September 15, 2023 • 35 mins
A few years ago, an editor asked Bloomberg investigative reporter Zeke Faux to take a look at the cryptocurrency Tether, a so-called stablecoin meant to precisely track the US dollar by backing it with real-world reserves. What followed was a tour through some of the most-colorful corners of the crypto world, from Mighty Ducks actor Brock Pierce’s yacht to FTX founder Sam Bankman-Fried’s digs in the Bahamas and, finally, a hotbed for human trafficking in Cambodia.
Faux joined the What Goes Up podcast to discuss his reporting, which is laid out in his new book Number Go Up: Inside Crypto’s Wild Rise and Staggering Fall.
“There's actually these whole office towers, floor after floor of people who've been lured from, say, like Vietnam, with the offer of a good job,” Faux says. “Then when they get there, they're trapped. They're told they can't leave. They're beaten. They get electric shocks, other forms of torture, and they're just given like 10 phones each and made to try to lure people into scams from around the world.”
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:13):
Hello, and welcome to What Goes Up, a weekly markets podcast.
My name is Mike Reagan. I'm a senior editor at Bloomberg.
Speaker 2 (00:19):
And I'm Wildona Hirik, across Acid reporter with Bloomberg, and.
Speaker 1 (00:22):
This week on the show, well WELDNA. I'm not sure
if listeners quite understand what our work environment is at Bloomberg.
We're all in this sort of open area. There's not
even cubicles, there's just desks, no knocks, tweets, so no
privacy none, and as a result, you can often overhear
other conversations, other reporters conversations, and I guess it's kind
(00:44):
of rude to eachstrap, but I mean.
Speaker 2 (00:46):
I do it.
Speaker 1 (00:47):
Yeah, we all do it.
Speaker 2 (00:48):
I listened to your lunch orders.
Speaker 1 (00:51):
But a lot of times what you overhear, what you
eaveschop on is super boring. You know, oh, why did
the stock market go Monday? And I'll say, not boring? Sure,
why is the market up today? What do you think
of this stock? You know? What does this economic data
mean for the market. That's where thing. It's very mundane stuff.
But about a decade ago, I was sitting near a
(01:12):
guy in next row over from me, who was on
the phone. I'd say ten hours a day, heavy Boston accent.
He was the most fun reporter to eavesdrop on I've
ever had in my career. Everyone else's asking about, you know,
the latest earnings and you know, what does the java's
claims number mean? And this guy would be talking about
(01:35):
scam artists, crime and strip clubs and drugs. Wow. I
wish I had recorded some of these interviews. It was
the most entertaining reporter evesdropping I think I've had in
my career.
Speaker 2 (01:48):
I can only imagine. I'm so jealous. I'm dying of
jealousy right now because I'd love to hear some of
this stuff.
Speaker 1 (01:53):
Well, don't be too jealous, because we have him. We
have him on the show this.
Speaker 2 (01:56):
Week because he wrote a book that was I read
a lot.
Speaker 1 (01:59):
Of books, not to you know, Oh, I know you do.
Speaker 2 (02:02):
I read a lot of books, but this was like
the best book I've read this year. It was so fun.
I read it so fast. Maybe one of these days
we'll let our audience know what book it. Who the
guy is without further ado, it's Zeke Fox. He is
our Bloomberg colleague, and he's the author of the brand
new book number go up. Inside Crypto's wild rise and
(02:23):
staggering fall. Zeke, I'm so happy you could join us.
Thank you so much for coming.
Speaker 3 (02:27):
Thanks for having me and for putting up with my
really loud conversations all those years.
Speaker 1 (02:32):
And I apologize for Eves wrapping on you all those years,
but no, it is possible.
Speaker 2 (02:35):
I'm sorry. Yeah, no, he's not sorry.
Speaker 1 (02:37):
What was like do you remember any of the well, so,
Zeke was pretty famous as an investigative journalist in our
circles in the financial world, long before Crypto, and I
think the probably the stuff I was Eves dropping on
might have been like the payday lender scams. Uh, one
of the first things you really started digging deep into.
Speaker 3 (02:58):
If I'm not mistaken, I mean, I have to admit that,
like you said, it's impossible, everyone's going to hear it.
And I talk pretty loud. I can't control myself. But
also I know that everyone's listening.
Speaker 2 (03:08):
I want to sit next to you. I'm going to
request it.
Speaker 1 (03:10):
Every new retrader should have to spend like a month's
sit next to Zeke and just listening to how he interviews.
It's a work of art.
Speaker 3 (03:16):
I learned a lot from Max Abelson, who would sit
near me. It was also very like a loud talker
and was great at inter getting these billionaires to tell
him all their secrets. He would be really interested in
their stories, but also he wouldn't let them off the hook.
He'd be like, don't just tell me that the new
CEO of Goldman Sachs is a nice guy? Like how
is he nice? Was he nice to you last Thursday?
(03:37):
What did he do that was so nice? How did
his eyes look while he made that nice statement?
Speaker 2 (03:42):
Okay, so you have your famous in the newsroom and
outside the newsroom for these strings of very interesting, intriguing stories,
very interesting characters. Mike mentioned the payday lenders. You have
so many. But so your new focus is crypto, and
I want to ask Q what made you go down
the crypto rabbit hole?
Speaker 3 (04:03):
Resisted looking into crypto? Like you said, I have always
really liked scams, and people would tell me crypto is
perfect for you, But there's something about it that I
didn't like it, because I like when you've got like
a kind of complicated scam and you have to look
through all the paperwork and figure out like the loophole
they're using and with crypto, they're just like, hey, buy
(04:24):
my new coin, and then like suddenly they're a billionaire.
I got into it like everybody else through Fomo. I
had this fuddy who we have like a group chat,
and he was texting us all about something he called
doggy coin. And this is like the height of the pandemic. Dudes,
you got to get some of this doggy coin. It's
so funny. It's going to go up, and I'm like,
(04:48):
it's dogecoin. And this already went viral, like several years ago.
They made fun of it on the Daily Show. It
was not even funny to begin with. This will never
happen again. But like he was right, doge coin went
up and he made a fair amount of money. And
he's sending us pictures from Disney World. He's like, he said,
(05:08):
I'm freaking nostra damis. You know, if you had listened
to me and bought dogecoin, you'd all be rich now
in Disney World, Yes, which would be a I do
not want to go there, so all.
Speaker 2 (05:19):
The prices are like extortions. Yeah, he must have made
a lot of money.
Speaker 3 (05:23):
This primed me to be like, you know what I
really want to prove I am still right. This stuff
is dumb. I'm going to look into it. And then
I Joel Weber, the editor of BusinessWeek, came by and
was like he had an idea for a crypto story,
and like in the past I might have turned it down,
but this time I was like, no, I'm going to
(05:43):
look into it. And once I did, like the first
part of it was to go to one of these
crypto conferences, and I was just like, as soon as
I started, I was like, oh my god, this is
a crazy world. Whatever you think about crypto, these people
are making like billions of dollars. This has got to
be like one of the craziest things happened in the
history of finance. It turned into like a two year
trip down the rabbit hole. By the end, I was
(06:05):
in like Cambodia.
Speaker 1 (06:06):
As one does. Yeah. But so that initial story from
Joel was about tether, which listeners who are unaware it's
a stable coin, which is a crypto coin that's meant
to track the US dollar exactly one to one, no
more and no less than. The idea is that he
maybe you made a bunch of money in crypto, and
now you want to store it in US dollar or
(06:29):
stable value, or you want to move it from one
exchange to the other, or whatever you want to do.
You want to keep it in that one dollar increment.
So Joel came here about tether, and that put you
onto the trail of a guy named Brock Pierce. So
talk to us about brock Pierce, and you're sort of
pursuit of him to find him and ask him about
what's going on with Tether.
Speaker 3 (06:50):
The best resume I've ever seen of anyone in finance.
