Number Go Up: A Conversation with Author Zeke Faux

Speaker 1: Yeah. It it was pretty weird.

Speaker 2: Our guest this episode, Zeke Fox, recently had a pretty weird experience when a book that he wrote featuring a real person was read aloud in a criminal trial against that person by that person who was Sam Bankman Fried.

Speaker 1: After FTX had failed, I had flew down to The Bahamas and I interviewed Sam for, like, a full day going up until the middle of the night at his $30,000,000 penthouse. And we talked about why FTX failed. And he gave me his version of the story ill advised given that he it was clear to both of us that he would likely be in big trouble soon. And in fact, the cops did show up, like, a couple weeks later.

Speaker 2: For anyone that doesn't know or could use a refresher, Sam Bankman Fried is an American entrepreneur who was convicted of fraud and related crimes in November 2023. Prior to this, Bankman Fried was the co founder of the FTX cryptocurrency exchange and the poster boy for crypto. His company's name was on arenas. At the height of his wealth and influence, Forbes listed him as the forty first richest American.

Speaker 1: I won't get into the details of exactly what he said, but he was some of these statements he made to me, he changed his story when he testified in his own defense at trial. And so the prosecutor brought in the book to say to Sam, well, you said this now, but, like, look what you said before. Why why is your story different?

Speaker 2: He is currently serving a twenty five year sentence for his role in orchestrating a years long scheme that diverted $8,000,000,000 from customer accounts to fund venture capital investments, political donations, and real estate acquisitions. As emblematic of the early twenty twenty's crypto crash as Sam Bankman Fried has become, I would say that Zeke Fox's book, the same one read in that courtroom, has emerged as an essential record of that period of time. Number Go Up, inside crypto's wild rise and staggering fall, is a globe trotting journey of one journalist just trying to understand crypto. Not just the tech, but the people, the psychology, and some of the human costs. It's a really great piece of reporting. It's a fun read, and it's a book that you first told me about, Scott.

Speaker 3: Yeah. Yeah. It was my favorite book of 2023. Mhmm. 2024. Twenty twenty three twenty twenty four. It came on September 2023, and I think I'd started listening to it over the Christmas break. So it's my favorite book of last year that I started last year, but I finished it this year, if that makes sense.

Speaker 2: Yeah. Yours and Wired, Washington Post, LA Times Financial. Sounds like it made a lot of best book lists.

Speaker 3: Yeah. It's a it's a great great read, and I actually didn't know about the book until I had finished Michael Lewis's book Going Infinite, which I know a lot of people have asked me for my take on. So so that that book Going Infinite led me to this book. And I loved this book and respected this book and appreciate the story here. And I think

Speaker 1: I think it's a a must read for anybody that lives in our space. Mhmm.

Speaker 3: And And? It comes out on paperback on October 1, which is probably the day that this episode will launch. So it's out on paperback today with new content from its original least release date to now.

Speaker 2: Yeah. Really good new chapters. There's some pretty cool new content following the follow-up of all this because, you know, Zeke was writing this, I think, kind of right right as things were crescendoing and then crashing, and a lot of stuff has happened since. So the the paperback is a a welcome addition to the book.

Speaker 3: Christmas twenty twenty three. I had I knew that I was gonna be doing a bunch of driving, a bunch of ski trips, a bunch of traveling about. So I picked up Going Infinite as an audiobook, and I was listening to it as an audiobook. And, I'd heard the criticisms and the biases towards Sam Bankman Fried and all this stuff. So, you know, I'm halfway through it, and people are asking me what I think. And I'm like, it just seems like a book. You know, I'm a huge Michael Lewis fan. I've read literally every book he's ever made that's been published. And I was excited for this one because I'd I'd heard that he was actually in The Bahamas when FTX kind of imploded. So I was really excited to, like, hear his recounting and, you know, get that

Speaker 1: Mhmm. Get

Speaker 3: that. I don't know. He just has a really great way of taking, like, a technical financial kind of subject and turning it into, like, a great narrative. And, yeah. So I finished this book on the road, driving somewhere, and the last chapter of it literally made my blood pressure go up. I got furious about it because he he essentially tries to wash away all of the, like, illegality of taking other people's money to buy things by saying, like, you know what? The people that lost money will be made true because his investments in anthropic will, like, pay out, you know, all of these things. He starts recounting all this stuff being, like, people will be made whole again. So it's not that bad what he did. And I was, like, at least that's the tone of it. If you haven't read the book, the book's okay. Just okay. And that chapter made me furious. So I literally pulled the car over out of anger and immediately opened audible and start whipping through other books being like I need to read something else. I need a palate cleanser from this to, like, bring my blood pressure down, put me back in a vacation mood. Now I'm off to the mountains to go skiing. Like, just let me enjoy myself. And bang, right in front of me is this book Number Go Up by Zeke Fox, Inside the Wild Ride. And I was like, you know what? Can't be worse than that. And I I buy it, and immediately, I'm, like, sucked in. I crush it in a few days. Loved it. Loved the chapter. Loved the story and the narrative and the travel and all of the experiences that he goes through, and it was just well written, great content. And he, truthfully, he shares a similar perspective as I do to the entire crypto world, which Mhmm. Landed with me. So, you know, a little bit of bias there, obviously. But Sure.

Speaker 2: We talk about this at the start of the conversation with Zeke that we're about to go listen to, but I think that Zeke figured out that this isn't just a tech story. It's this global story. And he turns it into what I think some of the best, a kind of journalism book I really love, which is the globe trotting investigation. It took Fox to Cambodia and El Salvador and had him mingling with, like, crypto elites and unexpected victims of the shadow economy that has emerged because of this tech. I think he got what this story really means. We wanted to talk to him about it. He was kind enough to join us. This is our conversation with investigative reporter at Bloomberg and the author of Number Go Up, Zeke Fox, here on Hacked.

Speaker 3: Thanks for joining us, and thanks for coming on. I I love the book, and, it was one of my favorite books of last year. And I'm I'm glad you could make the time to come on and give us, give us your time to chat about it.

Speaker 1: Thank you so much for having me on, Scott. I I feel, like, lucky that I was there for the weirdness of this, crypto boom and bust. And I've actually been I've been trying to move on, but it just keeps sucking me in.

