Cryptocurrencies II: Last Week Tonight with John Oliver (HBO)

foreign [Music] tonight concerns cryptocurrency the only word that makes Elon Musk not immediately we first covered crypto five years ago when I was 10 years younger and since then a lot has happened including unfortunately this video from just last year promoting the general concept of trading crypto hello it's me would you like to learn about exchanging cryptocurrency will go over everything everything is you got coins from different blockchains and wanna do some trading I mean a lot to dislike about that from her choosing to parody a song by one of our greatest singers while having a voice that I can only describe as a no chair turn to wearing those earrings which scream I do my best shopping at airports to the fact that her name is Randy Zuckerberg and yes she is Mark's sister meaning that incredibly she is the cool one in that family and that wasn't even the only song that she did she also did this one about how everything with crypto was gonna go great we're all gonna make it yeah we're all gonna make it we're all gonna make it everyone yep we're all gonna make it in crypto is a phrase that's aged about as well as welcome aboard the unsinkable Titanic those videos came out when crypto FIFA was still near its absolute Peak stadiums were getting named after crypto companies Matt Damon and LeBron James did commercials for crypto.com and celebrities from Larry David to Tom and Gisele pre-divorce but post love hyped a crypto exchange called FTX that was run by a 29 year old supposed genius Named Sam bankman freed AKA SPF he was on the cover of Forbes and Fortune with one calling him the next Warren Buffett and others calling him jpeg Morgan and Sequoia Capital One of the biggest Venture Capital firms had a 213 million dollar investment in the company but since then to put it mildly there has been an implosion which really broke through to public Consciousness just before last Christmas in a span of 24 hours Sam bankman freed was whisked by federal agents in the Bahamas to New York City where he faced a judge and walked out of a federal courthouse after posting bail on a 250 million dollar bond which prosecutors believe is one of the largest in U.S history right SPF was arrested for defrauding his customers out of billions of dollars and to be honest it seems like the courtroom sketch artist may have been one of them because this is one of the rudest illustrations I've ever seen the whole innocent until proven guilty thing clearly doesn't apply to the side of the law with the coloring pencils arrest was a big deal and his company imploded some like cnbc's Jim Cramer were Furious idiot he's a path high school he's a kind man we're talking about nearly four years of getting away with financial murder just because they could why those are some harsh words there from these squawking parrot on every Pirate's shoulder especially as just a year earlier Kramer was saying this tonight we're going to educate ourselves with Sam bankman free well Sam I got to tell you Snyder to have you because I think you're pretty much a Visionary yeah not great but also not surprising after all this is the same guy that proclaimed that bear Stearns is fine literally days before it folded told his viewers to buy Netflix right before it lost almost 70 percent in five months and once and this is true said that Google Facebook and Twitter should hire Kevin Spacey as a spokesperson Jim Cramer is the only person who could look you in the eye say you are going to die tomorrow and give you an immediate sense of calm knowing that you're going to live for another 50 years but FTX has been just one of the many dominoes that fell in the crypto world over the past two years the market value of all cryptocurrencies fell from around 3 trillion in late 2021 to around 1 trillion last year and there are small investors who got badly hurt by all of this one in five Americans has invested in traded or used cryptocurrency and you can find countless stories of people losing most of their life savings in the recent implosions underscoring that everyone in crypto was never actually going to make it no matter how much Randy Zuckerberg screams sang otherwise so tonight we thought we'd take a look at what has been happening in the world of crypto by looking at three of the biggest collapses over the past year each of these companies was founded on the promise that they would replace some part of our financial system there is Terror a cryptocurrency Celsius a crypto bank and FTX a crypto trading platform in theory they were supposed to be our next dollar our next Bank of America and our next Stock Exchange but in reality they are fiascos and before we start we're not going to be discussing the merits or the technology of the blockchain we did that five years ago it's still on the internet you can go watch it there or not not watching this show is always a strong option for you but just as a reminder every single crypto coin is just something someone with a laptop made up that is true for all of them like Dogecoin cat coin Panda coin furry coin come rockets Elon sperm and Monkey Juice those are all real by the way we were going to come up with a fake one as a joke but then we saw monkey jizz and it felt like a hat on a hat to the extent any of these coins have value it's based on whether people believe they do which often comes down to their confidence in the person or group who made the coin and that basic fact makes the crypto business very attractive to a certain type of person one columnist who's covered this intensively sums it up like this if you are running a scam you will be drawn to crypto you are running a confidence game and crypto offers the most efficient market for turning confidence into money and the story for all three companies