He started off early. He was a child actor. He's
in the Disney classic The Mighty Ducks and he plays
the coach Gordon Bombay in a flashback when he misses
this crucial penalty shot that haunts him decades later.
Speaker 1 (07:08):
Away.
Speaker 3 (07:08):
Oh no, it's right at the beginning of the movie.
Don't worry, So he went on. It wasn't just like
this one movie. He started in one called First Kid.
He had kind of like a Macaulay Culkin look. But
then he quit acting. As a teenager, he gets hired
at this dot com startup called den. He's given like
this great title, two hundred and fifty thousand dollars a
year salary. What happens at Den truly bizarre. Not even
(07:33):
sure it's appropriate to talk about in this podcast. You'll
have to read about it. Yeah, But by the end
of it, he's fled to Spain with the founder of Den,
and he's gotten really into massively multiplayer online games. He
ran a virtual item trading companies. Basically, you want to
get ahead quick in this game everquestor World of Warcraft,
(07:53):
you could pay real money to buy the megasword and
then you know, bump up to level seventeen really quick.
This would be big business, and he eventually hired Steve
Bannon randomly to be like the chairman of the company.
They made a big I think they sold it to
Did they sell it to Goldman Sachs or Goldman Sacks
broker the deal. Anyway, he gets out of this deal rich,
(08:16):
and he sees the potential of making real money from
the virtual world, and he becomes one of the earliest
investors in crypto. There's some debate over how much credit
he gets, but he's a co founder of Tether, which
was this first stable coin. So when I went to
go look into Tether, the big mystery was like, by
the time I'm looking into it, Tether claims that they
(08:39):
have fifty billion dollars in the bank somewhere, but they
won't say where. So I'm trying to find this fifty
billion dollars. And at the time, people are really worried
about this. Jim Kramer's on TV being like this could
crash everything, Like where's Tether's money? They won't say. Even
Janet Yellen held a meeting of all the top financial
regulators where they're like, where's Tether's money, What's gonna happen?
(09:00):
What does this mean for financial market? Yeah, So as
I started to look into it, I just couldn't believe
that this coin that was seemingly so important basically appeared
to be like the central bank of crypto, a key
point in the infrastructure holding all these schemes together, had
been founded by the Mighty Ducks guy. So in the
book I talk about I went down to a crypto
(09:23):
conference in Miami and went to a party at Brock's
house or a house he'd rented for the conference, and
it was truly just like the weirdest scene, like everyone's
just sort of milling about, getting like drunk, drunker and drunker.
Brock's not there, And when After I spend like a
whole day there, Brock shows up and then immediately disappears.
(09:46):
I catch up with him at another conference in the Bahamas.
I hear from a friend of mine is like, hey,
last night, I was at the craziest party on this yacht.
It was this mega yacht that this crypto billionaire bought
from this Russian oligarch. And she's just showing me her Instagram.
She shows me this video of him jumping off the
yacht and I'm like, oh my god, Brock's here. So
I text him. I'm like, can I come to your yacht?
(10:09):
He sends a speedboat to the sequel. Yes, it was
very I'm not gonna lie, it was very cool. So
when we finally talk and get into it and talk
about Tether, at this point he's sold his stake in
the company, he says for no money, and he it
turns out to be kind of like a dead end,
(10:30):
like he doesn't really know where this fifty billion dollars is.
But he's a really compelling interview. When we started talking
about like the mystery and how does he have any
clues about how to find Tether's money. But he's like
that do not mess this one up. This could be
your big chance, and I'm like, I totally agree, But also,
what's going on here, Brock, I.
Speaker 1 (10:47):
Don't think you guys are thinking of the chance and
the same sort of outcome.
Speaker 3 (10:52):
Yes, I think what he was saying is that Crypto
is going to do huge things for the world, and
if I'm just going to be like another hater, that's
how it wouldah.
Speaker 2 (11:06):
Teather ends up being the crux of the book. I
would say, so much revolves around Tether and coming things
just leading you back to Tether. But one of maybe
the more interesting avenues was with this character named Vicky,
who I like to call your pseudo girlfriend, maybe because
(11:26):
that's an interesting way to put it. So tell us
who Vicky is, how that relationship developed, and then what
that led you to. And this is I mean, really,
this was like such a great part of the book.
Speaker 3 (11:37):
One of the questions I have as throughout my two
years is who's using tether. One of the people I
find who's using it a lot I won't get is
Sam Bankman freed for his exchange FTX. But another thing
I hear about is people crooks are using this for
like money laundering, and then one day, I get one
of those random messages that like everybody gets. It's just
(11:58):
like a text mess and it's just like, hey, David,
like how's it going. And I'm like, I'm not David.
Speaker 1 (12:07):
And everyone else ignores these text messages. Yeah, it's like
I think we got a story here.
Speaker 3 (12:13):
Yeah, I'm like I was kind of like, you know what,
let's see where this goes. And so I wrote back.
I was like, I'm not David, I'm Zeke, but like,
who are you? And she says she's Vicky, and Vicky
from New York, right from New York. Yes, and we
kind of become pals. And she doesn't immediately let on
to what her angle is. She's just telling me about herself,
(12:36):
asking me what I like to do about my life.
She asked me to send her a picture.
Speaker 1 (12:41):
It sounds like the typical catfishing scheme at first. Yeah,
it's not quite that right. I was kind of playing
along and waiting for this to happen. And what it
is that she starts to let on that she's a
great crypto trader, like she's learned some tricks from like
her uncle or something. After like days of chatting and
where I finally had to be like, Vicky, I need
one hundred grand so I can get a Tesla. And
(13:02):
then she was like, I'll let you in on my secret.
And this is what I really wanted, what I was
waiting for. She has me download like a crypto trading
app that I had to like, she had structured me
how to sideload it on my iPhone, like it wasn't
from the official app store, and it looked like pretty legit.
But this is how the scam works. They get you
to buy tether on a regular trading app like coinbase,
(13:27):
orcrypto dot com, and then send it to this special
app where you're gonna learn how to use the like
short term nodes, and like, once you've sent the money
to it was called zbxss, it appears to be in
your account and everything, just like it would be on
a normal app, and like if you make trades, they'll
show you gains. They might even let you make a
(13:47):
small withdrawal, but like, really, once you've sent the tether
over to zbxss, it's gone. So at this point I
feel like I've gotten her tether address, and I feel
like I've let this go on long enough, and I'm
like Vicky, I have to tell you, Like I'm an
investigative reporter. I've been looking into these kinds of crypto
scams and how they use teather, and I've heard some
(14:08):
like disturbing things about what might be going on, which
I'll get into. Can we talk about can we get
real here? And then Vicky just said oh no, no, no, no,
it's not what you think, and she disappeared.
Speaker 2 (14:20):
I'm shocked.
Speaker 3 (14:21):
Yeah, So this is the real crazy part, which is
that I learned from reports out of Cambodia that a
lot of the people who run these kinds of scams
are themselves victims. And it sounds like some sort of
Quanon conspiracy theory, but they're victims of human trafficking. And
there's actually these whole office towers, floor after floor of
(14:45):
people who've been let's say they've been lured from say
like Vietnam, with the offer of like a good job
and like customer service. Then when they get there, they're trapped.
They're told they can't leave, they're beaten, they get electric shocks,
other forms of torture, and they're just made They're given
like ten phones each and made to like try to
lure people into scams from around the world. So I
(15:09):
suspected that Vicky was like one of these people, and
I wanted to, Like I was hoping she would tell
me more about like her working conditions, or that even
I might be able to, like somehow help her.
Speaker 1 (15:22):
But no Dice.
Speaker 3 (15:23):
So I start to go down this rabbit hole of
these other people who've looked into this, and there's actually
this crazy organization of people who've been scammed who, instead
of trying to get revenge, have made it their mission
to help these human trafficked scammers. Through them, I meet
a lot of experts are working on this. One guy
(15:44):
tells me that a crypto tracing expert, he estimates that
this accounts for like that ten billion dollars has been
lost this way and all using tether. From these guys,
I get connected with a YouTuber in Vietnam who's his
thing that he pays ransoms to help people get out
of these scam compounds. He connects me with some of
(16:06):
the victims who he's helped rescue, and I start talking
with them with a translator about their experiences. And I
meet this one guy, Twee, who had just gotten out
of one of the most famous compounds in Cambodia. He
tells me about just like horrific things like this. He's
in this compound that holds some people, say like five
(16:27):
or six thousand people.
