Introduction

This is the first essay in a series collectively titled A Pivotal Heist: Reflections on the Horrifying Sincerity of the FTX Fraudsters. Each essay will stand on its own, while exploring some common themes and sharing these disclaimers.

I’ll be writing about the many lessons I’ve gleaned from watching the collapse of the FTX cryptocurrency exchange, where Sam Bankman-Fried (a.k.a. SBF) and his inner circle were steeped in a web of extreme ideologies. I want to explain these ideas and why they matter, and then chronicle how I believe they went wrong. The beliefs in question have roots in some historical philosophers, particularly the 19th century utilitarians, and they also encompass a handful of more recent movements with names like effective altruism (EA), longtermism, and rationalism.

The latter term, in this sphere, refers not to “rationalism” in a generic sense, nor to the entire lineage dating back to thinkers like Descartes and Spinoza. Rather, our “rationalists” are a modern clique that arose among the blogs and forums of the early internet, including on a community website called LessWrong, and whose largest real-life incarnations are concentrated in the San Francisco Bay Area. These rationalists helped to spur forward several novel technologies such as prediction markets and artificial intelligence, and their writings continue to shape how the world talks about those fields. Over time, their epistemics – i.e., their modes of learning and knowing – and their warnings about AI captivated many of the leading effective altruists – or “EAs”, as they call themselves for short. Under this rationalist influence, the global EA philanthropic movement that had originated in Oxford, England saw its center of gravity shift toward a second large nexus in Berkeley, California.

Midway between those two geographic poles, I watched the rise and fall of the great SBF from my own uncomfortably close vantage point, working at Jane Street Capital, the New York trading fund where Sam and several of his lieutenants learned the ropes of finance.¹ My friends at that job introduced me to the core concepts of EA and rationalism, and I became a sympathizer and a minor donor. Over time, many of Jane Street’s most committed EAs trickled off to join Sam’s growing empire. Thus, when the crisis hit and I saw my past acquaintances condemned in the headlines, my thoughts went quickly to a few closer friends who were there on the ground in the Bahamas, outside of the conspiracy, watching their world collapse around them. I also had a number of EA friends outside of FTX, who were reeling from the sense of betrayal, as well as a couple of friends among the victims, whose funds had become suddenly unavailable.

Correcting the record

If you ever have the dubious fortune to see international breaking news unfold in your friend group, touching upon your own areas of domain knowledge, you’ll experience the comedy and frustration of seeing people get the basic facts totally wrong. I’d imagine that this is how most news looks from the inside, but in the case of FTX, the rumors were particularly wild, and it’s worth asking why.

A likely reason is that the story brought together so many different domains, reverberating far beyond cryptocurrency. It embarrassed actors within traditional markets, venture capital, and financial regulators. It implicated mega-celebrities from multiple arenas. It raised questions about international jurisdiction, psychopharmaceutical stimulant abuse, political influence for sale, and the eternal rivalry between new media and legacy sources. Somewhere in this mix was the connection with the rationalists, the EAs, and their pet causes such as global health, animal welfare, pandemic preparedness, and above all, the putative risks of an anticipated future invention called artificial general intelligence (AGI).

When FTX imploded, all these worlds collided. The fast-paced drama attracted a wide audience with variable expertise, all talking past one another. Even if you knew the deep lore in some of these fields, you were thrust into the other topics without much context, and your attention became the target of a fierce war for narrative on all sides. The truth did not always win out.

Many of the early misconceptions persist to the present day, and a major objective here is to set the record straight, lest the errors crystallize forever in the public mind. There’s no shortage of humbug, from Sam’s defenders who downplay the crimes, to the misleading headlines claiming that the victims were fully repaid, to the legion of indignant pundits who botch or oversimplify important details. It hurts my sleep to see people being so Wrong On The Internet, and it’s even worse because many of them should know better.

One troubling case is that I still see many stubborn layers of obfuscation and denial inside the EA movement itself. There’s no polite word for it. Classic psychoanalysis calls them “defense mechanisms”, and the internet calls them “cope”, or if the patient seems addicted, “copium”. In the immediate aftermath of FTX, when the EAs were dealing with grief, panic, and career uncertainty, I hesitated to confront them too forcefully. But now that over two years have passed, it’s time to peel the layers back, one by one, gently but with resolve, to reveal the hard reality beneath.