that we're going to look at tonight is one of confidence gained and then squandered let's start with Terror which was a cryptocurrency launched in 2018 by a Brash South Korean entrepreneur named dokwan people had faith in Terror in part because Quan exuded confidence hearing is on Twitch responding to a question about the volatility of companies in his space I wonder how many of these companies you think are entering the space just because it's hot and there's a lot of funding versus the ones that will still be here you know like two to five years later 95 were gonna die yeah 95 are going to die okay but uh yeah there's also entertainment in watching companies that too I mean that's pretty cocky but I guess he is kind of right there can be entertainment in watching a company die incidentally I believe that's the new slogan for Max hey do you like HBO but want to add to the property brothers and also don't like HBO Max there's entertainment in watching a company die Quan's company made something called a stable coin the idea of which is that unlike something like Bitcoin it would always be worth a stable amount so one unit of Terror or UST would always equal one US dollar and the way they guaranteed this was truly absurd because rather than simply collecting a dollar for every unit of Terror that it issued which would make sense it instead tied its value to a different coin Luna which it had also made up and said that it would turn Luna into Terra and Terra into Luna with a special algorithm if that sounds both complicated and stupid to you it is here is how the company explained it and just know you don't need to understand anything that's happening here because it doesn't make sense let's imagine the entire Terra economy as a pool size of the pool is determined by the total supply of UST if more people want UST The Tide Rises and if less people want UST the Tide Falls to bring back the water level to one dollar we can expand the pool by introducing a new supply of UST but where does new UST come from at Terror we've designed a machine that swaps one dollar worth of lunar to one UST okay imagine if someone came up to you when you're at the ATM and said give me that money and instead I'll give you blocks one block is always worth one dollar and the reason I can guarantee that is I'll sell as many fleesels as it takes to make that happen also I make the fleesels you would probably say no wouldn't you immediately but if they then said I do it with a special algorithm suddenly you might think that they know something that you don't well that's basically what happened here and to be fair some people did see the problem with this in 2018 an analyst looked at Tara's business model and said this is crazy this obviously doesn't work and Quan would shame anyone who dared question his model after a financial writer raise questions about the vulnerabilities of crypto Quan tweeted I don't debate the poor on Twitter and for a while his confidence worked at its height Luna's total value belonged to more than 40 billion dollars the Washington Nationals entered the partnership with them Quan's followers call themselves lunatics and one of his backers even got a lunar themed tattoo and that is a bold move from crypto Moby there I would say that is the worst tattoo I've ever seen but I have also seen this tattoo of R Kelly with the words I don't see nothing wrong and that's around five percent worse but we now know according to the SEC the algorithm didn't work as they'd claimed in fact at one point in 2021 Terra nearly collapsed and while Juan told people that the crisis had been averted thanks to his algorithm saying it was automatically self-healing it turns out it was only saved by the deliberate intervention of a third party which was quietly purchasing large quantities of Terror to restore its value but last May a few big trades destabilized the price of Terror prompting a panic in which both Terror and lunar holders started selling on mass and since they weren't backed by anything but Good Vibes both coins value were trading at essentially zero and the opposing it raised tens of billions of dollars of value as for Quan he now faces charges in multiple countries and he actually went on the run for a bit but before he was caught managed to find some emotional support on a crypto podcast here he is mid thought getting surprised by an unexpected guest your like you haven't slept in a while and like you feel almost um holy it's unboxing scroudy hey though um I just wanted to let you know Jail's not that bad it's um it's not the worst thing you know so don't don't fret if that I hope it does happen but if it does happen it's not that bad good to know wow I don't think there's ever been a more cursed Zoom call and I'm very much including That Celebrity imagine video and quick side note if you're wondering if Jim Cramer ever saw Manish shkreli's Scandal coming you should know that shkreli actually got his start at Jim Cramer's hedge fund so another eight in the hole for the crime game but it's not just cryptocurrencies that can be built on Sand the same can happen with crypto Banks which are already a bit of a misnomer because unlike traditional Banks they are not regulated or indeed in short but they are firms that will hold your crypto pay you interest and lend it out and that brings us to our second company Celsius one of the biggest crypto Banks founded by this guy Alex machinski now his so Wholesales pitch as you can see from his cool t-shirt was banks are not your friends which is clearly true but he really doubled down on that message in ads like this banks are not your friends we all know that and we decided to create a replacement for the banking system right something that acts in your best interest a place where you can actually have your money work for you not just