Speaker 1 (16:28):
Wow. And it's all in Cambodia.
Speaker 3 (16:31):
Yes, and Seannookville in southwestern Cambodia, and it's it's called Chinatown.
It's run by like Chinese gangsters. So I've made arrangements
with two reporters in Cambodia who had really been instrumental
in exposing this problem and bringing it to light, and
went over to out there to meet some of these
(16:51):
victims and to see some of these compounds myself.
Speaker 1 (16:55):
Yeah, you know, and this is a scam that sounds
like it's really would only be made possible because of
crypto and because of the sort of you know, no
border transactions that are allowed with crypto.
Speaker 3 (17:06):
That's really what made me think it was so interesting,
because I yeah, like there've always been these kinds of scams,
but there haven't been such a first of all, I mean,
the Crypto's story makes it very plausible that or at
least mildly plausible, that someone like Vicky might have some
secret trading secret.
Speaker 1 (17:24):
I mean, in the crypto world, like people are getting ridy.
Everyone's suffering from fomo. Like you said, you know, everyone's thinking,
you know, should I be in? Should I be in
this asset class? Everyone else's seems to be making money.
It's it's perfect timing for a scam like that.
Speaker 3 (17:39):
I feel weird just even thinking about it, but I'm
getting what I would get to Cambodia with these reporters,
mech Doron, Danielle Keaton Olsen, who had brought this Chinatown
problem to light. Right at the entrance to Chinatown, there
was a cash exchange store and I could still see
their like faded sign where they offered to trade tether
(18:00):
for cash. And like I'd spent like years looking ato crypto,
I'm not seeing any place where it's actually used in
the real world. But then, like in panom Pen, I
went to a currency exchange place to advertise teather. Outside
I saw a bunch of these and I, you know,
I had some tether on my phone, zapped it over
to this Chinese guy working behind the counter. He gave
(18:22):
me US dollars, no questions asked, and finally I'm like, oh,
like this is what crypto is good for.
Speaker 2 (18:28):
That's another part of the book that I wanted to
ask you about. Where you go to this money exchange
and this man comes in with flip flops and pajama pants.
He has this big plastic bundle of one hundred dollars bills. Ye.
Speaker 3 (18:41):
So this currency exchange was in the capital in Panompen
and the capital of Cambodia, in a sort of Chinese neighborhood.
So the boss was Chinese. This other Chinese guy walks
in kind of like hungover and just walks out with Yeah,
this brick of hundreds that a clerk told me later
(19:04):
was fifty grand. This is the Teather exchange. And I
since I sent some tether to the exchange place, I
got their wallet address and was able to see that
they were making big transfers every day. And this is
just one of many exchange places. And I visited another
town that was reportedly home to a lot of these
scam compounds with forced labor. It was the first place
(19:28):
I saw in Cambodia. I crossed the border, I got
off the bus. I'm at this town that's full of
like scam compounds where I've seen videos of like workers
getting beaten and right in the parking lot of one
of these casinos. I see a little booth that's advertising
trade your dollars for tether, Trade your tether for dollars,
(19:48):
And I was just like, I don't know, it's not
evidence of anything, but I'm.
Speaker 1 (19:51):
Like, so, you know, I think throughout the crypto boom,
many people were where released suspicious that yeah, it's frequently
you crypto is frequently used to facilitate scams like this
or make sort of this new version of these scams possible.
But what caught a lot of people by surprise, I
think fil Donna and I included, and then many in
(20:12):
the press, is that some of the players who were considered,
you know, the righteous leaders of this movement were scam
artists too, allegedly. And obviously the name that comes to
mind is Sam Bankman Freed. He really seemed to have
the world convinced that he was just sort of this
honest programmer who's building the infrastructure for crypto and you
(20:37):
can trust him. He testified before Congress. You met Sam
a few times in the Bahamas, and I think one
time in Miami too. It just talked to us about
meeting him, your first impressions and just kind of your
reporting process with SBF.
Speaker 3 (20:55):
I met him first time at this first crypto conference
I went to in Miami. He was there to have
the Miami Heats arena named after his company. He was
not like quite so famous yet, and I just wanted
to ask him some questions about tether But as soon
as I met him, I'm like, this guy is a
really fascinating character in himself. He's twenty nine years old,
(21:18):
he's worth like twenty billion. But what really gets me
going is that he tells me about I mean, his
shop worn story about effective altruism. But like, when this
guy was a teenager at MIT, and I've talked with
other people who knew him, like, I don't think this
is made up.
Speaker 1 (21:36):
He was.
Speaker 3 (21:38):
He was a vegan, he was an activist. He was
like handing out animal cruelty pamphlets. Then he meets this
philosopher who's they're talking about life. Sam is like, how
could I do something good for the world, And a
philosopher is like, I got an idea. Yeah, I mean,
anyone can give out pamphlets. How about you get rich
and give the money away? And he called this earning
(21:58):
to give. He he decides to do that and then
ten years later when I meet him, he's legitimately one
of the richest people in the world.
Speaker 1 (22:06):
See Ke, You've got one of the best BS detectors
in the world. It feels like that, at least at
the beginning, was genuine. Do you think this altruism?
Speaker 3 (22:15):
Yeah, So, now that FTX has been revealed to be
like a fraud and that users lost so much money,
he's about to go on trial. A lot of people
have questioned, did he ever believe any of that? Was
it a scam from the start? I kind of think
that it was true, that he really did want to
make money to give it away, and that in fact,
(22:38):
his belief that he was a good person who was
going to do good things for the world may have
led him to take risks to do fraudulent things because
he was like, if it's going to make me rich,
is justified, because I might save the world from the
evil robots that are coming. But yeah, so when I
met him, I was suspicious of Crypto, but I did
(23:00):
not think I thought it was a bit weird that
he's supposedly this great guy, but he's running what's essentially
like an offshore gambling parlor where like I think people
are all going to lose their money because like even
day trading is a bad idea, like it's proven to
be a money loser.
Speaker 1 (23:14):
But I mean, you can be an honest broker running
an offshore gambling parlor.
Speaker 3 (23:19):
Right I so immediately though, I was really taken by
his idea, because, like you were saying, I've always talked
with these scammers. I've actually even sort of had this
idea that it would be kind of cool if somebody
ran a scam for good and gave them money to charity.
And one of our first like in depth conversations I
was talking with Sam, he hadn't given very much money
(23:39):
away yet because and he was like, listen, I've given
away like a hundred million, but it's hard for me
because so much of my net worth is locked up
in the valuation of his private company, which I thought
was like, come on, you can't borrow against it. But whatever,
it was at least like a plausible excuse. But I
was like, Sam, you have so much credibility the crypto world.
(24:02):
You could do a scam right now. You could probably
make like several billion dollars give it away right now.
Wouldn't that be better? Than like whatever you're working on.
If what you're working on is too slow, and he
was just like, I think I could make more money
in the long run, being honest that checked out. I
was like, you know, you're probably right, even if you
(24:23):
could make a few billion with a scam. I later
went to go visit him in the Bahamas after FTX
had collapsed, but before the cops got there, and he
told me he was like, there was one thing I
wasn't totally straightforward with you about the first time we met.
You know, I told you my net worth was twenty billion.
(24:43):
If you like really looked at my networth on paper,
it was more like one hundred billion. He had so
much money of but all in these random coin cryptocurrencies,
some of which like he'd invent it. But I don't know.
I think they the people, these guys really all got
caught up in the craziness.
