoula Basseley Nakoula was taken in within 48 hours.

So we know the state can move fast when it wants to.

2. A prosecutor from the same office recommended filing a criminal complaint to quickly get Republicans prior to an indictment — so why couldn’t they have done that for SBF?

Second, was it really impossible for prosecutors to file a criminal “complaint” to bring SBF quickly into custody, after which they’d get a full grand jury indictment? Because that’s exactly what this former prosecutor from the same office that prosecuted SBF recommended as a strategy when they wanted to prosecute Republicans: the use of a criminal complaint to make an arrest quickly.

A criminal complaint, by contrast, is frequently used when prosecutors need to make an arrest quickly. This may happen, for example, when federal agents learn that a crime is about to occur, or has just occurred, and must act immediately.  In this situation, prosecutors do not have the time to go through the grand jury process.  Instead, prosecutors file a written document called a criminal complaint, together with an affidavit signed by an agent familiar with the case.  A judge or magistrate judge will review the complaint and affidavit, and issue an arrest warrant if he or she finds probable cause. Once an arrest is made on a criminal complaint, federal law requires that the defendant must be charged by an indictment (or by a criminal information, if it’s a misdemeanor case or the defendant agrees to waive indictment) within 30 days.

I mean, I’m not a lawyer, but this makes sense. Are we to imagine that the government has intentionally tied its hands for weeks in every such situation? Or can they move fast on other white collar cases when they want to, such as when it’s time to get Trump?

3. The state can put millions of innocent people under indefinite house arrest, but it couldn’t put SBF under legal arrest?

Third…let’s stop kidding around here. Are we truly to believe that a government that can invent justifications to surveil you without warrants or seize your assets without charges couldn’t hold SBF before trial? I mean, are you telling me that a state that put hundreds of millions of people under house arrest couldn’t⁵ quickly get SBF under legal arrest?

In reality, where there’s a will there’s a way. The American state can violate any law when it so wills, as shown by its routine use of civil forfeiture, warrantless surveillance, undeclared warfare, and extraordinary rendition. And it can likewise claim to be hamstrung by statute when it wants to proceed slowly.

And boy, did it proceed slowly! The fact that it took an entire month between Nov 11, 2022 (when it was clear SBF had stolen billions from customers) and Dec 12, 2022 (when SBF was finally arrested), with so much of the establishment rushing to platform SBF along the way (like Congress and New York Times) is what rightfully aroused the general public’s suspicion.

And to paraphrase an old proverb, “Caesar must be above suspicion.”

AN EMBARRASSMENT TO THE PARTY

So, we’ve established that (a) there was good reason not to trust the police and (b) there was also good reason to question the snail’s pace of prosecution. Why did the prosecution actually proceed, though?

Explanation 1: Standard Operating Procedure

You can believe Twitter’s school of fish, which switched memorylessly from abolish-the-police to trust-the-police. Their story is that the weeks in which SBF roamed free were just a yawner, just always how it is. After all, dontchaknow that it takes months to “build a case” (though Crypto Twitter built the case for them, starting with the Coindesk piece), that the authorities were moving at the “speed of light” (though Pertsev was jailed without charges in days), and that it was just totally normal for the New York Times to platform a cryptographically provable crook (though that self-same organization advocated deplatforming for years).

If you believe that, you’ll probably also believe that Russiagate was real (until it was admitted to be fake), that inflation was fake (until it was admitted to be real), that Rittenhouse was guilty (until he was determined to be innocent), and so on.

In other words, if you believe that it’s completely normal for a freedom fighter to be instantly held without charges while a known crook is left free to roam and then granted bail under circumstances even NYT found questionable, you’re a member of BlueAnon, the small fraction of the world that follows the party line of American Democrats much as an earlier generation toed the party line of Soviet Communists.

Nothing we say will get through to you.

Explanation 2: Intra-Democrat Civil War

But for the rest of the world — the Republicans, the Independents, the Bitcoiners, the Ethereans, the Indians, the Chinese, and all the others around the globe that Samuel Bankman-Fried defrauded — there’s a more parsimonious hypothesis: a quiet intra-Democrat civil war.

Because on Nov 15, 2022 it was admitted that senior Party members were watching the case closely:

…the fate of S.B.F. is being closely tracked at the highest levels of the Democratic Party, including by senior elected officials who are curious about what Sam’s fall means for the party and their pocketbooks. S.B.F., after all, was widely seen not only as a once-in-a-generation party donor, à la George Soros, but also as a unique political force, willing to push the envelope and take expensive risks (some would say too far). The optics for the left are awful, of course, as are the potential legal ramifications for Democratic organizations and betrayed S.B.F. aides if bankruptcy courts, class actions, or prosecutors try to claw the money back. Anxiety is running high.

