SBF’s trial gives us a closer look at his philosophy of betting on fraud and raises the question, what does his downfall mean for the Effective Altruism movement?
Sam Bankman-Fried’s criminal trial is underway, and we already have some testimony that perhaps gives us a glimpse into the mind of a man who might be one of the most conniving fraudsters of his generation. Caroline Ellison, Bankman-Fried’s former romantic partner and the former CEO of his cryptocurrency hedge fund, Alameda Research, testified that Bankman-Fried often talked about a coin flip scenario. In this scenario, heads meant the world improving by a factor of two. Tails, however, meant the world’s destruction.
Bankman-Fried, according to Ellison, said he would flip the coin, and he urged others to do the same. Of course, this is exactly the type of utilitarian logic that has landed Bankman-Fried in custody as he faces charges of siphoning billions of dollars from unsuspecting FTX customers into investments in risky startup companies and a life in the lap of luxury. If convicted, he could spend the rest of his life in prison instead.
Ellison’s testimony is that of one witness, but as the trial progresses, more and more members of Bankman-Fried’s inner circle corroborate what she has said. This includes Nishad Singh, FTX’s former director of engineering, who told jurors that Bankman-Fried spent large sums of money on real estate, venture investments, campaign donations, and celebrity endorsements.
Assuming Ellison’s testimony is true, one wonders what the end game was in Bankman-Fried’s mind. Perhaps he thought that the value of Bitcoin and cryptocurrencies in general would stay stable or increase, allowing him to hide his debts for the rest of his life. After all, if the value of Bitcoin had not plummeted, Bankman-Fried might still be living in his luxurious penthouse in the Bahamas. Remaining abroad and out of sight of U.S. regulators also kept him out of authorities’ minds. It is not absurd to imagine that stable crypto prices, favor with politicians whom he supported financially, and links to affable celebrities would sustain Bankman-Fried’s fraud for a lifetime.
Ultimately, though, the coin flip analogy is a great way to interpret Bankman-Fried’s current predicament. When someone believes that life is a series of coin flips, where heads means they double their fortune and tails means total destruction, they will inevitably be totally destroyed. No coin comes up heads forever.
Years ago, Bankman-Fried was featured in a YouTube video that highlighted his dedication to Effective Altruism. Viewed now, the video seems like a parody of the collapse of his house of cards. It tells the story of a young man who is willing to sacrifice certain luxuries for the greater good. Drives a Toyota Corolla instead of a Lamborghini. Wears an Apple Watch instead of a Rolex. Sure, he lives in a penthouse in the Bahamas, but he has roommates.
As Bankman-Fried’s trial progresses, it will be interesting to see what other witnesses have to say and what evidence the prosecution produces. If Bankman-Fried loses his trial, it will raise further questions. Did his interpretation of Effective Altruism lead him to believe that stealing billions of dollars was noble and justified, as long as he directed some of that money to the right causes and charities? And, would other members of the Effective Altruism movement agree with that conclusion? Sam Bankman-Fried—and, possibly, his fellow Effective Altruists—have much to answer for.