Speaker 1 (25:03):
And who wouldn't. I don't know, Zeke, your stories are
so crazy that for the first time ever on Booker's Up,
(25:23):
I think we're gonna skip our craziest things and just
keep hearing more of Zeke's fat.
Speaker 2 (25:28):
Yeah, because it pales in comparison to some of this
stuff that we're hearing. So the book, Like you just
told us like three or four great stories, there's so
many more in the book. And what struck me is
that you took part in a lot of this, like
you actually did, you know, like the trading with and
texting with Vicki. You also try to buy your own
NFT so you can get into a party that you
(25:51):
ended up not having to need the NFT for, right,
And I'm just wondering about like your real world interactions
with the crypto industry, the crypto space, the people who
are part of this space, and maybe some of the
shortcomings of what you experienced. You know, when you sent
Vicki one hundred tether you actually sent eighty one tethers
(26:14):
because the fees were so high that they exchange took
and et cetera. There was just so much of your
experience being a part of this.
Speaker 3 (26:22):
Yeah, it was instructive to try to use crypto myself,
and I was kind of shamed into it because crypto
people were always like, you can't, you're biased, you don't
have crypto, you haven't tried it. How do you know
about crypto? So I finally was like, all right, fine,
you got me, I'm gonna try it. And I bought
a very expensive NFT one of these cartoons that go
(26:44):
for like hundreds of thousands of dollars. Mine was only
twenty thousand. It was like a picture of a melting monkey.
Speaker 2 (26:52):
When I read this part of it, I literally was like,
don't do it, don't do it.
Speaker 3 (26:56):
Yeah, if you get one of these, you're allowed to
go to ape Fest, which is like a week long festival.
But it was very instructive. This kind of boring part
of just like buying this ape because the process of
sending money from my bank to like crypto world was
just like horrible. It was terrifying. And when I learned
(27:20):
essentially if you know browser extensions like ad block, the
little icons next to the URL box and Chrome, it
was like, oh, like my money is going to live
there and if I click the wrong button, it'll just
be gone. I'm like, this is no fun in a
crypto app. It was a really popular one called meta Mask,
and when you sign up, they have you watch this
(27:40):
video where they're like, don't lose your password, we really
mean it in fact for real, have it engraved on
a piece of metal and then bury it in your backyard,
and I'm just like, first of all, no, I'm not
doing that. I'm too lazy. And then when I got
to ape Fest, this revealed like another problem with NFTs,
which is that they're supposed to be cool. When I
(28:01):
got to the club, everybody had a board epe. Mine
was the cheapest one, and even like pimply teenagers were like,
your board ape sucks. I even was able to confront
one of the promoters of the bard Ape Yacht Club,
who really, it's got very popular with celebrities. One of
the celebrities that was like instrumental and giddio it going
with Jimmy Fallon. He was there, but I was like, hey, Jimmy,
(28:25):
check out my board ape. He pretended to be interested.
At this point, the value of board apes had recently
gone down by like fifty percent. It had still had
a long way to go.
Speaker 2 (28:34):
But maybe it was this party or a different party
where you asked somebody like, what is the how can
this be useful for the everyday person? And the person
said to you, why are you asking me this? Like
why do you care so much about that aspect of it?
It's not that important.
Speaker 3 (28:48):
He was just like, truly baffled. That was at a
party for a different NFT thing called Degenerate Trash pandas
I tried to go to one called Solana Monkey Business
that they were costing twenty five thousand at the time,
but I wasn't ready. I was like, I'm not paying
for like a trash Panda or like monkey business. I
want the one that Justin Bieber has. But as soon
(29:08):
as I got that board ape, I was like, I
have to unload this, like I couldn't sleep. I was
able to sell it after the ape fest at only
a small loss.
Speaker 1 (29:17):
Zeke, let me square the circle here a little bit
and bring it back to Tether. You know, as we
started at the beginning, this is sort of what drew
you into the crypto rabbit hole. And yeah, and you
and I have talked about this before, and your original
Business Week story on Tether is just phenomenal. You know,
if I recommend people read the book, but also go
back and read that original BusinessWeek story, and I think
(29:40):
you had a line in there. How Tether as a
company seems to be like, you know, it's a carpet
knitted out of red flags basically, you know, there was
so much there to be suspicious of and rightly so,
you know, I no one knew where these reserves were.
They said they invested in commercial paper. No one in
the commercial paper market had ever heard of them. It
(30:00):
just seemed so suspiciously. But the ironic thing is that
so many things fell apart in crypto, FTX and Terra,
you know, the Luna Holy ecosystem and all the dominoes
that fell afterward. Tether is still there. It's still for
most of the time worth a buck. Walk us through
(30:21):
sort of the story arc of Tether from where you
started into where we are now and how you're thinking
about Tether, you know, is all these red flags what happened?
Speaker 3 (30:30):
Yeah, it was very surprising. I mean I was not
alone in thinking that they were like the most suspicious
company in crypto, and like when I published after I'd
investigated for a little while. I mean, there's a whole
backstory of it's the boss of Tether, who's former plastic
surgeon from Milan who had like a weird career and
import export business. But Tether was sued by New York's
(30:53):
Attorney General for misrepresenting its reserves. But in twenty twenty two,
in the summer when everybody's all the other crypto companies
started collapsing, really like a legitimately high percentage of all
the people I met in crypto their companies had were collapsing,
but Tether stayed strong and like they still have not
provided the detailed accounting of their risk of where they're
(31:15):
keeping their money that the critics had asked for. But
I mean, the way Tether works, you send money in,
they send you these Tether tokens, and if you send
the tokens back, they're supposed to send you the money back.
And people you can tell from looking at the blockchain
people during the crash, people did send back in billions
(31:38):
of dollars, billions of tokens, like five or ten billion
worth of tokens. And if those people did not get
their money, we would have heard the complaint. Tether was
able to send back a lot of money, Like they
clearly had at least a lot of money, and it
kept growing to where now it's seventy or eighty billion
dollars that they have. To the skeptics, they're like, hey,
(31:59):
just because they had if they may have had five billion,
that doesn't mean that everything they're saying now is accurate.
The owners of Tether are like, what more do you
want from us? We redeemed like ten billion dollars. But
the real plot twist for Teather came with interest rates.
So their business used to be kind of a bad business.
They were sitting on all this money, but they couldn't
(32:20):
do anything with it.
Speaker 1 (32:21):
Theoretically would be in the safest investments sealing nothing right.
Speaker 3 (32:24):
And that's where like there were some questions early on
that I think were legitimate. Were they taking some risks
with that to juice their returns? Now they can just
put it in treasuries. It's a small operation. And these guys,
if if their numbers now are accurate, they're saying they
are put buying treasuries and they're earning like billions of
dollars a year, like they're one of the more If
(32:46):
if this is all accurate, Tether's one of the most
profitable companies in the world. Like they're making more money
than like Nike. It's and it's just like this weird
former plastic surgeon in Italy, buddy from the importing business.
They are like the real winners of crypto and I
when I went down to the Bahamas in at the
(33:08):
end when Sam bankman Fried's company had collapsed. He was
a big user of tether, all these offshore casinos were,
and I thought maybe now he'd let me in on
the secret. I was like, so about Tether you got,
maybe now you can tell me the big secret.
Speaker 1 (33:23):
And he was like, no, Well, don I think I'm
gonna petition. Have my desk moved back closer to Zeke?
Can you tell us what's next? What's next on the
Zeke Fox agenda?
Speaker 3 (33:34):
Honestly, I've I only I wrote this book now because
I felt I'd never felt like I'd found the right story.
And I really don't know how I'm gonna how I'm
gonna match it.
Speaker 2 (33:43):
He needs a vacation.
Speaker 1 (33:47):
Well, Zeke Fox, author of Number Go Up and our
good friend here at Bloomberg. We could go on for hours,
but I think I think that's gonna have to do
with Zeke. Thanks so much for your time. Really appreciate it.
Thanks Mike, Thanks.