Speaker 3: It seems like you're not the only one that's got that problem. The, yeah. The your book is is kind of a a wild ride for, like, a journalistic piece. You know, you're jetting off, going to different places, going to these weird conferences and crypto elite parties, and you're buying monkey NFTs to get into certain parties. So I think before we get into the nuts and bolts talking about the book, you know, how how fun was it to make? Because it seems like it would have been a ton of fun for a project. Oh,

Speaker 1: it was awesome. I mean, this is my first book, but I I grew up reading books like, Bringing Down the House. That's like the MIT blackjack book by Ben Mezrich or Into Thin Air by Jon Krakauer. And I always loved these adventurous nonfiction books. But, I I mean, I've been an investigative reporter now for, like, fifteen years. And I just like, the right story wasn't wasn't coming along. And I started digging into crypto kind of reluctantly. And once I got into crypto, I was like, oh my god. This is a story I've been waiting for. And I'm the one who can go on this adventure. Like, I can dive into this world. And once I pitched the book, in November 2021 when Bitcoin was trading for $69,000 and people were really talking about, like, Web three is the future. And my pitch was that this was all going to collapse soon, and I would be there to chronicle it. And I had to act very confident in order to, give this pitch, but I actually wasn't really so sure it would all play out the way that it did. And I can't claim that I knew exactly what would happen, but I was just like, these coins don't do anything. There's no way that they can be worth $3,000,000,000,000. And once I got approved to write this book, I've decided that this was my shot and I was going to anything that I thought, like, teenage me as a reader would have wanted to read, like, I'm gonna go do that and I'm gonna investigate it. So when El Salvador adopted Bitcoin as an official currency, of course, like, I had to go. Or, the guy a lot of the book is about, this mysterious company called Tether and the former Italian plastic surgeon, who is its, boss, Giancarlo di Vissini. He was avoiding me. And, you know, in my normal job, I don't know. We'd have to have a lot of meetings. Like, does it make sense to go try to interview him? With the book, I'm the boss. I'm gonna go to Italy to Switzerland to go to his girlfriend's art show to see if I could surprise him. And then when he didn't show up, I went back again. And I did finally, get to confront him. So, it was it was really fun. And, yeah, highlight of of my career. And I'm really proud of, I feel like I had this great opportunity to chronicle what was going on. And I'm so I'm proud that I tried my best to do it and went all over the world to try to bring people, like, stories of what crypto is really doing.

Speaker 3: Yeah. Well, thanks for doing it because I thought the book was hugely entertaining and and very you know, your investigation was obviously very deep. The I do find it just, like, ironic how I think you opened the book kind of talking about how all your friends are making crypto money and they're taking their families to like Disney World and stuff. And then here you are being like the the the cynical reporter of it and then you get this global, like, insane trip out of it and, like, have this wild, like, couple years of your life making this

Speaker 1: Yeah. I hadn't really thought about it that way, but you're right because I opened by explaining how I was kind of jealous of my friend Jay making money on what he called doggy coin and then going to Disney. And I guess, like, this is sort of my revenge that I went to, like, way cooler places than Disney Mhmm. With and I made money on crypto by writing a book about it.

Speaker 3: Exactly.

Speaker 1: So, yeah, I didn't think about it that way, but I guess you're right.

Speaker 3: The the other thing too is, like, and if frequent listeners of our podcast will know that I'm pretty cynical about crypto, and I often argue that it it has no utility to society and and to me it just like it does nothing but your book actually highlights that people have found that utility in largely criminal circles and, you know, do you think that crypto has a future where given enough regulatory control, maybe some industry morality, do you think it could turn a corner and maybe be something useful at some point? Or do you just think it's a lost cause at this point?

Speaker 1: So much effort by so many smart people has gone into crypto that it would almost be surprising if they couldn't come up with anything useful to do with it. Mhmm. But at this point, I mean, it's been fifteen years since Bitcoin was invented. It's now as old as WhatsApp. It's as old as Uber and like ask yourself, have you ever used crypto for anything? Do you know people that use crypto for anything? Like other than gambling and like Yeah. It's pretty rare.

Speaker 3: Illegally, sometimes.

Speaker 1: So I I'm I'm pretty pessimistic. But, I mean, I did I titled my book Inside Crypto's Wild Rides and Staggering Fall. So clearly, I didn't expect, like, Bitcoin to come right back up to 60,000. So people's interest in gambling on made up coins has, surpassed my expectations.

Speaker 3: There's, there's an old investment saying, and I'm gonna try and get it right because I'm pulling it out deep in my memory, but it's, the market can stay insane longer than your money can stay liquid or something. It's something like that. But essentially that you're that that even if the market is acting irrationally, it'll stay irrational longer than your money can hold you in the market to catch the recovery. And I feel like that applies to to crypto largely.

Speaker 1: Yes. Like, I've never been one to say, oh, like, let's bet against crypto. I've even though I felt like I I feel like any sort of investment an investment's value is based on it producing profits or some sort of, use utility. And so I think in the long run, if there's no utility, there will be no value. And so when I see things like, for Axie Infinity, which was like this gambling game that became it was a phone kind of a Pokemon ish game you played on your phone, and but you had to buy the Pokemon for real money. And then you would use the Poke when you when you battled, you'd earn this crypto called smooth love potions. And, like, it all made when I saw that, like, worth, like, billions of dollars, I'm like, okay. This doesn't make any sense. No value is being generated. It's bound to go down. But I would never be the one to say it's going to go down tomorrow. It could easily double before it goes down. And I guess, crypto is a little like that. And you never know what's happening behind the scenes. You know, there's so much, manipulation and, insiders who are working together to control the price of different tokens. So yet another reason to

Speaker 3: Stay clear.

Speaker 1: Not bet against anything in particular.

Speaker 3: The, the the the part of the book about the smooth love potions, I actually kinda forgot about it because I read this book at Christmas. It's been nine months since I read it, and the I forgot about that that chapter where you talk about how, like, people had started forming businesses where they were employing people to play this insane game, and I I I remember being like, oh my god. It's worse than I ever thought.

Speaker 1: I mean, it was so embarrassing. The crypt the promoters of this, Axie Infinity so the the price of the Axies, the Pokemon, got so high that regular people could not afford to buy them. So they started renting them from other people, and they would get paid to play this phone game all day. And, like, just to be clear, like, this makes no sense. Like, their smooth love potions don't do anything. There's no reason for them to have value. The only thing you do with them is buy more Axies. And the only reason you want Axies is to earn smooth love potions. So it's, like, completely circular. But for a while I mean, there were, like, more than a million people in The Philippines playing this. And, yeah, when I went there, I met people who had, like, like, taxi drivers who'd mortgaged their car to buy these axes. Or, I I mean, I interviewed one woman who had borrowed money, I think, from relatives. And when it didn't work out, she now was making plans to, leave her children with her parents and move to Dubai to earn some money back. So, like and these crypto guys, like, they didn't plan all this out, but they just sort of put this mechanism out into the world. And they certainly didn't give people any refunds when it when it collapsed, you know. It's just like, like, they don't feel any responsibility for what's happening, but kind of, like, pretty predictable things that happened when they created this, this game with these, economics that, were set up this way.

Speaker 2: That was, that was something that I was struck by in reading your book is my sense of crypto for a long time was this is, Silicon Valley funny money. This is Tech Bros gambling with cryptography wired into it. And so much your book is spent saying like, kind of communicating that this was a global project. And and that people all around the world that you would never have thought would have interacted with this suddenly are, and sometimes with catastrophic outcomes. Were you surprised by how global a reach this had by the time you, like, started investigating it?

