Meet the Man Who Called Out FTX’s Smoke and Mirrors Before Anyone Else
How did Marc Cohodes sniff out FTX's scheme? One of the first things he noticed was that Sam Bankman-Fried couldn’t answer simple questions or explain where his money came from.
The fallout of the FTX implosion has just begun, and the closer one looks, the worse it gets.
For those who don’t know, FTX was one of the world’s largest cryptocurrency exchanges until the last week or so. Its CEO, Sam Bankman-Fried, was worth some $16 billion at the start of last week, according to calculations from Bloomberg. Now he’s wiped out and facing an investigation and the prospect of prison.
Since the downfall of SBF, who not long ago was doing commercials with Tom Brady and Larry David, everyone has come out with a story about how they sensed something was not quite right.
Elon Musk says his “BS-detector” went off while talking with SBF, while Chamath Palihapitiya said his people were told three words—the last one ended with “yourself”—when they asked for additional information before investing with FTX.
I won’t deny Musk and Palihapitiya some props for seeing through SBF’s smoke and mirrors, but there’s a man who deserves more praise: Marc Cohodes.
In an interview with Keith McCullough of Hedgeye more than two weeks ago, Cohodes, a trader and prolific short seller, was calling out Bankman-Fried. This is well before news broke of FTX’s implosion, which is what makes Cohodes remarks so impressive—since he absolutely tore into FTX and SBF.
How did Cohodes know? One of the first things he noticed was that SBF couldn’t answer simple questions or explain where his money came from.
“When you have a big trade…you know the details of that trade. You know the date you hit it; you know all the players involved,” Cohodes says. “When anyone tries to pin SBF down on where he made his money, you can’t get a cogent answer.”
Cohodes goes on to explore the executive leadership of FTX, which had no board of directors. It consisted of a mystery man named “Gary Wang” who Cohodes seems to doubt exists, as well as a chief regulatory officer who apparently was legal counsel for a fraudulent online poker enterprise—a fact he apparently was hiding.
Cohodes also said it didn’t smell right that FTX was buying up a bunch of crypto enterprises that were going belly-up, which helped SBF earn the nickname “the JP Morgan of crypto.”
“He’s not the JP Morgan of crypto, because he can’t sit there and look you in the face and explain anything,” Cohodes says.
Cohodes became so convinced that FTX was not on the up-and-up that he and his people hired an experienced journalist to begin digging into the story.
“Nothing here fits. Everything reads like this is a complete scam,” Cohodes says. “I think this thing is dirty and rotten to the core.”
Cohodes talks about a whole lot more—including SBF’s political donations and a theory about possible ties to Communist China—and the FTX discussion begins around the 36:00 mark. (WARNING: Cohodes and McCullough are not shy about dropping F-bombs.)
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