Cointime

Download App
iOS & Android

How the Mooch Helped Push the First Domino in the FTX Crash

Donald Trump’s old press secretary, Anthony Scaramucci, played a fascinating role in the downfall of crypto exchange FTX. But he’s still a believer.

About 18 hours before his old boss Donald Trump announced a fresh tilt at the US presidency, former White House press secretary – for 11 days – Anthony Scaramucci revealed his role in the unravelling of crypto exchange FTX and the downfall of its founder, Sam Bankman-Fried.

It’s all The Mooch’s fault – sort of.

Anthony Scaramucci’s time in the White House was brief but very memorable. AP

In September this year, Scaramucci sold 30 per cent of his firm Skybridge to FTX; Bankman-Fried wanted to buy the lot but Scaramucci was hesitant. “I am 58 years old [and] it’s been my life’s work,” he told a Bloomberg event on Tuesday night.

Happily, Scaramucci got cash. Unhappily, Bankman-Fried requested The Mooch whack $US10 million ($14.8 million) into FTX s underlying crypto token, FTT, which Scaramucci did in the spirit of the deal.

Then, just a few weeks ago, Scaramucci took Bankman-Fried on a fundraising tour to the Middle East – “I’ve been doing this longer than Sam has been alive, so I have a lot of relationships over there” – which was designed to raise $US2 billion at a valuation of $US32 billion. Scaramucci says Bankman-Fried’s key message, which he now knows was “unfortunately made up”, was that the money would be used to buttress FTX’s balance sheet and allow it to buy distressed crypto assets to stabilise the sector.

But it was in some of those meetings, Scaramucci says, that Bankman-Fried started trash-talking Changpeng “CZ” Zhao, the founder and boss of rival crypto exchange Binance. This got back to Zhao, who then dumped his holdings of the FTT token, sparking a run that exposed the leverage inside FTX and Bankman-Fried’s other business, Alameda Research.

Scaramucci says that fateful Middle East trip, and Bankman-Fried’s trash talk, “tipped the first domino [of the FTX collapse] a lot earlier than that domino would have been tipped otherwise”.

Compared to his appearance at The Australian Financial Review Cryptocurrency Summit in April, Scaramucci looked decidedly downbeat. While he hopes to buy the 30 per cent stake in Skybridge back from FTX’s liquidators, that’s likely to involve a long fight. He insists his due diligence was thorough, but knows it clearly wasn’t good enough.

“I think it’s very hard to protect yourself from that misrepresentation. If just one person can avoid the calamity that I’m living with right now….it’s worth it for me to share the story.”

Still, Scaramucci hasn’t completely lost his crypto-convert zeal. He continues to hold the view that crypto products and blockchain technology will ultimately foster better products than those currently used by the financial sector.

Big technological shifts always bring frauds and doubters, Scaramucci says, but eventually “better products typically get adopted”.

“I think that probably slowed the forward progress and slowed the future. But I still think the future is coming.”

What the industry needs now, Scaramucci says, is collaboration between crypto founders and regulators to build trust in the sector.

“The crypto industry has learned why we have banking regulation. We need regulation. You can set things up without guardrails and do a lot of damage.”

Indeed. But what crypto surely also needs now is less of the sort of hyperbole that advocates such as Scaramucci have indulged in.

At the Financial Review crypto Summit, Scaramucci happily predicted bitcoin would go to $US500,000. On Tuesday night, he lumped bitcoin doubters in with those who dismissed the motor car or the internet.

Surely we’re beyond this cartoonish stuff now. Regulation will help rebuild confidence in the crypto sector, but its leaders need to start remaking the case that the technology has a utility beyond speculation and financial engineering.

FTX
Comments

All Comments

Recommended for you

  • BTC breaks through $69,000

     the market shows BTC breaking through $69,000, currently at $69,021.49, with a 24-hour increase of 1.15%. The market is highly volatile, please manage your risk accordingly.

  • Spanish Foreign Minister: Not worried about any consequences of refusing US access to military bases

     on March 3 local time, Spanish Foreign Minister Alvarez defended the Spanish government's refusal to provide the Rota and Moron military bases to the United States for participation in attacks on Iran. Alvarez stated that the operation initiated by the United States and Israel is not supported by the United Nations and is not part of the bilateral agreements allowing the use of the aforementioned Spanish sovereign military bases. Alvarez also said that the Spanish government is not concerned that this stance will have any consequences. Alvarez stated: "The position of the Spanish government represents the will of the vast majority of the Spanish people as well as the vast majority of people worldwide, which is to defend the UN Charter, respect international law, and believe that cooperation is always more powerful than confrontation."

  • Spot gold plunges nearly $100 in the short term.

     spot gold plunged nearly 100 dollars in a short time, spot gold fell below 5170 dollars/ounce, with a daily decline of 2.94%. 

  • BTC falls below $67,000

    the market shows BTC fell below $67,000, currently at $66,996.93, with a 24-hour increase of 1.18%. The market is highly volatile, please manage your risk accordingly.

  • ETH breaks $2,000

    the market shows ETH breaking through $2000, currently at $2001.64, with a 24-hour increase of 2.89%. The market is highly volatile, please manage your risks accordingly.

  • The US spot Bitcoin ETF saw a net inflow of $962.48 million yesterday.

    according to Trader T's monitoring, the US spot Bitcoin ETF had a net inflow of 962.48 million USD yesterday.

  • BTC falls below $66,000

     the market shows BTC fell below 66,000 USD, currently at 65,986.66 USD, with a 24-hour decline of 1.31%. The market is highly volatile, please manage your risks accordingly.

  • BTC falls below $66,000

     the market shows BTC fell below $66,000, currently at $65,973.16, a 24-hour drop of 2.66%. The market is highly volatile, please manage your risks accordingly.

  • ETH breaks $2,000

    market shows ETH breaking through $2000, currently at $2000.29, with a 24-hour increase of 3.73%. The market is volatile, please manage your risk accordingly.

  • The United States uses Anthropic's artificial intelligence technology in its airstrikes in the Middle East.

     United States used Anthropic's artificial intelligence technology in airstrikes in the Middle East, and just hours before the attack, Trump had just issued a ban against Anthropic.