Speaker 1: I mean, definitely. I I mean, the the crypto people are really good at creating this impression that the industry is going mainstream and that, like, major players in Silicon Valley and on Wall Street are sort of in the process of adapting crypto adopting crypto and using it to speed transactions or, track people's identities or And, like, I feel like that narrative has sort of been there from the when I started looking into it a few years ago till now. Mhmm. It's always, like, on the verge of adoption. And so what I found when I looked into it was, like, that was not true at all. The startups that I was being pitched when I would meet with crypto guys were way more far fetched, and, many of them turned out to be, like, total frauds. And, yeah, they were marketing these to, like, regular people all over the world who were putting in money that they couldn't afford to lose. Like, one of the first crypto guys that I met was Alex Mashinsky of Celsius. And we were at Bitcoin twenty twenty one, which was this big gathering, one of the first conferences of any type since COVID restrictions lifted. There were, like, 10,000 Bitcoin bros in Miami. Mashinsky was everywhere, and he had this pitch that you could, deposit your crypto at Celsius and earn up to 19% a year. But if you wanted a loan from Celsius, the rates were very low. So So it's sort of like backwards banking. Like, you know, the bank has

Speaker 3: to, like Yeah. The spreads. Yeah.

Speaker 1: And so, this is kind of funny, but these crypto guys mostly were very promotional. So they were eager to meet with a reporter. It was not hard to set up meetings with most of them. And so sometimes I wouldn't even know very much about them before I met them. So I was sitting down with Mashinsky and he gave me this pitch. And I actually just wanted to ask him about whether he had any intel about something else. But I was just sort of hearing his pitch to be polite. And he told me this. I'm like, wow, that sounds I don't say these things out loud. But I'm like, but to myself I'm thinking, this sounds like totally backwards.

Speaker 2: Mhmm.

Speaker 1: This is the worst business that they have ever heard. This guy is not legit. So but I'm like, okay. So how much money have you raised for this, Celsius thing you're telling me about? And he's like, oh, people have deposited, you know, $15,000,000,000. And I'm like, I and this is one of the ones where in the moment I did call it right. Like, I thought to myself, am I sitting with, like, like, the next Bernie Madoff? Like, this is pretty cool. And he I I will say he was, later arrested for fraud. Turns out the backwards business plan did not work. There's a lot of sketchy stuff going on behind the scenes.

Speaker 3: Shocker.

Speaker 1: He has pleaded not guilty. His trial is scheduled for a few months from now. So it it could be that he presents some new evidence and, it's not actually fraudulent, but not looking very good.

Speaker 2: Turns out the backwards business plan didn't work. I love that.

Speaker 3: Just to just to hang on this concept of wasted utility because it seems like a conversation that Jordan and I have more frequently on this podcast. You know, given that lots of these crypto companies base themselves in in offshore regulatory havens and things like this, evading scrutiny or trying to evade it at all costs, you know, as an investigative reporter that works on Wall Street, you know, do you have any insight as to why the central banks and the treasury secretaries? And do you have any idea why they let this stuff happen? And and the creation of a shadow currency, like, it just seems like something they should have stopped.

Speaker 1: Well, you mean, like okay. So if you're talking about, like, crypto as a whole, I feel like at first it seems sort of, like, harmless and like a nerdy hobby, like, ham radio or something. And so Mhmm. I I think they, that's why they let it go. When now when you're looking at this most recent bubble, when there were tons of companies that were raising billions of dollars, many of them are getting in trouble now. And I asked myself, for example, the the SEC filed this big lawsuit against Coinbase. And it was saying, hey. A lot of the coins you trade on Coinbase are securities. You are not properly licensed to do that. Therefore, what you do, like, basically, your app is illegal. And, you know, Coinbase denies it. They're fighting it. But my question is, I mean, you could just open the app and see this. Mhmm. It was, so why didn't the SEC bring the case a couple years earlier? And it's kind of maybe this is cynical of me, but I think that they didn't want to be the ones to pop the crypto bubble. I think that they didn't wanna sue everybody while it was going great because the cases are hard to make if there's no investor losses, and you'd have a lot of people who are upset that you're, you know, ending the fund. Now it could be it just I mean, these cases do take a long time to, investigate and to bring. So it's not so unusual that someone gets sued a few years later. I mean, I would I told the crypto guys while the boom was on, when when people would say, oh, the SEC hasn't done anything, it must be legal. I would say, no. Like, they take, like, several years. There's no do I would not read it that way. And it just actually, there was a there was a teenager I interviewed for the book, who didn't make it and didn't make the cut. Mhmm. And just the couple days ago, his company got sued by the SEC, and the SEC said that they had raised a billion dollars and hadn't followed the rules. They got off with, like, a slap on the wrist. And these kids were literally in high school when they got the billion dollars. And that didn't make the cut for the book. That's how crazy this, crypto boom was.

Speaker 2: The teen billionaire didn't make it in. You had bigger things to talk about. The crypto project that, like, kinda seemed like it kicked off things for you, these questions, and is, I think, emblematic of what we're talking about here was Tether. It's very crucial to the ecosystem. There's a lot of red flags. Can you just walk us through what Tether is, how it kinda became so important, and how it turned you on to this story?

Speaker 1: I had had this argument with my friend Jay. I was sort of primed to wanna prove I was right about crypto. And my editor at business week, Joel Weber, came by my desk and said, what do you know about stable coins? And I might have said, oh, I don't wanna learn about crypto. It's too annoying. But, I was ready for it. So Tether is the biggest stablecoin. And what a stablecoin means is that each Tether token is supposed to be worth a dollar. Its value on exchanges usually stays very close to that because each Tether token is supposed to be backed by 1 real dollar in the bank somewhere. And at the time that I got the assignment, Tether there were 55,000,000,000 Tether tokens out there, which meant that they're supposed to be Tether was supposed to have $55,000,000,000 in the bank somewhere. That's an amount that would make it, you know, one of the top 50 banks in The US if it was a bank. And this company over the years, I mean, the amount of information out there about it was laughable. Like, it it was it played a key role in crypto. Like, on most days, more Tether changed hands than any other cryptocurrency. And I found that, like, big traders relied on it to move money from one exchange to the next. Essentially especially in the early days, a lot of crypto exchanges had trouble with banking. Like, it wasn't that opening a bank account for a crypto exchange was illegal, but some of the banks were worried that the exchanges might be engaged in fraud. So they thought too much trouble. Let's not deal with them. And so what do you do if you are a crypto exchange that doesn't have banking? You can't have you like, it's like a casino that can't sell the poker chips. So a lot of the exchanges were, like, we're gonna outsource that to Tether. So people could be acquire Tethers and then send those to the exchange, do all their trading there. And then when they wanted to cash out, they trade their crypto back for Tether on and the Tether could be, like, redeemed for dollars. And, I mean and to be clear, the crypto guys complain a lot about these bankers who didn't want to bank them. It's like, well, there's a pretty good fraud percentage among those, like, the big crypto companies a couple of years ago. Maybe not such a terrible idea. But basically, like, if you think of crypto as one giant casino, which I think is pretty fair, Tether is like the chips for the whole casino. It's like the cage where people, can cash in. That's become less true recently as more and more there become more and more ways to send trade real money for cryptocurrencies. But in the early years, like, without Tether, this whole last bubble might not have gotten going the way that it did. But from the beginning, there were real questions about whether Tether actually had the real money. Like and it was totally bizarre. Like, I went to this first crypto conference and everyone was telling me, yes. Like, I trade tons of tether. And then people would say things to me like, but, yeah, it would be totally unsurprising if it blew up. Or I think may I think maybe it's like some sort of honeypot run by the CIA. Or, I mean, no conspiracy theory was too far fetched. So I was like, this is at the center of crypto, but even the people who use it every day don't really believe in it. The CEO and the CFO at that time had never given an interview. The CEO was seen in public so little that some people thought he was a fake person. And one of my favorite weird tidbits about the company was one of its founders was Brock Pierce, who was a former child actor who played a small role in The Mighty Ducks. He's a young Gordon Bombay in the flashbacks, misses the penalty shot. So, I mean, I could go on, but, like, the company's based nowhere. They it said they said at one point that they were regulated by, the Virgin Islands. But when I contacted the regulator, they were like, no. And I just thought this is, like, a big mystery that's hiding in plain sight. It's not on Wall Street, if you expose this many red flags about a company, like, regulators would be all over it, and maybe people who used it would think twice. And in crypto, it just seemed like this wasn't happening. So I set out at first to figure out, well, do they really have this money? And that proved to be, a lot trickier to investigate than than I had imagined.