A pivotal event

The EAs aren’t the only group who had an intense and imperfect reaction to FTX. Even as the mechanics of the fraud were still coming to light, observers both near and far raced to speculate about the implications. The event was a true Rorschach test, and by looking back at this kaleidoscope of commentary, we can see a telling snapshot of the zeitgeist at a key transitional moment.

Many of these responses were of dubious merit, with critics inserting their own tired fixations or rehashing common misconceptions about EA and rationalism. If I may dip my unqualified hand back into the old Freudian lexicon one more time, I might even say that there was some “projection” afoot. That is to say, the glaring pitfalls that these critics saw in EA and rationalism might be mirrors, reflecting back a foul dust that preys on all the rest of us. And at least for me, the events of FTX raise some deep existential questions that almost everyone ducks here.

Whatever you make of this commotion, it is clear that the bankruptcy was a watershed moment for a certain nerdy swath of online culture. It was, in a word, pivotal. Ironically, that’s a term of art in certain rationalist circles worried about AI, where a “pivotal act” is a dramatic, high-stakes gambit to alter the course of technological progress and secure a positive future. It’s only fitting that the shocking heist of FTX user deposits has proven to be so pivotal for EA, for all its online neighbors, for cryptocurrency, and pivotal to my own understanding of the world.

This means that you are really getting two stories for the price of one: a story about SBF’s financial empire, and a story about all the ideas and communities surrounding it. (And that “price”, to be clear, is free. I don’t expect to monetize this project.)

Here’s another piece of jargon for you: Rationalists are fond of a concept from physics called a lightcone. The idea is that, surrounding any given event, there is a region of earlier spacetime from which information (traveling at or below the speed of light) can affect the event, as well as a symmetrical region in the future which the event can affect in turn. These two regions, before and after, make up the event’s lightcone. It’s a fun little result in special relativity. You can take it as a hard outer limit for humanity’s expansion into the cosmos, or you can use it as a metaphor, which is what I will do right now:

Alongside getting the facts straight, another major theme of this series will be to trace out the intellectual and cultural “lightcone” of FTX. We will trace how a handful of enticing ideas evolved over time, coalesced into a cluster, and then smacked into the reality of some actual, concrete events. We’ll see some of the major debates that happened in the course of this development, and relate this to the shifting ideals of decentralized finance. Then, looking toward the future half of the lightcone, we’ll survey the immediate conversations that FTX ignited and trace out the lasting effects.

Pictured: The light cone surrounding a specific event (or here, “observer”) in space and time. From Wiktionary. Rationalists tend to write this as a single word, “lightcone”.

I won’t always take sides in these debates. Instead, I want to provide the general reader with an independent entrypoint into this scene. I would like to bring you up to speed, point out a few minefields that can really mess people up, and explain the huge implications these discussions have for the rest of us.

An ongoing story of our time

For one thing, the story has surprising ties to some other seismic events of November 2022. That fateful month saw not just the downfall of FTX, but also:

• OpenAI released their breakout version of ChatGPT using GPT-3.5, demonstrating that the world could no longer ignore the massive progress in large language models (LLMs).
• Congressional Democrats outperformed expectations in the US midterm elections, buoyed partly by SBF’s campaign contributions, although it later emerged that he had also funneled some money to certain chosen Republicans, and he had developed some misgivings about “woke”.
• Elon Musk assumed control of Twitter, which he would later rename to X, after months of contentious legal battles.

It was a pivotal month in more ways than one.

The FTX saga has deep connections to AI, and its implications for the trajectory of the new technology are impossible to overstate. The overnight success of ChatGPT propelled one of rationalism’s key issues into the limelight, intensifying the controversy over whether AGI is a meaningful concept and, if so, whether it poses an existential risk to humans. Yet at that very moment, the downfall of SBF and the disgrace of EA led to a major chill in the world’s receptiveness to the AI safety agenda.

Meanwhile, a political and cultural “vibe shift” was underway. For years, many of our story’s characters hoped against hope to maintain an apolitical coolness. But politics finds everyone eventually, and in a couple of convoluted ways, the fallout from FTX sheds light on why so many vaguely nonpartisan tech people have recently swung toward the right. It may even give us some premonitions of what a new political center might look like.

