I was the first VC to try to invest in SBF, 4 years ago, well before FTX had even launched. I shared some of my story with CNBC, but there is more - a lot more.
Here's what I learned, and why I passed on investing based on suspicion of deception and reckless risk-taking.
But first, how do I know I was one of the first VCs to talk to Sam? Because Sam tweeted about his “horror story” experience with me, the investor who delved too deep and asked too many questions.
That’s me below, “G.” Hi!
2) I'll start with two very different horror stories. I'm not going to name names, but you know who you are.
The first story is the longer one. There was a VC; call them G. We were in talks with G for a while about investing into Alameda.
In many ways the talks were good!
In my next tweets, I’ll talk more about what I learned from my up-close encounter with a future super villain.
And what I think VCs, the crypto community, and regulators (!) can do better to stop these kind of catastrophes from bad actors in the future.
This is a big conflict of interest: in 2018, Sam tried to use our investment in Alameda to start FTX, an entity that we neither knew of nor owned
It's also ironic! Since, last week, Sam was caught doing the opposite: siphoning $10B+ from FTX to bail out Alameda, his private firm
Including me. I sat on this story for years because I was afraid of Sam's retribution. Which I think was a reasonable fear. I mean, read his original tweets about me! They're very mean.
Still, my 'horror story' with Sam is small potatoes vs the millions of lives he’s hurt today.
1. A few months before we met Sam, Alameda lost north of $10M - a huge amount of their assets - on “trade errors.” We could never figure out if this was due to fraud, incompetence, or a well-meaning mistake.
My heart goes out to everyone affected by this catastrophe. Crypto is a technology of freedom, but it makes it easier to do bad things as well as good.
As a community, we in crypto need to do better to catch and call-out bad actors before they become supervillains.
2. Following Sam’s $10M+ "trade errors" (known internally at Alameda as "the April fiasco"), the co-founder of Alameda - who may also have been Sam’s girlfriend? - quit, along with about half the team.
They also broke up 😢
Even back in 2018, it was clear to us that Sam took reckless risks with other people's money, and wanted to use our capital to finance his own secret projects, to our detriment
It didn’t seem right to support someone like that, no matter how smart or good he was at making money
4. We were taking awhile, so Alameda decided to also try raising debt. They bought a booth at a crypto conference and handed out fliers that advertised “HIGH RETURNS WITH NO RISK” and “no downside.” Seriously. We warned them this was nuts, they said oops, but like... what.
Sadly, Sam found other marks for his shell game after we left the picture.
Today, FTX's investors, customers, and even employees have found that their money was transferred to an "unaffiliated," privately owned, highly levered trading firm (Alameda) that they know nothing about.
Alameda and FTX were the same people, used the same computers, and Alameda was hemorrhaging money to pay for FTX’s startup costs… but Sam felt that it should be a separate deal, with a separate price.
3. Alameda had received starter loans from several wealthy people in the Effective Altruism community. Sam was worried that they might not want him taking on new investment, so he proposed to keep them in-the-dark about us. We didn’t think that was honest to his backers.
A few months into our diligence, Alameda started losing money - and fast. Alarmed, we asked what was up. Sam, nonchalantly, said that he was incubating an unnamed crypto exchange (it would become FTX), which was sucking up all his team’s attention and resources.
I’ve been a crypto VC for 9 years and seeded about a dozen of the largest crypto exchanges and trading firms. So when I heard about a hotshot trading firm called Alameda Research, I was interested.
My first impression of Sam was that he was one of the smartest people I’d ever met. He was ambitious, had a nose for making money, and wasn’t afraid to take risks. Maybe too unafraid.
Ultimately, I decided not to invest in FTX. I continued to avoid all of Sam’s other token projects like Serum and FTT, now infamous as the collateral used to prop up his levered trading.
Ok, that’s fine, although weird that Sam didn’t disclose his new exchange idea upfront. We like backing founders with new ideas! Except Sam said that Alameda and FTX were separate. Huh?