Speaker 2: There's a line in the book where you say, some argue that Tether was creating tokens out of thin air. If they were right and Tether really was a Ponzi scheme backed by nothing, it would be one of the biggest frauds in history. Tether is what got you on to this investigation. How did it all kinda shake out?

Speaker 1: Tether, like, is what brought me to each place in the crypto world. So, like, Sam Bankman Fried and his exchange FTX were one of the biggest users of Tether. So when I went to go meet him, part I got sort of sidetracked because he was such an interesting character, and it's hard not to follow what he was doing in The Bahamas. But one of my goals was to try and find out from him if, if there was something up with Tether. And as crypto collapsed, Tether actually stayed strong. Totally the opposite of what I would have predicted. I was able to find out that, of this stockpile, the money that they had, at least some of it was several billion was loaned to Alex Mashinsky's Celsius at a high interest rate to try and earn some profits on the user reserves. And I also found out that to earn extra interest, they've invested some of the reserves in Chinese commercial paper, which pays a slightly higher interest rate than American commercial paper, but is generally avoided by US money market funds. So that made me a little bit more suspicious, but come the summer of twenty twenty two, when crypto prices started dropping and a lot of crypto companies failed, a lot of users went to go cash in their Tether. And you can see this on the on the blockchain that people went to go redeem more than $10,000,000,000 of Tether. And, look, if Tether didn't send them the $10,000,000,000, they would complain. So that made it seem made me more confident that Tether did have the money. And then most recently, so during the period that I was investigating it, Tether's main bank was in The Bahamas, and it was called Deltek. Its chairman, Jean Chalapin, was actually the one of the guys who created the cartoon Inspector Gadget. That is what had made him rich. Banking was sort of like a late in life, career change. And he had been when so he was one of the my early interviews, and I'd gone to ask him, like, could you vouch for Tether? You're their main banker. And he'd said he only had some of their money, but, it so he he couldn't be sure about the rest of it, which, maybe wanna investigate more. But more recently, Tether has shifted the bulk of their reserves to, US investment bank called Kenner Fitzgerald. And its chairman, Howard Lutnick, who's a pretty mainstream Wall Street guy, has gone on TV. He's been at conferences. And he said, we hold Tether's reserves now, and they've got the money. So I think that the doubters at first, it looks like they're wrong and that Tether, if they did at one point have some sort of hole, they could have earned their way out of it and now are are backed. Because something happened for Tether that was really advantageous. Before, interest rates were near zero, so Tether couldn't earn any money on its reserves easily. The business wasn't very good. But now with interest rates at 5%, Tether has actually grown to a $100,000,000,000. So they can just park that money in something really safe like treasuries held by Cantor Fitzgerald, and they can collect $5,000,000,000 a year in interest payments with basically no risk. And they're doing that. They're also still making some riskier investments, but they're earning so much money that they could if there were any problems earlier on, they could have papered them over by now on so but the flip the weird thing about Tether now is that it appears to have become, like, essentially PayPal for pirates. Like, this is the the payment processing network that is favored by criminals around the world. And I write about some of that in the book, but more and more examples keep coming up, like, gray market, Russian military imports, Chinese fentanyl manufacturers, Venezuelan, Venezuela's national oil company has said they're gonna use Tethr to evade sanctions. So my interest like, at first was more on, is the money there? And then by the end of the book and and up till now, I've become more interested in what kind of illicit activities is Tether enabling.

Speaker 3: The, yeah. Yeah. I I love I love where that part of the book goes when you when you end up in Southeast Asia and mocking about seeing how people are using it. And, like, the the same thing I think we see is how much crypto is facilitating, you know, negative parts and negative utility. I guess we could call it like human trafficking, ransomware, and other kinds of, you know, cyber crimes. It seems to be everywhere. I did just read an article about what you just mentioned about oil companies using it to avoid sanctions as a form of payment to to transfer resources avoiding, you know, currency and banking regulations. So yeah. Fascinating.

Speaker 1: Like ransomware would not exist without cryptocurrency. Mhmm. Like, it it enables this. I mean, think of all the movies like Die Hard or something where you've got, like, the bad guy, but the bad guy needs to receive the sack of cash. And, like, the plot is set to catch the bad guy when you give him the sack of cash. I mean, now the guy could just say, like, here's my wallet address. Send me the crypto. And like they do. You know, there there was just a someone paid some company paid $75,000,000, to, so over ransomware the other

Speaker 2: day? When I hear about a big international company using this stuff to circumvent international sanctions and the will of a bunch of different states, And then I think back to the sort of, like, libertarian ethos of the whole project that starts to feel like a feature, not a buck. Like, that almost feels like something you'd point to be like, exactly. That's what we were trying to do all along.

Speaker 1: That that's a good point. And but it's kind of weird that the cryptocurrency that actually does seem to be enabling this is one that is US dollar based

Speaker 2: Sure.

Speaker 1: And totally centralized.

Speaker 2: Right.

Speaker 1: Like, Tether's move on different blockchains, like, the Ethereum blockchain or Tron. But this one company in the center of it holds the dollars and actually has the ability to block transactions or to freeze people's accounts. So Tether can't really claim, like, you know, this is just code. You know, there's no stopping us. It's like, no. This is actually just sort of a company in a amorphous location, that's facilitating all this stuff. And they won't they if you ask Tethr, they will say, we comply with law enforcement orders. We'll we'll block sanctions we will block sanctioned addresses. They don't claim to be they don't wanna be seen as a outlaw operator, but they also don't wanna come under a particular country's strict regulations.

Speaker 3: I think if I was making $5,000,000,000 a year strictly based on treasury interests, I probably wouldn't wanna be on anybody's hit list either.

Speaker 2: Good point.

Speaker 3: The so it starts with Tether. You know? Tether ends up surviving, but you you bump into Sam Bank when freed in the FTX kind of in your investigation of Tether, and they don't end up surviving. So, you know, what do you how do you how do you feel like the whole rise and fall of FTX has kind of affected the broader crypto market and crypto industry?