Speaker 2 (34:05):
What Goes Up. We'll be back next week. Until then,
you can find us on the Bloomberg Terminal, website and
app or wherever you get your podcasts. We'd love it
if you took the time to rate and review the
show so more listeners can find us. You can find
us on Twitter, follow me at Wildona Hirich. Mike Reagan
is at Reaganonymous. You can also follow Bloomber Podcasts at podcasts.
(34:30):
What Goes Up is produced by Stacy Wong and our
head of podcasts is Sage Paulman. Thanks so much for
listening and we'll see you next week
Hello, and welcome to What Goes Up, a weekly markets podcast.
My name is Mike Reagan. I'm a senior editor at Bloomberg.
Speaker 2 (00:19):
And I'm Wildona Hirik, across Acid reporter with Bloomberg, and.
Speaker 1 (00:22):
This week on the show, well WELDNA. I'm not sure
if listeners quite understand what our work environment is at Bloomberg.
We're all in this sort of open area. There's not
even cubicles, there's just desks, no knocks, tweets, so no
privacy none, and as a result, you can often overhear
other conversations, other reporters conversations, and I guess it's kind
(00:44):
of rude to eachstrap, but I mean.
Speaker 2 (00:46):
I do it.
Speaker 1 (00:47):
Yeah, we all do it.
Speaker 2 (00:48):
I listened to your lunch orders.
Speaker 1 (00:51):
But a lot of times what you overhear, what you
eaveschop on is super boring. You know, oh, why did
the stock market go Monday? And I'll say, not boring? Sure,
why is the market up today? What do you think
of this stock? You know? What does this economic data
mean for the market. That's where thing. It's very mundane stuff.
But about a decade ago, I was sitting near a
(01:12):
guy in next row over from me, who was on
the phone. I'd say ten hours a day, heavy Boston accent.
He was the most fun reporter to eavesdrop on I've
ever had in my career. Everyone else's asking about, you know,
the latest earnings and you know, what does the java's
claims number mean? And this guy would be talking about
(01:35):
scam artists, crime and strip clubs and drugs. Wow. I
wish I had recorded some of these interviews. It was
the most entertaining reporter evesdropping I think I've had in
my career.
Speaker 2 (01:48):
I can only imagine. I'm so jealous. I'm dying of
jealousy right now because I'd love to hear some of
this stuff.
Speaker 1 (01:53):
Well, don't be too jealous, because we have him. We
have him on the show this.
Speaker 2 (01:56):
Week because he wrote a book that was I read
a lot.
Speaker 1 (01:59):
Of books, not to you know, Oh, I know you do.
Speaker 2 (02:02):
I read a lot of books, but this was like
the best book I've read this year. It was so fun.
I read it so fast. Maybe one of these days
we'll let our audience know what book it. Who the
guy is without further ado, it's Zeke Fox. He is
our Bloomberg colleague, and he's the author of the brand
new book number go up. Inside Crypto's wild rise and
(02:23):
staggering fall. Zeke, I'm so happy you could join us.
Thank you so much for coming.
Speaker 3 (02:27):
Thanks for having me and for putting up with my
really loud conversations all those years.
Speaker 1 (02:32):
And I apologize for Eves wrapping on you all those years,
but no, it is possible.
Speaker 2 (02:35):
I'm sorry. Yeah, no, he's not sorry.
Speaker 1 (02:37):
What was like do you remember any of the well, so,
Zeke was pretty famous as an investigative journalist in our
circles in the financial world, long before Crypto, and I
think the probably the stuff I was Eves dropping on
might have been like the payday lender scams. Uh, one
of the first things you really started digging deep into.
Speaker 3 (02:58):
If I'm not mistaken, I mean, I have to admit that,
like you said, it's impossible, everyone's going to hear it.
And I talk pretty loud. I can't control myself. But
also I know that everyone's listening.
Speaker 2 (03:08):
I want to sit next to you. I'm going to
request it.
Speaker 1 (03:10):
Every new retrader should have to spend like a month's
sit next to Zeke and just listening to how he interviews.
It's a work of art.
Speaker 3 (03:16):
I learned a lot from Max Abelson, who would sit
near me. It was also very like a loud talker
and was great at inter getting these billionaires to tell
him all their secrets. He would be really interested in
their stories, but also he wouldn't let them off the hook.
He'd be like, don't just tell me that the new
CEO of Goldman Sachs is a nice guy? Like how
is he nice? Was he nice to you last Thursday?
(03:37):
What did he do that was so nice? How did
his eyes look while he made that nice statement?
Speaker 2 (03:42):
Okay, so you have your famous in the newsroom and
outside the newsroom for these strings of very interesting, intriguing stories,
very interesting characters. Mike mentioned the payday lenders. You have
so many. But so your new focus is crypto, and
I want to ask Q what made you go down
the crypto rabbit hole?
Speaker 3 (04:03):
Resisted looking into crypto? Like you said, I have always
really liked scams, and people would tell me crypto is
perfect for you, But there's something about it that I
didn't like it, because I like when you've got like
a kind of complicated scam and you have to look
through all the paperwork and figure out like the loophole
they're using and with crypto, they're just like, hey, buy
(04:24):
my new coin, and then like suddenly they're a billionaire.
I got into it like everybody else through Fomo. I
had this fuddy who we have like a group chat,
and he was texting us all about something he called
doggy coin. And this is like the height of the pandemic. Dudes,
you got to get some of this doggy coin. It's
so funny. It's going to go up, and I'm like,
(04:48):
it's dogecoin. And this already went viral, like several years ago.
They made fun of it on the Daily Show. It
was not even funny to begin with. This will never
happen again. But like he was right, doge coin went
up and he made a fair amount of money. And
he's sending us pictures from Disney World. He's like, he said,
(05:08):
I'm freaking nostra damis. You know, if you had listened
to me and bought dogecoin, you'd all be rich now
in Disney World, Yes, which would be a I do
not want to go there, so all.
Speaker 2 (05:19):
The prices are like extortions. Yeah, he must have made
a lot of money.
Speaker 3 (05:23):
This primed me to be like, you know what I
really want to prove I am still right. This stuff
is dumb. I'm going to look into it. And then
I Joel Weber, the editor of BusinessWeek, came by and
was like he had an idea for a crypto story,
and like in the past I might have turned it down,
but this time I was like, no, I'm going to
(05:43):
look into it. And once I did, like the first
part of it was to go to one of these
crypto conferences, and I was just like, as soon as
I started, I was like, oh my god, this is
a crazy world. Whatever you think about crypto, these people
are making like billions of dollars. This has got to
be like one of the craziest things happened in the
history of finance. It turned into like a two year
trip down the rabbit hole. By the end, I was
(06:05):
in like Cambodia.
Speaker 1 (06:06):
As one does. Yeah. But so that initial story from
Joel was about tether, which listeners who are unaware it's
a stable coin, which is a crypto coin that's meant
to track the US dollar exactly one to one, no
more and no less than. The idea is that he
maybe you made a bunch of money in crypto, and
now you want to store it in US dollar or
(06:29):
stable value, or you want to move it from one
exchange to the other, or whatever you want to do.
You want to keep it in that one dollar increment.
So Joel came here about tether, and that put you
onto the trail of a guy named Brock Pierce. So
talk to us about brock Pierce, and you're sort of
pursuit of him to find him and ask him about
what's going on with Tether.
Speaker 3 (06:50):
The best resume I've ever seen of anyone in finance.
He started off early. He was a child actor. He's
in the Disney classic The Mighty Ducks and he plays
the coach Gordon Bombay in a flashback when he misses
this crucial penalty shot that haunts him decades later.
Speaker 1 (07:08):
Away.
Speaker 3 (07:08):
Oh no, it's right at the beginning of the movie.
Don't worry, So he went on. It wasn't just like
this one movie. He started in one called First Kid.