Announcing our new $200M cryptofund at
@hack_vc
. We're crypto-native, one of the most active users of protocols, and one of the largest communities of crypto engineers. Backing crypto founders, weirdos, and hackers at the earliest stages.
🤖 Imagine an Airbnb for GPUs powered by blockchain, suggests
@alpackaP
, who dives into how crypto can solve AI's biggest hurdles, offering a future where innovation is accessible to all through decentralized marketplaces.
🎧 Listen now:
@mdudas
Coinbase is great no doubt, but the real tech story is the top non-fiat exchanges - Bitfinex, Bittrex, Binance - that are doing 5x this with no big VC backing, no "top startup talent", and far far away from Silicon Valley.
@iamDCinvestor
@RyanSAdams
I got on a Coinlist fundraising call with
@aeyakovenko
a few days after Black Thursday in March 2020
at 2am central time
why?
Because Coinlist can't serve americans, and Solana's russian social groups had indicated the most interest
If you are a VC and hate capitalism, I think you should just throw in the towel, or stop smoking whatever it is you are smoking. Stop hitting yourself bro!
@paulg
@TVietor08
@mattyglesias
But he’s right, money is fungible.
Now Iran can reduce their welfare spending by $5B and increase their military spending by $5B.
1) We’re hiring an investment/research partner to join the
@hack_vc
team.
Are you a giga brain researcher? Or a shadowy super coder who eats sleeps breathes crypto? Do you want to work with a team of crypto OGs to seed the best projects in the space?
Then
“Once we chose our lead as Hack VC, the floodgates opened up and we got 20x oversubscribed. We had over $100 million in interest and partnered with the investors who we thought could help us the most.”
We try our best to serve 🎩
1/ We're proud to announce that we led an institutional financing round for 0G, a modular AI blockchain. 0G is positioned as the premier modular data availability solution for web3, including the next frontier of crypto-powered AI networks.
[More below]
0/ I recently invested in
@KineProtocol
, a new decentralized derivatives exchange built on Ethereum, founded by former Huobi and Matrixport execs.
So what is Kine and why is it important?
At
@hack_vc
, we’re investing in the infrastructural revolution to take web3 mainstream. We are doubling down on this opportunity with our new fund announcement today.
We wrote all about our new $150M Venture Fund (which brings our AUM to ~$420M) in our latest blog. Check it out for more on our vision for the fund, deep conviction in web3, and excitement to support our founders. Read more:
JUST IN: Day trading for crypto:
@terra_money
's creators have launched a platform for minting synthetic assets that mirror U.S. stocks.
@BradyDale
reports
Huobi is one of the largest and most important crypto companies today. I’m excited to support them as an advisor as they expand their global investing, especially into DeFi. If you’re a crypto founder looking to disrupt the global financial system, reach out! We can help.
@RyanSAdams
@panekkkk
This is a $500K ARR lending business. It’s nice but not crazy, they would be lucky to raise a small Series A and get a TechCrunch article if this was a fintech startup.
We at
@hack_vc
have been seeding AI companies for a couple years. The convergence with crypto is finally here with Ritual.
We've worked with
@niraj
as co-investors for 6 years while he was at Polychain, thrilled to partner with him and Akhilesh to make this happen.
Excited to welcome
@hosseeb
as the third Managing Partner at
@dragonfly_cap
.
Haseeb previously was a partner at MetaStable and will lead our token and deep tech crypto investing.
Kine is bringing all the benefits of centralized derivatives platforms to the DeFi world. It represents one of the biggest leaps forward in DeFi and I couldn’t be more excited to be supporting them with
@naval
and other great investors.