Speaker 1: So I think that for the mainstream, like, for you ask like an average person in The US, what do you think about crypto? I think one of their main thoughts is, like, isn't that the way the curly hair guy stole people's money? So I think that it actually has discredited crypto in a lot of people's minds. But that said, on the failure of FTX, prices were at, like, their nadir, and they've totally recovered since then. Not just Bitcoin, but a lot of other weird currencies. But weirdly, it's all happened without any of the buzz about crypto being the future. It's almost as if just like enough people have embraced crypto gambling Mhmm. That it's brought the prices back. So and the crypto industry has said, hey, Sam Bankman Fried was a bad apple. Now, you know, crypto is safe again. You know, place your bets. Let's go. And in, in Washington, where crypto industry is spending lots of money lobbying, you'd think that politicians would be really put off by the fact that, like, the last crypto guy who was popular down there was telling them all sorts of lies and running a giant fraud. But actually, you still hear there's quite a few politicians on both sides of the aisle who are saying, yeah, we we wanna protect this innovation. We don't want them to move offshore. We need friendlier rules. But I think that's because the crypto industry is spending so much money and donating so much money.

Speaker 3: Yeah. There's a there's a different conversation for a different day there about the American political system and the power of financial lobbying, but maybe we avoid that one today.

Speaker 1: Yeah. The, I mean, Sam, Sam Bankman Fried did tell me at one point. He was like, people say there's, too much money in politics. I actually think there's not enough. You know? And meaning that you don't have to spend that much money to get a lot of influence. And he was surprised that more corporations didn't didn't give more.

Speaker 3: The, in the epilogue of your new the paperback version of your book that's coming out in October, I think you make I think it was in there where you'd made reference to Sam Bankman Fried believing that he in the future expected value of his life, there was a 5% expected value that he'd become the president of The United States. And it it just, like, makes me laugh, you know, the, child prodigy, you know, one of the largest Ponzi fraudsters, financial criminals of, like, a long time. And there was a strong chance that he was so juiced in with the political parties that he might perceive that he would become a the president at

Speaker 1: some point. But Well, I have to say so people there was this other reporter who was actually working on commission from one of Sam's venture capital backers who wrote this article that people made fun of a lot. And he said, when I was sitting with Sam, I felt like he could be the world's first trillionaire. And people joked about that. But I have to say that during the boom, when I was at FTX's offices, these types of things did not seem that improbable or impossible, at least. I was really skeptical about crypto as a whole, but it seemed to just be going up and up and up. And it felt like Sam had it all figured out. Like, if crypto was gonna survive in any way, this was the guy who was gonna be the big winner. And it was just it was kinda wild to see. Like, I'm most CEOs are really cautious and stage managed. And if you get ten minutes with them, they've got, like, three people sitting right next to them, making sure they don't say anything weird. Sam was just, like, pull up a chair. And I'm sitting there with him while he's messaging with CEOs and, politicians. He gets offered looking over his shoulder as someone asked him if he wants to buy MoneyGram, the money transfer company. He's like, nah. People are begging for his time. After I see him, he's on his way to Georgia to meet with, like, the country Georgia to meet with its, president. And it just seemed like like anything was was possible for him. So I can certainly see that for him caught up in that, he could imagine, oh, yeah. Maybe I'll be I'll be president.

Speaker 3: He's already got more influence than some of the presidents. The the when it comes to kind of the the merger between the traditional finance world and the crypto finance world, you know, it it didn't seem like crypto had any kind of movement except for illegal circles where people need to circumvent regulations and sanctions and things like that. But like people don't use crypto in their daily life and I think that or they don't seem to anyway. I don't know of any way that does. But you know, there's people like Jamie Dimon, the CEO of JPMorgan Chase who's very cynical and and I've I've tuned in to CNBC before and watched him get into a fight with some of the other panelists about the value of crypto and Jamie holds a very low perception of that value. And it seems like more and more of the financial community holds or perceives some kind of value. Do you do you see that as a reporter for Bloomberg? Or

Speaker 1: Yes. Like, I still don't think it's most people or that, this is kind of funny, but as I keep learning, writing about Wall Street, there's just like a ton of money in the world. There is so much money. So, like, the money that's going into crypto, even if it's sort of a lot by crypto standards, is like a tiny amount by money standards. So sure, like, there's a lot of billionaires out there and some of them are getting more interested in Bitcoin. But I would still say that the mainstream opinion is is against it. And but I do think it's a little bit like, this isn't like the most original observation. It's a little bit like the emperor's new clothes where, you know, everybody's saying it's so cool and people just don't wanna be the one to say, oh, no. Like, this is this is, there's nothing there. It's a little bit easier to say like, oh, yeah. Like, I've I've I hold a little Ethereum or Mhmm. You know, I'm I'm buying a little Bitcoin. And I also think that people underestimate the power of FOMO. Like, that was what drove me to be jealous of my friend, Jay. But it also, drives these hedge fund managers who see they're like, hey. My friend put 10% of his fund in crypto and it went up a lot. Maybe I should do it. Or but I think more common on on Wall Street is that they see that people are gambling on crypto and they're like, this probably will continue. How do we get a cut of that? Not like how do we gamble on crypto, but just like how do we become the house and earn the profits from that? Whether that's by, like, facilitating it directly or providing financing to crypto companies. Wall Street is just set up to, like, profit from whatever other financial activities people wanna do.

Speaker 3: I I feel like I feel like if we'd written a segue to talking about Bitcoin ETFs, we could have done it that well. Yeah. So the the the one of the things that I was most shocked about and we talked about on the show was was that they approved and allowed that the SEC allowed Bitcoin and other crypto ETFs to come to market. And I know you kinda talk about it a little bit in the in the paperback version of your book. What are your thoughts on this?

Speaker 1: So I was less surprised. I felt like there are just so many ways to bet on Bitcoin that are legal that it's like, what's one more? And I felt like it was hard for them to keep holding the holding the line on that and saying no Bitcoin ETFs. I was actually surprised that by the popularity of the Bitcoin ETFs, I thought that if you wanted Bitcoin, you'd probably already have it. But they attracted quite a lot of new money. And the hype over the coming of the Bitcoin ETFs led to a huge rise in all crypto prices. But what I keep I don't some people will point to the Bitcoin ETF as like a use case for crypto or an example of crypto going mainstream. And I would say no. This is just a way for you to bet on the price of Bitcoin. It's not, it's actually kind of, like, antithetical to the mission of Bitcoin.

Speaker 3: The, one of the things I I found most interesting is that, like because I think one of the big reasons or one of the big motivations was if they can put it in ETFs, then people can use it in their retirement accounts, their IRAs, and things like that. And Vanguard, one of the largest financial institutions of of retirement, you know, investmenting investment management, like, refused to allow their clients to buy into them, which wasn't a big surprise, but the thing that I was most surprised about was the discussion that society had after that. Like, an institution as large as Vanguard putting up their hand being, like, no, we're doing this as a protection for our clientele kind of caused this massive conversation, which I thought was healthier than most conversations around crypto.

Speaker 1: Yeah. And I'm I mean, I just saw I happen to see, like, some marketing material that BlackRock had put together around Bitcoin. And I'm I've seen Larry Fink, the CEO of BlackRock, do interviews about the their Bitcoin ETF. And I feel like they've certainly moved beyond just sort of you could imagine someone who made ETFs just saying like, hey, we don't recommend any of these. We're just offering you the cheap way to bet on whatever kind of sectors you want.