He had kind of like a Macaulay Culkin look. But
then he quit acting. As a teenager, he gets hired
at this dot com startup called den. He's given like
this great title, two hundred and fifty thousand dollars a
year salary. What happens at Den truly bizarre. Not even
(07:33):
sure it's appropriate to talk about in this podcast. You'll
have to read about it. Yeah, But by the end
of it, he's fled to Spain with the founder of Den,
and he's gotten really into massively multiplayer online games. He
ran a virtual item trading companies. Basically, you want to
get ahead quick in this game everquestor World of Warcraft,
(07:53):
you could pay real money to buy the megasword and
then you know, bump up to level seventeen really quick.
This would be big business, and he eventually hired Steve
Bannon randomly to be like the chairman of the company.
They made a big I think they sold it to
Did they sell it to Goldman Sachs or Goldman Sacks
broker the deal. Anyway, he gets out of this deal rich,
(08:16):
and he sees the potential of making real money from
the virtual world, and he becomes one of the earliest
investors in crypto. There's some debate over how much credit
he gets, but he's a co founder of Tether, which
was this first stable coin. So when I went to
go look into Tether, the big mystery was like, by
the time I'm looking into it, Tether claims that they
(08:39):
have fifty billion dollars in the bank somewhere, but they
won't say where. So I'm trying to find this fifty
billion dollars. And at the time, people are really worried
about this. Jim Kramer's on TV being like this could
crash everything, Like where's Tether's money? They won't say. Even
Janet Yellen held a meeting of all the top financial
regulators where they're like, where's Tether's money, What's gonna happen?
(09:00):
What does this mean for financial market? Yeah, So as
I started to look into it, I just couldn't believe
that this coin that was seemingly so important basically appeared
to be like the central bank of crypto, a key
point in the infrastructure holding all these schemes together, had
been founded by the Mighty Ducks guy. So in the
book I talk about I went down to a crypto
(09:23):
conference in Miami and went to a party at Brock's
house or a house he'd rented for the conference, and
it was truly just like the weirdest scene, like everyone's
just sort of milling about, getting like drunk, drunker and drunker.
Brock's not there, And when After I spend like a
whole day there, Brock shows up and then immediately disappears.
(09:46):
I catch up with him at another conference in the Bahamas.
I hear from a friend of mine is like, hey,
last night, I was at the craziest party on this yacht.
It was this mega yacht that this crypto billionaire bought
from this Russian oligarch. And she's just showing me her Instagram.
She shows me this video of him jumping off the
yacht and I'm like, oh my god, Brock's here. So
I text him. I'm like, can I come to your yacht?
(10:09):
He sends a speedboat to the sequel. Yes, it was
very I'm not gonna lie, it was very cool. So
when we finally talk and get into it and talk
about Tether, at this point he's sold his stake in
the company, he says for no money, and he it
turns out to be kind of like a dead end,
(10:30):
like he doesn't really know where this fifty billion dollars is.
But he's a really compelling interview. When we started talking
about like the mystery and how does he have any
clues about how to find Tether's money. But he's like
that do not mess this one up. This could be
your big chance, and I'm like, I totally agree, But also,
what's going on here, Brock, I.
Speaker 1 (10:47):
Don't think you guys are thinking of the chance and
the same sort of outcome.
Speaker 3 (10:52):
Yes, I think what he was saying is that Crypto
is going to do huge things for the world, and
if I'm just going to be like another hater, that's
how it wouldah.
Speaker 2 (11:06):
Teather ends up being the crux of the book. I
would say, so much revolves around Tether and coming things
just leading you back to Tether. But one of maybe
the more interesting avenues was with this character named Vicky,
who I like to call your pseudo girlfriend, maybe because
(11:26):
that's an interesting way to put it. So tell us
who Vicky is, how that relationship developed, and then what
that led you to. And this is I mean, really,
this was like such a great part of the book.
Speaker 3 (11:37):
One of the questions I have as throughout my two
years is who's using tether. One of the people I
find who's using it a lot I won't get is
Sam Bankman freed for his exchange FTX. But another thing
I hear about is people crooks are using this for
like money laundering, and then one day, I get one
of those random messages that like everybody gets. It's just
(11:58):
like a text mess and it's just like, hey, David,
like how's it going. And I'm like, I'm not David.
Speaker 1 (12:07):
And everyone else ignores these text messages. Yeah, it's like
I think we got a story here.
Speaker 3 (12:13):
Yeah, I'm like I was kind of like, you know what,
let's see where this goes. And so I wrote back.
I was like, I'm not David, I'm Zeke, but like,
who are you? And she says she's Vicky, and Vicky
from New York, right from New York. Yes, and we
kind of become pals. And she doesn't immediately let on
to what her angle is. She's just telling me about herself,
(12:36):
asking me what I like to do about my life.
She asked me to send her a picture.
Speaker 1 (12:41):
It sounds like the typical catfishing scheme at first. Yeah,
it's not quite that right. I was kind of playing
along and waiting for this to happen. And what it
is that she starts to let on that she's a
great crypto trader, like she's learned some tricks from like
her uncle or something. After like days of chatting and
where I finally had to be like, Vicky, I need
one hundred grand so I can get a Tesla. And
(13:02):
then she was like, I'll let you in on my secret.
And this is what I really wanted, what I was
waiting for. She has me download like a crypto trading
app that I had to like, she had structured me
how to sideload it on my iPhone, like it wasn't
from the official app store, and it looked like pretty legit.
But this is how the scam works. They get you
to buy tether on a regular trading app like coinbase,
(13:27):
orcrypto dot com, and then send it to this special
app where you're gonna learn how to use the like
short term nodes, and like, once you've sent the money
to it was called zbxss, it appears to be in
your account and everything, just like it would be on
a normal app, and like if you make trades, they'll
show you gains. They might even let you make a
(13:47):
small withdrawal, but like, really, once you've sent the tether
over to zbxss, it's gone. So at this point I
feel like I've gotten her tether address, and I feel
like I've let this go on long enough, and I'm
like Vicky, I have to tell you, Like I'm an
investigative reporter. I've been looking into these kinds of crypto
scams and how they use teather, and I've heard some
(14:08):
like disturbing things about what might be going on, which
I'll get into. Can we talk about can we get
real here? And then Vicky just said oh no, no, no, no,
it's not what you think, and she disappeared.
Speaker 2 (14:20):
I'm shocked.
Speaker 3 (14:21):
Yeah, So this is the real crazy part, which is
that I learned from reports out of Cambodia that a
lot of the people who run these kinds of scams
are themselves victims. And it sounds like some sort of
Quanon conspiracy theory, but they're victims of human trafficking. And
there's actually these whole office towers, floor after floor of
(14:45):
people who've been let's say they've been lured from say
like Vietnam, with the offer of like a good job
and like customer service. Then when they get there, they're trapped.
They're told they can't leave, they're beaten, they get electric shocks,
other forms of torture, and they're just made They're given
like ten phones each and made to like try to
lure people into scams from around the world. So I
(15:09):
suspected that Vicky was like one of these people, and
I wanted to, Like I was hoping she would tell
me more about like her working conditions, or that even
I might be able to, like somehow help her.
Speaker 1 (15:22):
But no Dice.
Speaker 3 (15:23):
So I start to go down this rabbit hole of
these other people who've looked into this, and there's actually
this crazy organization of people who've been scammed who, instead
of trying to get revenge, have made it their mission
to help these human trafficked scammers. Through them, I meet
a lot of experts are working on this. One guy
(15:44):
tells me that a crypto tracing expert, he estimates that
this accounts for like that ten billion dollars has been
lost this way and all using tether. From these guys,
I get connected with a YouTuber in Vietnam who's his
thing that he pays ransoms to help people get out
of these scam compounds. He connects me with some of
(16:06):
the victims who he's helped rescue, and I start talking
with them with a translator about their experiences. And I
meet this one guy, Twee, who had just gotten out
of one of the most famous compounds in Cambodia. He
tells me about just like horrific things like this. He's
in this compound that holds some people, say like five
(16:27):
or six thousand people.
Speaker 1 (16:28):
Wow. And it's all in Cambodia.
