You may be familiar with Curtis Yarvin's idea that Covid is science's Chernobyl. Just as Chernobyl was Communism's Chernobyl, and Covid was science's Chernobyl, the FTX disaster is rationalism's Chernobyl.
The people at FTX were the best of the best, Ivy League graduates from academic families, yet free-thinking enough to see through the most egregious of the Cathedral's lies. Market natives, most of them met on Wall Street. Much has been made of the SBF-Effective Altruism connection, but these people have no doubt read the sequences too. FTX was a glimmer of hope in a doomed world, a place where the nerds were in charge and had the funding to do what had to be done, social desirability bias be damned.
They blew everything.
It will be said that "they weren't really EA," and you can point to precepts of effective altruism they violated, but by that standard no one is really EA. Everyone violates some of the precepts some of the time. These people were EA/rationalist to the core. They might not have been part of the Berkley polycules, but they sure tried to recreate them in Nassau. Here's CEO of Alameda Capital Caroline Ellison's Tumblr page, filled with rationalist shibboleths. She would have fit right in on The Motte.
That leaves the $10 billion dollar question: How did this happen? Perhaps they were intellectual frauds just as they were financial frauds, adopting the language and opinions of those who are truly intelligent. That would be the personally flattering option. It leaves open the possibility that if only someone actually smart were involved the whole catastrophe would have been avoided. But what if they really were smart? What if they are millennial versions of Ted Kaczynski, taking the maximum expected-value path towards acquiring the capital to do a pivotal act? If humanity's chances of survival really are best measured in log odds, maybe the FTX team are the only ones with their eyes on the prize?
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Notes -
He gambled with customer's money (by giving lines of credit to his hedge fund, amongst other things), when the terms of the exchange explicitly said it wouldn't.
I thought this video did a pretty good job of explaining it, with some receipts.
https://youtube.com/watch?v=MWfuDeO9thk
I don’t think that’s anything that a modern international bank wouldn’t do? Like, surely JP Morgan Chase extends lines of credits to their own hedge funds, using bank deposits to fund them. (Granted they prolly don’t extend 50% of their assets to them. But I think that’s a difference in appetite for risk than any real ethical boundary)
The terms claiming they wouldn’t do that is dumb. I’m not sure they exactly violated them, since they didn’t loan the assets to FTX trading, they just allowed another client (Alameda) to trade on margin on shitty terms. But they definitely violated the spirit of it. (Though I don’t really know what “title” is supposed to mean in this context)
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