Speaker 3: Mhmm.

Speaker 1: But he that's not what they're doing. And he they've actually been really, recommending this Bitcoin ETF, which I thought was, somewhat

Speaker 3: surprising. Well, given that it is the new gold in the anti inflationary matrix, then, anyway, that's a joke. But

Speaker 1: Yes. Well, yes. I know. And given, I mean, given, I don't know if you MicroStrategy CEO, Michael Saylor, who's, like, the Bitcoin intellectual. He says it's going to 13,000,000, so you'd be a fool not to get it now.

Speaker 3: Number number go up. Am I right?

Speaker 2: Number go up. Yeah.

Speaker 1: It's been funny to see, so number go up comes from something I heard at this first Bitcoin conference. And this Bitcoin guy said, he actually he called it number go up technology. And he explained, like, when the price goes up, that gets people excited and more people wanna buy. And when they buy, the price goes up more. And then, more people get excited. And he call yeah. He called it number go up technology. And I'm like, this sounds like a pyramid scheme, not technology. What are you talking about? But at least for a time, it can definitely work. And the I've actually seen since the I feel like since the book came out, people have been saying number go up more and talking about it, but in a positive way. Like, they're all I've seen I think there's more of an embrace of number go up thinking. And it's almost even within the crypto world, it's seen as kind of cringe to talk about, you know, Web three or Mhmm. NFTs or stuff like that. Now, like, I can think of exact a lot of a a lot of counterexamples as I say it, but I do feel like there's been a move in the number go up direction. I mean, look at, like, have you followed these meme coins on Solana, which has been a lot of talk in crypto in the last, like, year or so. No. It's just like people just keep launching, like, ever stupider coins. Like, one of the most legit ones right now or one that's generating the most hype is, it's called mother. It's made by Iggy Azalea, the kind of, a little bit washed up, I think, singer. And it's you know, there's no claims that it does anything.

Speaker 3: And nor will it ever.

Speaker 2: Yeah. No. It felt like before the fall, it was this isn't a digital casino. This is the money of the future. This is the future of all technology. And post fall, it's just like, this digital casino rips. Like, it it it has been a total shift.

Speaker 1: Yeah. I mean, because I've I've had, I think it was my, colleague, Matt Levine, was saying to me at one point, if let's say something is like the money of the future. I mean, that's like very very valuable. So even if there's like a tiny chance that it's the money of the future, that tiny chance is very valuable. Mhmm. And so you could almost justify a lot of the, prices that way. But if we're gonna totally abandon the money of the future idea, and just be like, oh, let's buy Iggy Azalea's coin because other people might. I heard her party in Singapore last night was cool. All the crypto guys are in Singapore right now for a big conference, and I hear there's great parties.

Speaker 2: I bet.

Speaker 3: Are you sad you're not there?

Speaker 1: No. It's too actually, covering, parties is is kind of, it's kinda tough because Sure. Like, you're there and it seems, or well, I'll give you an example. If you, there was a there's a scene in the book where I'm at, Brock Pierce, one of the founders of Tethr. I'm at a how at at a house he rented for a crypto conference where he's throwing, like, these parties. And, like, if you read it, I think it's pretty funny. A lot of funny stuff happens. Some, like, annoying guy asked me to taste a pastry for him. Someone insults like a woman playing the piano. Someone talks about promoting this Trump coin and says f the SCC. But for me, being there, I mean, I was sitting there for, like, fifteen hours to generate, like, the one mildly amusing page in the book. Then that's sort of like the and and it also gets depressing. I mean, I think back to, Sam Bacon and Freed put on this one big conference when things were going great for him called Crypto Bahamas. And, I mean, I guess I may be a little I don't know why I thought this, but I was I sort of had I thought this is gonna be, like, these will be the finally, I'll meet the legit crypto guys. This is Sam Biggeman Fried's conference. It's not for, you know, regular gamblers. This is only, like, institutional crypto. And then all I got presented with was, like, one, like, dumb scheme after another.

Speaker 3: And and a and a bowl load of ketamine lollipops?

Speaker 1: No no ketamine was offered to be there.

Speaker 3: Oh, man.

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Speaker 2: I guess to kinda keep going on the theme of institutionalizing all this stuff, one of the more surreal parts of the book is is El Salvador. El Salvador adopting Bitcoin, national currency. Why why do you think that happened, and what happened next?

Speaker 1: So this was this Bitcoin twenty twenty one conference was very eventful, and the this was announced at the end of the conference. It was one of the moments that convinced me that I was onto something perhaps book worthy. There was this crypto bro on stage, young guy, like, maybe in his twenties, curly hair. He's wearing a hoodie. He's sort of mumbly. He walks back and forth. He's, like, cursing a lot. He seemed to be talking about, like, a summer vacation in El Salvador and how, like, Bitcoin would save the poor people there. And then, like, boom. He plays a video, and he's got Nayib Bukele, the president of El Salvador, saying Bitcoin will be legal tender in our country. And then he's crying. He's, like, bawling on stage. And he's saying, we will die on this hill. We will fucking die on this fucking hill. And he's the tears are falling. And I look around the audience, like, thinking everyone's gonna be laughing like me. But no.

Speaker 4: Like,

Speaker 1: people are rapt. Like, I swear some of the people there were crying too. And I realized that as I talked to people involved with the project, this was kind of a a fulfillment of a dream, which was that, not like a very sophisticated dream. But, initially, just like a few more people being interested in Bitcoin was enough to make the price go up. But, like, the price has gone up pretty high. So now we need, like, bigger pools of money to come into Bitcoin to push the already high price up even higher. And who's got a bigger pool of money than, a country? So the idea was that El Salvador and its citizens, even being a small country, would be like a big, boost for Bitcoin. Not calling it a pyramid scheme, but just like picturing a pyramid, could be helpful for

Speaker 2: Pyramid change. Pyramid change structure,

Speaker 1: call it. Yeah. A cone. A cone.

Speaker 3: It's not a pyramid. It's a cone.