Speaker 3 (16:31):
Yes, and Seannookville in southwestern Cambodia, and it's it's called Chinatown.
It's run by like Chinese gangsters. So I've made arrangements
with two reporters in Cambodia who had really been instrumental
in exposing this problem and bringing it to light, and
went over to out there to meet some of these
(16:51):
victims and to see some of these compounds myself.
Speaker 1 (16:55):
Yeah, you know, and this is a scam that sounds
like it's really would only be made possible because of
crypto and because of the sort of you know, no
border transactions that are allowed with crypto.
Speaker 3 (17:06):
That's really what made me think it was so interesting,
because I yeah, like there've always been these kinds of scams,
but there haven't been such a first of all, I mean,
the Crypto's story makes it very plausible that or at
least mildly plausible, that someone like Vicky might have some
secret trading secret.
Speaker 1 (17:24):
I mean, in the crypto world, like people are getting ridy.
Everyone's suffering from fomo. Like you said, you know, everyone's thinking,
you know, should I be in? Should I be in
this asset class? Everyone else's seems to be making money.
It's it's perfect timing for a scam like that.
Speaker 3 (17:39):
I feel weird just even thinking about it, but I'm
getting what I would get to Cambodia with these reporters,
mech Doron, Danielle Keaton Olsen, who had brought this Chinatown
problem to light. Right at the entrance to Chinatown, there
was a cash exchange store and I could still see
their like faded sign where they offered to trade tether
(18:00):
for cash. And like I'd spent like years looking ato crypto,
I'm not seeing any place where it's actually used in
the real world. But then, like in panom Pen, I
went to a currency exchange place to advertise teather. Outside
I saw a bunch of these and I, you know,
I had some tether on my phone, zapped it over
to this Chinese guy working behind the counter. He gave
(18:22):
me US dollars, no questions asked, and finally I'm like, oh,
like this is what crypto is good for.
Speaker 2 (18:28):
That's another part of the book that I wanted to
ask you about. Where you go to this money exchange
and this man comes in with flip flops and pajama pants.
He has this big plastic bundle of one hundred dollars bills. Ye.
Speaker 3 (18:41):
So this currency exchange was in the capital in Panompen
and the capital of Cambodia, in a sort of Chinese neighborhood.
So the boss was Chinese. This other Chinese guy walks
in kind of like hungover and just walks out with Yeah,
this brick of hundreds that a clerk told me later
(19:04):
was fifty grand. This is the Teather exchange. And I
since I sent some tether to the exchange place, I
got their wallet address and was able to see that
they were making big transfers every day. And this is
just one of many exchange places. And I visited another
town that was reportedly home to a lot of these
scam compounds with forced labor. It was the first place
(19:28):
I saw in Cambodia. I crossed the border, I got
off the bus. I'm at this town that's full of
like scam compounds where I've seen videos of like workers
getting beaten and right in the parking lot of one
of these casinos. I see a little booth that's advertising
trade your dollars for tether, Trade your tether for dollars,
(19:48):
And I was just like, I don't know, it's not
evidence of anything, but I'm.
Speaker 1 (19:51):
Like, so, you know, I think throughout the crypto boom,
many people were where released suspicious that yeah, it's frequently
you crypto is frequently used to facilitate scams like this
or make sort of this new version of these scams possible.
But what caught a lot of people by surprise, I
think fil Donna and I included, and then many in
(20:12):
the press, is that some of the players who were considered,
you know, the righteous leaders of this movement were scam
artists too, allegedly. And obviously the name that comes to
mind is Sam Bankman Freed. He really seemed to have
the world convinced that he was just sort of this
honest programmer who's building the infrastructure for crypto and you
(20:37):
can trust him. He testified before Congress. You met Sam
a few times in the Bahamas, and I think one
time in Miami too. It just talked to us about
meeting him, your first impressions and just kind of your
reporting process with SBF.
Speaker 3 (20:55):
I met him first time at this first crypto conference
I went to in Miami. He was there to have
the Miami Heats arena named after his company. He was
not like quite so famous yet, and I just wanted
to ask him some questions about tether But as soon
as I met him, I'm like, this guy is a
really fascinating character in himself. He's twenty nine years old,
(21:18):
he's worth like twenty billion. But what really gets me
going is that he tells me about I mean, his
shop worn story about effective altruism. But like, when this
guy was a teenager at MIT, and I've talked with
other people who knew him, like, I don't think this
is made up.
Speaker 1 (21:36):
He was.
Speaker 3 (21:38):
He was a vegan, he was an activist. He was
like handing out animal cruelty pamphlets. Then he meets this
philosopher who's they're talking about life. Sam is like, how
could I do something good for the world, And a
philosopher is like, I got an idea. Yeah, I mean,
anyone can give out pamphlets. How about you get rich
and give the money away? And he called this earning
(21:58):
to give. He he decides to do that and then
ten years later when I meet him, he's legitimately one
of the richest people in the world.
Speaker 1 (22:06):
See Ke, You've got one of the best BS detectors
in the world. It feels like that, at least at
the beginning, was genuine. Do you think this altruism?
Speaker 3 (22:15):
Yeah, So, now that FTX has been revealed to be
like a fraud and that users lost so much money,
he's about to go on trial. A lot of people
have questioned, did he ever believe any of that? Was
it a scam from the start? I kind of think
that it was true, that he really did want to
make money to give it away, and that in fact,
(22:38):
his belief that he was a good person who was
going to do good things for the world may have
led him to take risks to do fraudulent things because
he was like, if it's going to make me rich,
is justified, because I might save the world from the
evil robots that are coming. But yeah, so when I
met him, I was suspicious of Crypto, but I did
(23:00):
not think I thought it was a bit weird that
he's supposedly this great guy, but he's running what's essentially
like an offshore gambling parlor where like I think people
are all going to lose their money because like even
day trading is a bad idea, like it's proven to
be a money loser.
Speaker 1 (23:14):
But I mean, you can be an honest broker running
an offshore gambling parlor.
Speaker 3 (23:19):
Right I so immediately though, I was really taken by
his idea, because, like you were saying, I've always talked
with these scammers. I've actually even sort of had this
idea that it would be kind of cool if somebody
ran a scam for good and gave them money to charity.
And one of our first like in depth conversations I
was talking with Sam, he hadn't given very much money
(23:39):
away yet because and he was like, listen, I've given
away like a hundred million, but it's hard for me
because so much of my net worth is locked up
in the valuation of his private company, which I thought
was like, come on, you can't borrow against it. But whatever,
it was at least like a plausible excuse. But I
was like, Sam, you have so much credibility the crypto world.
(24:02):
You could do a scam right now. You could probably
make like several billion dollars give it away right now.
Wouldn't that be better? Than like whatever you're working on.
If what you're working on is too slow, and he
was just like, I think I could make more money
in the long run, being honest that checked out. I
was like, you know, you're probably right, even if you
(24:23):
could make a few billion with a scam. I later
went to go visit him in the Bahamas after FTX
had collapsed, but before the cops got there, and he
told me he was like, there was one thing I
wasn't totally straightforward with you about the first time we met.
You know, I told you my net worth was twenty billion.
(24:43):
If you like really looked at my networth on paper,
it was more like one hundred billion. He had so
much money of but all in these random coin cryptocurrencies,
some of which like he'd invent it. But I don't know.
I think they the people, these guys really all got
caught up in the craziness.
Speaker 1 (25:03):
And who wouldn't. I don't know, Zeke, your stories are
so crazy that for the first time ever on Booker's Up,
(25:23):
I think we're gonna skip our craziest things and just
keep hearing more of Zeke's fat.