you work for your money and basically three years since we launched the product we've paid a billion dollars back to the community now despite the fact that he sounds exactly like Tommy wizzo in the room machinski built one of the biggest crypto lenders with more than 12 billion dollars in deposits and one of the ways that he did this was awesomeness would get up to 18 interest rates on their deposits that first is the average of 0.06 then being offered by traditional Banks and he'd like to say that Banks could actually pay those sorts of rates if they wanted to adding somebody is lying either the bank is lying or Celsius is lying and hey porque no Los Dos two things can be true like how Frankie Mooney's could be both 37 years old and 12 at the same time or how the rock can be one of the highest paid actors in Hollywood despite never actually acting went out of his way to build trust among customers holding weekly live stream amas sometimes featuring dumb stunts like when he started one wearing a Mandalorian mask and on these calls he would brag about all the great things that his company was doing for people while occasionally engaging in the single worst attempt at a dab I have ever seen the beauty of what Celsius managed to do is that we deliver a yield we pay it to the people who would never be able to do it themselves we take it from the rich and we beat the index okay that's like going through the Olympics and getting 15 medals in in 15 different fields okay what the was that a heads up dab and to be honest why a dab at all it's not 2015 and you're not a guest on Ellen also you're 57 years old that demonstrates a lack of judgment frankly terrifying in someone supposedly running a financial institution and yet machinski insisted we are probably one of the least risky businesses that Regulators worldwide have ever seen which was just flagrantly untrue a counter-pointed examiner later found that he was making incredibly risky loans and was also using customers money to pay the high yields that he'd promised which sure sounds like the textbook definition of a Ponzi scheme eventually Celsius started minting its own coin to inflate its balance sheet a coin that his own employees said was worthless and that its price should be zero what even said that the whole thing was very Ponzi like and at one point the company's former Finance Chief said we are doing something possibly illegal and definitely not compliant and what an office that must have been to work in find yourself wandering over to Cheryl's desk like hey girl great top uh quick question are we like doing great because I'm getting like major crime Vibes in here also have you seen our boss dab and when Celsius inevitably collapsed people got hurt especially because in the fine print the company's terms of you stated that customers transferred all rights of ownership in their crypto assets by depositing them in a salesy's account meaning that when people try to withdraw their money they found out it legally wasn't theirs anymore and while Celsius machinski have not been criminally charged tens of thousands of customers still have digital assets trapped on the platform and Celsius has reported that it owes them 4.7 billion dollars all of which is enough to make you think that while banks are not your friends this guy may actually be your enemy so so we've got money and a bank which brings us back to Sam bankman freed and FTX it was basically a whole trading platform the pitch was that FTX was an exchange where you could buy and sell cryptocurrencies just like stocks and its ease was emphasized in ads like this one with Steph Curry the play in hindsight like a bit of a red flag this is Steph Curry the world's leading expert on cryptocurrency I'm not okay quit messing around man give me some tips on crypto no but you are an expert right no I'm not an expert and I don't need to be with FTX I have everything I need to buy sell and trade crypto safely we all have towards semicolons you never a hundred percent using one of those are you it's a real go with God punctuation although we'll say it kind of makes sense that they get Steph Curry for that ad considering that he's already a spokesperson for Subway a restaurant whose slogan is officially eat fresh but spiritually trust us it's tuna and for a while that pitch worked pretty well fgx held a conference in the Bahamas less than a year ago that included a panel with Tony Blair and Bill Clinton and appearances by Orlando Bloom and Katy Perry Tom Brady was even there in person too making videos like this what's up guys I'm here with my boy Sam from FTX we're at crypto Bahamas conference we're going to start the day we're gonna do some tick tocks for you guys and uh it's gonna be amazing day we'll get started we'll do a uh get ready with me Sam where you going bro no Sam Sam from one Ohio six to another never stand that close to Tom Brady it's doing you no favors there is a reason that I've never been photographed with Chris Hemsworth no matter how much he begs for it now the joke there was that Sam was a shy self-effacing genius and that's the general vibe that he went for it's why he dressed like every day was laundry day and combed his hair with a balloon obviously we now know that things Came Crashing Down But even after they did SBF was still defensive about what he'd built a lot of people look at you and see Bernie Madoff yeah I mean I don't think that's who I am at all but I understand why they're saying that people lost money when you look at the classic Bernie Madoff story there was no real business there the whole thing as I understand it I think was was just one one big Ponzi scheme right fgx that was a real business yeah but was it though because I understand that no one wants to admit that their business was a scam it's the same reason no parent