Speaker 1: It no. It's kind of hard to say what's in it for Bukele. I mean, he got a lot of notoriety out of this and became, like, a crypto influencer. And he's always somebody who's been very active on Twitter. And, I mean, putting trying to put a good spin on it. I mean, this was, it's a it is a really small country, so even the, like, relatively limited amount of Bitcoin related tourism that came to El Salvador, could be helpful to them. But, overall, the experiment's been kind of, it was been a total bust. What happened was that they created a national Bitcoin app. And they told all the citizens, if you download it, we'll give you $30. It's called Chivo. And they told all the merchants, you've gotta accept Bitcoin now. But the app was super buggy. There's all sorts of problems with the rollout. And when I went there, it'd been going on for about nine months, and it was very hard to find anybody using Bitcoin for anything. There was also this sort of attitude where people are kind of sick of the gringo is coming there and making them use Bitcoin. I would I went to this, El Zonte, this, like, surfing community or, it's a beach community that's popular surfing destination. And it was sort of the birthplace of this Bitcoin project. So it's like, if you're a Bitcoin tourist, you go to El Salvador, you're gonna go to El Zonte. Well, the first store I went to is like a little roadside stand, and I went to go buy a bottle of water. And in my best, Gringo Spanish, I was like, Bitcoin? And the guy running the store was just like, basura, which means trash. He took the water and he left. There's it was like a there were like bars on the window. It wasn't like a store that he went in. That was it. There would be no water for me if I wanted to pay with Bitcoin. And, like, that was the typical attitude. I've it was very embarrassing to try and go to all these stores and, try to buy Bitcoin. But Bukele has also I mean, he promised there would be a he would build a Bitcoin city financed by Bitcoin bonds in a Bitcoin mining volcano. Like, none of that has happened. But he has become kind of popular. He's made some deep pocketed new friends. For example, the guys who run Tether now have an office there. They you've been pictured with Bukele, and maybe that has some sort of, it's unclear what benefit that has for the government, but maybe there could be some something going on between them down the line. His Bukele has invested some of the El Salvador's treasury in Bitcoin, and he hasn't been very transparent about that. But based on the timing of his tweets and when he said he's buying Bitcoin, it seems like he's done alright. Like, he's probably made some money on that. But that might be offset by the cost of this national Bitcoin rollout. But, honestly, I was it was, totally eclipsed by his, monodura crackdown on El Salvador's gangs. They've, arrested more than fifth they there's more than 50,000 people arrested in prison. Like, basically, anyone who is suspected of being a gang member could be thrown in prison indefinitely without charges or proof on it's like, human rights groups are up in arms. It appears to be genuinely like a pretty popular policy. The country was really suffering from gang violence. There was an article in the New York Times about it where they interviewed someone who was saying that their own son had been locked up unjustly, but they supported this policy. So going down there to report about Bitcoin, I just felt like, you know, people are like, don't we have some we have more important things to talk about. And for the it was surprising to me to see the Bitcoin promoters who I see at these conferences talking this up like this El Salvador experiment with some sort of big win when anyone who went there could tell that nobody had any interest in Bitcoin there. Like, as a test of whether people would use Bitcoin as a currency is a total failure. But they still you still see people talking it up. And now, I mean, sort of the pitch for El Salvador was, like, first El Salvador, next to the world. Like, once other countries see how great it's going in El Salvador, they're gonna want in too. And we've seen none of that until recently when presidential candidate Donald Trump came to the 2024 edition of this Bitcoin conference and basically gave his version of the Bukele speech. He didn't say The US would make Bitcoin legal tender, but he actually went through most of their other talking points and announced that he would make, he'd have the US government establish a strategic Bitcoin reserve. So, again, like, experiment failure, plans seem really far fetched. But in spite of that, you know, Bitcoin marches on. Wow.

Speaker 3: The, I can't help but feel like the American dollar is already kinda digitized with, like, the growth of things like Zelle and Cash App, like, movement of money between people and and retailers and customers in a digital form, Apple Pay. Like, there's so many versions of it that have essentially digitized the actual USD that ties to the traditional banking system. I just feel like any utility that Bitcoin had in its early days or any proposed utility that Bitcoin had in its early days has been circumvented by the traditional system already?

Speaker 1: I mean, I you can think of exceptions, but, yes, like, I generally agree. And I found I did a lot of traveling for this book. And there were countries where I never even took money out of the ATM. I had a tap and pay credit card that charged no transaction fees and actually rebated me airline miles. So there was no need for me to use crypto. And you see this at, I would see often at crypto conferences, they would not use crypto. It's like the whole idea of using crypto. Again, it's like it's kinda passe. Donald Trump, a couple nights ago, was at, he visited a Bitcoin themed bar in Downtown Manhattan called Pub Key, and he used Bitcoin to buy some cheeseburgers. And now let's be clear. When I say he used Bitcoin to buy some cheeseburgers, there were two other guys with some phones. They were doing the Bitcoining. It took, like, a whole minute. And by the end of it, they weren't even sure if the Bitcoins had moved. And Donald Trump was making some, like, really weird faces. So, I I don't know if you can really count this as the first presidential Bitcoin transaction. But setting that aside, like, that's very, like, 2020.

Speaker 2: Sure.

Speaker 1: Like, people aren't even excited about that kind of thing anymore. Tell me. They've kind of, like, moved on. And you you were sort of talking about this before, but, like, if you if you strip away all of the, like, potential breaking the rules use cases of crypto, it's like what's left? Like, a a very slow database. And when you're dealing with a regular person, like, when you're trying to get a regular person to adopt a product, like, let's say, like, my mom, you can't just pitch her on, like, how cool the blockchain is. She knows about her credit card and how it works and you just tap it. You need to, like, compete with that. And they're just so far away, from any sort of, like, consumer product. And I would ask a lot this one of my go to questions when I talk to these crypto guys was, let's say it stops going up. Like, I'm not saying it crashes, but, like, your coin, whatever it is. Let's say it just sort of was flat, which not unreasonable thing to expect. Why would anyone want your coin then? What is it good for? And people, like, they just didn't have, good explanations. And like many of those people are in jail now.

Speaker 2: And how can it function as a currency if it doesn't get at least kind of flat at some point? I don't wanna buy something with an extremely volatile currency.

Speaker 1: Yes. Or I mean, actually, if if it's if you have the expectation that it's gonna go up a lot, you really don't wanna spend it. It's a big, disincentive to invest that money. Like, why would you buy a business? If if you're Michael Saylor and you think Bitcoin's going to 13,000,000, you would not invest that Bitcoin in opening a new business and buying a house or anything. You gotta just hold on to it until it goes up to 13,000,000.

Speaker 3: I I also like the idea of going to a crypto conference and standing in the bar lineup and getting to the front of the bar ordering drinks and then them being like, sorry, we only take, you know, Visa tap. I'm You're like, but but

Speaker 1: I I I will say to their credit at the most recent Bitcoin conference, the Bitcoin machine did seem to be working. This is like has not been the case at many crypto events I've been to in the past. I mean, one of my favorite examples of that was, NFTs were if you were the, like, least hype y pitch for NFTs was that maybe they'd be good for, like, concert ticketing. You know, there's all these problems with, like, counterfeit ticketing. Maybe the artist wants to control, like, how the options for reselling the tickets. NFTs would be great for that. And in the book, I go to Ape Fest, a big concert put on by the Bored Ape Yacht Club. And even you had to have an ape to get in. They still did not use the apes as tickets. Like, there was this whole other system that like a secondary ape validation system to get into Ape Fest. So it's it's like if you guys can't even figure it out and you're so motivated, why are the normal people gonna do it?

Speaker 2: You're, to jump to the other side of the world from El Salvador, your investigation took up, like, a pretty dark turn when you started uncovering how crypto, was fueling human trafficking in Cambodia. I was curious if you could tell us that part of the story. And I'm curious, did you have a sense going into this that an anonymous currency is gonna take you somewhere pretty ugly, or was that still very startling to uncover?