Speaker 2 (25:28):
Yeah, because it pales in comparison to some of this
stuff that we're hearing. So the book, Like you just
told us like three or four great stories, there's so
many more in the book. And what struck me is
that you took part in a lot of this, like
you actually did, you know, like the trading with and
texting with Vicki. You also try to buy your own
NFT so you can get into a party that you
(25:51):
ended up not having to need the NFT for, right,
And I'm just wondering about like your real world interactions
with the crypto industry, the crypto space, the people who
are part of this space, and maybe some of the
shortcomings of what you experienced. You know, when you sent
Vicki one hundred tether you actually sent eighty one tethers
(26:14):
because the fees were so high that they exchange took
and et cetera. There was just so much of your
experience being a part of this.
Speaker 3 (26:22):
Yeah, it was instructive to try to use crypto myself,
and I was kind of shamed into it because crypto
people were always like, you can't, you're biased, you don't
have crypto, you haven't tried it. How do you know
about crypto? So I finally was like, all right, fine,
you got me, I'm gonna try it. And I bought
a very expensive NFT one of these cartoons that go
(26:44):
for like hundreds of thousands of dollars. Mine was only
twenty thousand. It was like a picture of a melting monkey.
Speaker 2 (26:52):
When I read this part of it, I literally was like,
don't do it, don't do it.
Speaker 3 (26:56):
Yeah, if you get one of these, you're allowed to
go to ape Fest, which is like a week long festival.
But it was very instructive. This kind of boring part
of just like buying this ape because the process of
sending money from my bank to like crypto world was
just like horrible. It was terrifying. And when I learned
(27:20):
essentially if you know browser extensions like ad block, the
little icons next to the URL box and Chrome, it
was like, oh, like my money is going to live
there and if I click the wrong button, it'll just
be gone. I'm like, this is no fun in a
crypto app. It was a really popular one called meta Mask,
and when you sign up, they have you watch this
(27:40):
video where they're like, don't lose your password, we really
mean it in fact for real, have it engraved on
a piece of metal and then bury it in your backyard,
and I'm just like, first of all, no, I'm not
doing that. I'm too lazy. And then when I got
to ape Fest, this revealed like another problem with NFTs,
which is that they're supposed to be cool. When I
(28:01):
got to the club, everybody had a board epe. Mine
was the cheapest one, and even like pimply teenagers were like,
your board ape sucks. I even was able to confront
one of the promoters of the bard Ape Yacht Club,
who really, it's got very popular with celebrities. One of
the celebrities that was like instrumental and giddio it going
with Jimmy Fallon. He was there, but I was like, hey, Jimmy,
(28:25):
check out my board ape. He pretended to be interested.
At this point, the value of board apes had recently
gone down by like fifty percent. It had still had
a long way to go.
Speaker 2 (28:34):
But maybe it was this party or a different party
where you asked somebody like, what is the how can
this be useful for the everyday person? And the person
said to you, why are you asking me this? Like
why do you care so much about that aspect of it?
It's not that important.
Speaker 3 (28:48):
He was just like, truly baffled. That was at a
party for a different NFT thing called Degenerate Trash pandas
I tried to go to one called Solana Monkey Business
that they were costing twenty five thousand at the time,
but I wasn't ready. I was like, I'm not paying
for like a trash Panda or like monkey business. I
want the one that Justin Bieber has. But as soon
(29:08):
as I got that board ape, I was like, I
have to unload this, like I couldn't sleep. I was
able to sell it after the ape fest at only
a small loss.
Speaker 1 (29:17):
Zeke, let me square the circle here a little bit
and bring it back to Tether. You know, as we
started at the beginning, this is sort of what drew
you into the crypto rabbit hole. And yeah, and you
and I have talked about this before, and your original
Business Week story on Tether is just phenomenal. You know,
if I recommend people read the book, but also go
back and read that original BusinessWeek story, and I think
(29:40):
you had a line in there. How Tether as a
company seems to be like, you know, it's a carpet
knitted out of red flags basically, you know, there was
so much there to be suspicious of and rightly so,
you know, I no one knew where these reserves were.
They said they invested in commercial paper. No one in
the commercial paper market had ever heard of them. It
(30:00):
just seemed so suspiciously. But the ironic thing is that
so many things fell apart in crypto, FTX and Terra,
you know, the Luna Holy ecosystem and all the dominoes
that fell afterward. Tether is still there. It's still for
most of the time worth a buck. Walk us through
(30:21):
sort of the story arc of Tether from where you
started into where we are now and how you're thinking
about Tether, you know, is all these red flags what happened?
Speaker 3 (30:30):
Yeah, it was very surprising. I mean I was not
alone in thinking that they were like the most suspicious
company in crypto, and like when I published after I'd
investigated for a little while. I mean, there's a whole
backstory of it's the boss of Tether, who's former plastic
surgeon from Milan who had like a weird career and
import export business. But Tether was sued by New York's
(30:53):
Attorney General for misrepresenting its reserves. But in twenty twenty two,
in the summer when everybody's all the other crypto companies
started collapsing, really like a legitimately high percentage of all
the people I met in crypto their companies had were collapsing,
but Tether stayed strong and like they still have not
provided the detailed accounting of their risk of where they're
(31:15):
keeping their money that the critics had asked for. But
I mean, the way Tether works, you send money in,
they send you these Tether tokens, and if you send
the tokens back, they're supposed to send you the money back.
And people you can tell from looking at the blockchain
people during the crash, people did send back in billions
(31:38):
of dollars, billions of tokens, like five or ten billion
worth of tokens. And if those people did not get
their money, we would have heard the complaint. Tether was
able to send back a lot of money, Like they
clearly had at least a lot of money, and it
kept growing to where now it's seventy or eighty billion
dollars that they have. To the skeptics, they're like, hey,
(31:59):
just because they had if they may have had five billion,
that doesn't mean that everything they're saying now is accurate.
The owners of Tether are like, what more do you
want from us? We redeemed like ten billion dollars. But
the real plot twist for Teather came with interest rates.
So their business used to be kind of a bad business.
They were sitting on all this money, but they couldn't
(32:20):
do anything with it.
Speaker 1 (32:21):
Theoretically would be in the safest investments sealing nothing right.
Speaker 3 (32:24):
And that's where like there were some questions early on
that I think were legitimate. Were they taking some risks
with that to juice their returns? Now they can just
put it in treasuries. It's a small operation. And these guys,
if if their numbers now are accurate, they're saying they
are put buying treasuries and they're earning like billions of
dollars a year, like they're one of the more If
(32:46):
if this is all accurate, Tether's one of the most
profitable companies in the world. Like they're making more money
than like Nike. It's and it's just like this weird
former plastic surgeon in Italy, buddy from the importing business.
They are like the real winners of crypto and I
when I went down to the Bahamas in at the
(33:08):
end when Sam bankman Fried's company had collapsed. He was
a big user of tether, all these offshore casinos were,
and I thought maybe now he'd let me in on
the secret. I was like, so about Tether you got,
maybe now you can tell me the big secret.
Speaker 1 (33:23):
And he was like, no, Well, don I think I'm
gonna petition. Have my desk moved back closer to Zeke?
Can you tell us what's next? What's next on the
Zeke Fox agenda?
Speaker 3 (33:34):
Honestly, I've I only I wrote this book now because
I felt I'd never felt like I'd found the right story.
And I really don't know how I'm gonna how I'm
gonna match it.
Speaker 2 (33:43):
He needs a vacation.
Speaker 1 (33:47):
Well, Zeke Fox, author of Number Go Up and our
good friend here at Bloomberg. We could go on for hours,
but I think I think that's gonna have to do
with Zeke. Thanks so much for your time. Really appreciate it.
Thanks Mike, Thanks.
Speaker 2 (34:05):
What Goes Up. We'll be back next week. Until then,
you can find us on the Bloomberg Terminal, website and
app or wherever you get your podcasts. We'd love it
if you took the time to rate and review the
show so more listeners can find us. You can find
us on Twitter, follow me at Wildona Hirich. Mike Reagan
is at Reaganonymous. You can also follow Bloomber Podcasts at podcasts.
(34:30):
What Goes Up is produced by Stacy Wong and our
head of podcasts is Sage Paulman. Thanks so much for
listening and we'll see you next week
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