If you read all the contemporary pieces from that outlet (like this, this, this, and this), a picture emerges of an intra-Democrat civil war kicked off by the SBF revelations, between those whose careers would be negatively impacted if SBF was prosecuted (like David Yaffe-Bellany and Maxine Waters) and those whose careers would be positively advanced (like the prosecutors who finally reeled him in). One journalist who covered SBF even admitted people texting that they were “sorry for his loss”!

This shouldn’t be too implausible, as we’re in the middle of another Democrat civil war right now, between Israel and Palestine supporters. We went through yet another one a few years ago, between Biden and Bernie supporters. The cleavages on SBF don’t exactly line up with those other fracases, but they approximately do: the institutionalists wanted to control crypto and thus were friends with SBF, while the leftists wanted to destroy crypto and thus distrusted SBF.

These factions were in rough balance prior to the revelations of fraud, but once he became toxic the left seized the opportunity to push out SBF-aligned people. Yes, there was a bizarre attempt⁶ to make SBF into a tragic figure, as David Morris contemporaneously observed, but ultimately — despite all his “good work” in helping party members get elected with stolen funds — SBF became just too embarrassing for the party to protect.

Again, if you read all the stories about the “SBF Pandemic”, the “SBF Blast Radius”, and the “SBF Legal Meteor” it appears to have taken a few weeks for all the people he’d funded with stolen money to sync up with each other and get their stories straight — in no small part to defend against the possibility of clawbacks. But ultimately the anti-SBF faction won out. He was an embarrassment to the Party, and he had to go.

WHAT HAVE WE LEARNED?

OK, that was long, but someone had to write it. Now the question is: what did we learn? I actually think there are a few takehomes.

• We learned that Crypto Twitter broke the case wide open, exposing Bankman-Fried in the first place, causing a massive liability for the Democrat Party, and ultimately compelling the regime to action on their #2 donor.

• We learned that contemporaneous accounts acknowledged that citizen journalism had outperformed legacy media on this case, and indeed that the New York Times and Congress seemed to be involved in covering up the crime.

• We learned that regulators are incapable of distinguishing good projects from bad; they were contemplating no action on SBF, while taking no action on approving Bitcoin ETFs.

• And we learned that no legacy journalist, politician, regulator, or policeman flagged SBF before his stolen money swung elections across the country, elections that will never be unwound. The investors who put money into FTX lost their shirts, but the politicians who took money out of FTX will keep their seats.

Look, I get why people want to claim that the “system worked.” After years of abolishing the police, after years of rampant crime in blue cities and completely politicized law enforcement…it’s refreshing to see one case that seems to get the right result.

But don’t take your eye off the ball. The only reason we’re here is that the Network succeeded where the State failed. No legacy journalist, politician, regulator, or policeman figured out that SBF was a criminal. But the Internet did.

1. I call it Twitter through this post for clarity, as that was its name at the time. But you can mentally substitute X if it makes you happy.

2. Part of is the direct contributions, which reportedly total almost $100M. Sure, in theory those could be refunded, and about $6M reportedly has been. But (a) it seems FTX’s bankruptcy estate is trying to compel lawmakers to refund the remaining ~$93M and (b) as even NYT acknowledges “that could be difficult…because the donations were among their biggest and because such groups typically spend almost all of their cash in the run-up to major elections.”

The other part, though, are the massive dark money expenditures from his PACs. We’re probably just scratching the surface, but we’re talking at least $14M for “Protect our Future” and $22M for “Guarding Against Pandemics”, which bought elections and mansions alike with stolen money. These sums of money are enormous; we’re talking about the #2 Democrat donor after Soros. Even if there is some belated recovery of funds, we’ll never redo every election he tainted.

3. Both organizations have apparently been compelled to return the money.

4. This is the pivot from wokism to statism. When they were out of power in mid-2020, Democrats advocated for abolishing the (local) police, but once they were in power they immediately allocated billions for the Capitol Police.

This is a worth a full article in its own right, but by “abolish the police” what the Democrats actually meant was four things. First, abolish the policing of Democrats, as felons tend to vote Biden. Second, abolish police protection of Republicans, so that Democrat-affiliated BLM mobs could burn down deplorable houses without consequences. Third, abolish the local police (who tend to vote Republican), and redirect their funding to Democrat-aligned NGOs. And fourth, abolish the rule of law, to turn the criminal justice system into a politicized institution that persecutes those outside the Party and goes easy on those within it.

5. And no, it’s not that we want them to make up the law as they go along. I’m just pointing out that they’re infinitely creative when persecuting the innocent, yet ploddingly constrained when pursuing the guilty.

6. Remember, the media is exceptionally experienced at making criminals into sympathy objects; this is the playbook they run over and over again, from knife-wielders to stock-swindlers. And it is initially what they seemed to be trying with SBF, though it didn’t work.