Perhaps it would interest you to know that Elon Musk and J.D. Vance both independently dabbled in this ideological scene, long before transforming themselves into the top henchmen of MAGA. But let’s not overstate their relevance. Musk may be a main player on the world stage, but in our story here, he’s a minor character who floats in and out of the background, flirting over a rationalist pun or tweeting out when he finds something interesting. It’s true that he did signal-boost a longtermist book as “a close match for [his] philosophy”, and indeed, longtermism does overlap with the explicit grand goals that Musk has worked hard at his entire life, when not tweeting. Still, be forewarned that the links between FTX, rationalism, and politics are not as straightforward as they might seem.

Given the broad shadow cast by the rationalist movement, we’ve continued to see sporadic news stories about its outer fringes. I could tell you about how a radical splinter cell of transgender vegan rationalists came to denounce the movement’s main leaders and embark on what’s been sensationally called a nationwide murder spree. Or even more tenuously, I could describe how some watered-down rationalist materials made their way onto the eclectic reading list of one Luigi Mangione, accused healthcare CEO assassin. I will mostly just trust other people to report on these developing stories, along with any similar events that come along. If it bleeds, it leads.

Those are fringe cases. FTX was the big one. It was the great glorious collision of ideas into reality. Sam was not some peripheral actor who happened to hear about these movements. He was their fêted hero, and with his demise, a generation came of age. I want to give you a better understanding of his story, and how it sparked a battle for the soul of that generation. I hope you’ll be entertained along the way.

And if I succeed, you will come out with something more. This is a story about trust, and how to navigate the so-called “information ecosystem” in a time of epistemic transition. It’s a story about news, and how to read it skeptically without falling into conspiracism. It’s a story about communities, how they fail, and how they learn and grow. There are no easy answers here, but I do intend to offer you some general frameworks for thinking about fraud, cults, corruption, misinformation, and courage.

A sequential approach

Here’s the plan.

To do the topic justice will require a lot of words, spanning a number of essays. Each essay stands on its own, but they will also build upon each other thematically, working towards some larger points I’d like to make.

The project will be long but finite. I have a rough outline with a beginning, middle, and end. There is some room for flexibility: I’m open to new information along the way, and may change my mind on issues big or small as I see how people in the relevant movements react. I expect to learn a lot in the process.

There is a lot of source material to condense. The rationalists and EAs have produced a vast expanse of writing over the years, and their critics aren’t very succinct, either. I like to joke that anyone who wades into the rationalist/EA world is confronted with their “80,000 blogposts”. That’s not a literal count; it’s a friendly jab at the name of EA’s career advice portal, “80,000 Hours”, which counsels young aspirants on how to achieve maximum impact with their finite working lives. I will discuss some of their highlights, and thread those concepts together with the many financial twists and legal wranglings of the FTX story.

Borrowing a rationalist word, I will organize my essays into several “sequences”. This will make for a fun experiment, testing whether Audre Lorde was correct as to whether you can dismantle the master’s house using the master’s tools.

The first sequence will be a thematic overview, circling through some of my main points. After that, the second sequence will truly dive into the rabbit hole with a full dramatis personae, laying out the wider universe of characters and concepts that form the backdrop, as well as the complex personalities of the FTX story itself. A few more sequences will follow, going deeper into the ideas, the reactions, the myths, and the facts.

About this first sequence: a “Thematic Overview”

This opening sequence is a first pass through the main ideas and the motivating questions. I want to be candid upfront about what I am saying, and what I am not, before we get too deep into the weeds.

Within these first few essays, I will give you my high-level interpretation of the FTX fiasco and why it matters to the wider culture. I’ll tell you a bit more about my pseudonymous self – my own ringside seat in the story, and the cavalcade of emotions it prompted for me. I’ll stake out my own fairly neutral stances on both crypto and AI. Finally, I’ll discuss my hopes and fears for EA, and for the individuals who have passed through these circles.

Throughout, I will weave in a barebones account of FTX’s rise and fall, and discuss the gravity and complexity of the crimes themselves. However, the ideas will take precedence over the events for now.

As a ground rule, this first sequence will omit most of the evidence and detailed arguments that you might reasonably expect to accompany some of my bolder assertions. This is a domain where every hyperlink leads down its own rabbit hole, and every definition is loaded with nuance and controversy. So for now, I will shoot for brevity and withhold the proper citations until later.² I will gently sprinkle in some terminology, but I’m making the deliberate choice to avoid introducing too many names and phrases.

Apart from those caveats, the Thematic Overview should be fairly self-contained. Even if it’s all that you read, you’ll get a birds-eye view of the issues I feel are at stake. 

First up, I will tackle a foundational point upon which the whole series rests: the true motivations of the FTX culprits.