wants to admit that their child sucks saying it out loud makes it real doesn't it but the truth is some kids do some kids are just to put it nicely not a fun hang you still love them of course but do you like them exactly but but it is worth understanding just what sbf's real business consisted of because it turns out that in addition to FTX he had a hedge fund called Alameda and he also produced his own coin because of course he did called ftt and very basically according to authorities what he did was filled up his hedge funds books with the coin that he produced using his exchange to inflate that coin's price and once his hedge fund had a giant stash of his own coin it used as collateral to take out several loans essentially the feds say that he created fake money inflated its price and then borrowed real money against that but wait I'm not done because he was also taking money from actual FDX customers the ones remember who were putting money into FTX because Steph Curry told them it was safe and then loaning it back to his hedge fund the whole thing was honestly pretty blatant after everything collapsed a new CEO came in to handle the bankruptcy is he told Congress he was shocked at just how sloppy and poorly run everything was this is really old-fashioned an embezzlement this is just taking money from customers and using it for your own purpose not sophisticated at all literally you know there's no record keeping whatsoever they use QuickBooks multi-billion dollar company using QuickBooks QuickBooks QuickBooks it's true they used QuickBooks and look I'm no accountant I mean I should be I look like my most formative childhood memories were in an H R Block I look like I fell into a vat of radioactive itemized receipts I don't like what it What appears if you say Microsoft Excel into the mirror three times but I'm actually not accountant and yet even as for a company of that size is absurd that man also revealed that FTX let thousands of uncashed deposit checks sit around like junk mail and approved millions of dollars of expense reports via emoji on slack and I'm dying to know which Emoji they used because we all know emojis on slack have very specific meanings for instance thumbs up means I'm done with this conversation this means I'm too lazy to type thank you this means I'm dying inside don't talk to me this means feeling cheeky let's go and this one means look at me I'm a Italian but but I've yet to discover which emoji means go ahead spend millions of dollars of company funds but if I had to guess I'd say it's probably money bath but it is it is no wonder that that new CEO has said never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information has occurred here which is really saying something given his career includes overseeing the bankruptcy of Enron and if you don't remember how bad Enron was us Google it I can't do everything for you suffice to say it's very bad the through line in all three companies I've talked about tonight is them confidently presenting a veneer of expertise even as beneath the surface they were a complete show and it kind of says something that even as they imploded all three of the men behind them were still trying to Bluster their way out of it that interview where SBF insisted his company was a real business came after it had declared chapter 11 as for dokwan he spent time pushing a new Terror 2.0 coin and was finally arrested last month after a lengthy Pursuit including at one point him tweeting that he wasn't on the run from South Korean authorities to which they responded that he was obviously on the Run and as for mashinski here is audio of him trying to Buck up his team at an all hands meeting even as his company was crumbling around him well perhaps he filed for bankruptcy twice right does it make the Pepsi taste less good right Delta file for bankruptcy right do you not fly Delta because they filed for bankruptcy oh it's not the same thing isn't it crashed four billion planes and drinking Pepsi gave everyone Infinity diarrhea then yeah people might lose trust in them and for pretty good reason and the thing is there are still companies out there making all the same claims that you've seen tonight and I'm not saying that they are all scams maybe these three are the exceptions although they would be joining all the other exceptions that we haven't had time to talk about tonight from bitconnect to quadriga to so so many more but the truth is in a financial system where the only real currency is confidence scammers are going to thrive and I know that we usually like to point to a solution at the end of our stories and that often means calling for more regulation but I'm not sure that's a good idea here the danger is regulation might give this sector more legitimacy assessment looks safe when it is clearly not and that in turn might entice Banks to start getting more involved in crypto giving the sector even more legitimacy and also exposing all of us to its volatility it really says a lot that one of the leading advocates for the government to strongly regulate crypto was Sam bankman freed and look I'm absolutely not saying that we should get rid of crypto entirely it could eventually be useful maybe the third time that we talk about it we'll all be using a digital coin to buy everything I doubt it but I can't predict the future after all I'm no Jim Cramer but but we should recognize that right now the main thing you can really do with crypto is gamble with more crypto this is all still a casino so if you do want to invest do your own due diligence never put in more than you can afford to lose and if you ever see someone doing this run

Channel: LastWeekTonight

Views: 5,473,616

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Id: o7zazuy_UfI

Length: 24min 13sec (1453 seconds)

Published: Sun Apr 23 2023