Speaker 1: I totally did not think it would get this dark. When I pitched the book, I had no idea about this problem, and it maybe was only just getting off the ground. But the problem we're talking about is called, pig butchering. And it's, like, it's what's behind these wrong number text messages that most people I know get. And for the in the book, I get one from someone who calls themselves Vicky Ho, and I play along just trying to see how it works. I was especially I was investigating Tether, and I was curious if she how she would make use of Tether. And she said to me at first, like, hey, David. You know, it's me, Vicky. Been a long time or something like that. And, you know, if you engage with these people, what they'll do is they'll try to make friends with you. They might try to establish a kind of romantic connection, but they start dropping hints that they're really good at trading crypto. And they'll eventually have you download Vicky had me download an app called ZBXS. And she told me that if I could get some crypto and send it there, she would teach me short term contract node trading for gains of 25 to 70% per time. And it like, if we laugh, it sounds stupid. But at the time, I mean, there are so many things in crypto that sounded stupid that were getting people rich. So, like, is this more implausible? And the now the reason you need crypto for the scam is that, like, the scammers have you download this fake app. And, look, if they could do it, they'd have you just pay with credit card to put your money in the fake app. Because like you said, it's much easier. But the credit card companies actually have whole teams designed to, like, detect suspicious transactions. And if I tried to charge, like, $10,000 to, like, some sort of Cambodian merchant on my Visa, it would get flagged. They'd call me. And, also, I could charge it back if enough people complain. The account will get closed for the merchant. It's this whole problem. Same with bank wires. So these scammers ex tell you to go on a real crypto app like Coinbase, acquire some crypto, most often Tether, and then send it to their, you know, address on the blockchain. And then you've got this app. There you've got this new friend, in my case, Vicky, and they're giving you these tips. And as you trade, it looks like you're making money in the app, so you might be tempted to send in more and more. And they will even let you take out some money to show you that it's real. But in their whole conversation with you, they're sizing you up. And once they've got you to send in as much as they think they're gonna get, they just disappear and take all the money. And the FBI estimates that last year, Americans lost $4,000,000,000 to this. There's I found a guy there's a guy who lost $47,000,000 to this. He was he was a bank CEO, and he started embezzling from his bank. And the bank failed because he sent so much money to pig butchering scammers. So but the really dark thing is that the scammers themselves, are often victims of human trafficking. And they're in these, like, heavily fortified office towers in Cambodia or Myanmar. They're often from they're learned from other countries with offers of a good job, and then they maybe in customer service, and they get there, their passports are taken, they're trapped, and they're forced to run these scams under threat of torture, beatings, electrocution, or worse. And I I for the book, I interviewed a lot of people who had escaped from these compounds or generally bought their freedom by paying a ransom, who told me, just like the most terrible stories about it. And I ended up going to Vietnam to meet one of them, and then to Sihanoukville in Southwestern Cambodia to see the compound that that he had escaped from. And the crypto guys will tell you, like, what does this really have to do with, with crypto? But but I would it's a little bit like I would put this sort of in the ransomware category. It's a crime that's, like, theoretically possible without crypto, but crypto has made it so much easier that it supercharged it and almost, like, turn this into a new category of crime.

Speaker 2: Mhmm.

Speaker 1: I mean, it's one academic estimate was that these pig butchering scams generate something like they've generated like $75,000,000,000 in, proceeds. Then they figured this out by looking at the blockchain. It's just like, like the the UN is estimating that this makes up like a decent percentage of the, GDP of some of these in Cambodia or on, I mean, it's I cannot over they estimate that, the UN estimated 220,000 people are trapped in scam compounds. So it's like, it's horrible. And when I first heard about it, it was less well documented. And I sort of, thought of it as almost like a sounded like some sort of Pizzagate conspiracy. Mhmm. But I investigated it and it's real. And I I one thing that, was very surprising to me was excuse me. So one thing that was surprising to me was that I was taking a bus from Ho Chi Minh City to Phnom Penh, the capital of Cambodia. And I've just been interviewing this, victim who'd a Vietnamese victim. And the bus crossed the border at, Bavette, which is like a casino town, just across the border into Cambodia. And I've seen videos of, scam compounds in Bavette. I've seen videos of people escaping from them. It was pretty well documented that were there were some big ones. And so I got off the bus there to, like I don't know what I was hoping to accomplish, but just to see them in person. And I'm in the parking lot of this big casino that's, like, a known hub for scam compounds. And right in the parking lot, there's a little booth where you can trade Tether for US dollars or local currency. And it just struck me that, like, I've spent years at this point going around the world trying to figure out if people were using crypto for anything. They weren't even using it to sell you beer at the crypto conference. But here in the parking lot of the scam compound, there was a convenient way to trade crypto for cash. And, like, doesn't prove anything, but for me, that was, like, a very telling moment.

Speaker 3: Like a a light bulb moment.

Speaker 2: Yeah.

Speaker 3: The, I think we're kinda getting close to the end. We don't wanna ruin too much of the book because I highly recommend everybody should read it. It was definitely my favorite book from last year. But the, before we jumped on the call, you'd actually fired over a note that, your book, Number Go Up, was actually imparted into evidence in the Sam Bankman Fried trial and Sam Bankman Fried was forced to read sections of your book allowed during the trial. So I just wanted to get your take on how you felt about that. How you how you've if you've listened to the testimony and and just kinda your perspective on it because that's something super unique to you and to this book. So

Speaker 1: It it was pretty weird. So like after FTX had failed, I had flew down to The Bahamas, and I interviewed Sam for, like, a full day going up until the middle of the night at his $30,000,000 penthouse. And we talked about why FTX failed, and he gave me his version of the story. And he admitted some things to me in the moment that struck me as ill advised given that he it was clear to both of us that he would likely be in big trouble soon. And in fact, the cops did show up, like, a couple weeks later. And so I won't get into the details of exactly what he said, but he was some of these statements he made to me, he changed the story when he testified in his own defense at trial. And so the prosecutor brought in the book to say to Sam, well, you said this now, but, like, look what you said before. Why why is your story different? Mhmm. And, honestly, I mean, it's, of course, exciting to see the book play this role, but I had, kind of mixed feelings about it because when I'm doing all these things, I like to think about myself as someone who is just, like, sort of a regular person who is going doing their best to figure out the truth of the situation and what's really going on and who's, like, asking the questions that anyone would ask. And I don't really think of myself as someone who is, like, gathering evidence for, a future prosecution. And I don't go into my interviews looking to trip someone up. You know, when I was interviewing Sam, I just I had I told him before the interview that he'd been making some public statements about what happened. They were kinda confusing, and then I wanted to try to understand his side of the story. And when I'm talking to him, I'm pretty open where when he said things that I didn't agree with or I didn't believe, I would say, I don't think that's very credible. Can you tell me more about that? Like, what's your evidence for that? And but what I'm doing all these things, I think it would make them more challenging if in the back of my head, I was thinking this is, like, evidence for, for a trial, you know, it's it's just, I think of it as like, hey, we're talking about something that happened. And why can't we just talk about this like regular people, you know, understand it better?

Speaker 2: Oh, your excellent telling of this story has become part of the story. It's a it's a fascinating full circle moment. Number Go Up, Inside Crypto's Wilder Eyes and Staggering Fall. It's out on paperback October 1 with new chapters about the trial and the crypto resurgence. Zeke, thank you so much for sitting down and chatting with us about it.

Speaker 3: Yeah. Thanks for coming on. Thanks for coming on.

Speaker 1: Thanks, guys. It was really fun.