@leet888
I told many investors in 2019, and then Sam tried to blacklist me - see the CNBC article
But this was years ago, Alameda was a tiny startup, FTX didn’t exist, and I had no actual proof of fraud. As for this week’s catastrophe, sadly I’d be the last person to know beforehand
Presenting Polaris
The first OS project built from the ground up by the 🐻⛓️ team. Polaris is a general purpose blockchain framework enabling the integration of the EVM into any underlying consensus layer. Its current iteration has been optimized for the Cosmos SDK.
@naval
@freerobby
I suspect this is already happening and is the the real reason behind America’s massive Adderal dependency. 16M prescriptions for people ages 20-39.
Unveiling Imperii Partners, an investment bank purely for the crypto and decentralized economy, founded with my incredible partner
@TonyScu
. Ready for growth.
The Berachain team is expanding.
We're looking to add 10-15 heads in person at our offices in Toronto. We'll be hiring backend, frontend, and infrastructure devs, along with designers, technical project managers and quantitative analysts.
Apply at now.
Classic Web2.0 thinking… Web3.0 is the ultimate merging of finance with software. Crypto apps sacrifice scalability and UX in the short-run to create totally novel apps that have ownership, digital property rights, and financial features natively embedded.
@dharmesh
@adamdangelo
@naval
@LukeYoungblood
@nadertheory
Where I diverge from the web3 crowd, is I think it’s hard to bootstrap a network with financial rewards and then convert to utility later. I think the reason that users join really matter, and that needs to sustain whether you’re user 1 or 100 million. But I’m wrong a lot!
Alpine Testnet is now LIVE!
Sustainable DeFi yield from multiple chains, easy diversification, near-ZERO transaction costs, email based wallet (or metamask for the crypto-natives), & radical transparency–unlike the centralized “DeFi”
Let's unpack 🧵
Almost there. The 2 most important skills to succeeding in life, business, all social relations are:
1. Noticing when someone is trying to persuade you
2. Identifying WHY they are trying to persuade you, i.e. their incentives
Then everything becomes obvious
this is fine but the best defense against the dark arts is to notice when someone is _trying_ to persuade you of something and simply refuse without justification
"thats crazy bro" solves 99% of your problems here
@buzz
The exemption appears to be for all DAOs, of which there are tens of thousands, not just companies that A16Z invested in… was this article written by a bank.
@pythianism
@cmsholdings
@kyled116
I’ve been reading books about the famous HFers lately, basically if you 50% for a couple years in a row and gross a couple billion, you get your own chapter in a book.
Pretty sure you, me, and most people in this thread already qualify for our own book chapters. 😉
@jgp_nyc
@atxtransitblog
The premise is not “provocative” it is flat out wrong as everyone in this thread is telling you.
Rents are high because nyc is the greatest city in the world and 2B people want to live in your district dude. Build more housing.
There's no concept of chargebacks in crypto. All payments are final. It turns out, this is a really important feature of cryptocurrencies. And it has deep implications for its financial applications.
I sketch out the argument my newest blog post:
Our GC,
@dbulaevsky
, wrote about the current moment in crypto law and regulation. Earlier this year at our hack.summit() conference, he asked SEC Commissioner Hester Peirce what she would do if she were a crypto founder in the U.S. 1/9
EAs are a threat to humanity; most are also deeply cynical if not simply evil. Given the grave risk they pose to human flourishing, by their own logic, we should use any means necessary to stop them.
I think
@hack_vc
explained even better than us why
@aligned_layer
is gonna be huge. It’s clear they have experience with developer communities and in writing documentation.
Neo: What are you trying to tell me? That I can port my identity and credit rating onto a blockchain?
Morpheus: No, Neo. I’m trying to tell you that when blockchains are ready, you won’t need an identity or credit rating.
If Sybil-resistant identity is fundamentally not incentive compatible, I like to think DeFi is about asking:
How complete a financial system can we build w/o assuming anything about individual creditworthiness?How much is credit used as a crutch in the legacy finsystem’s design?
Thrilled to be able to work with GOATs & OGs from both Web 2 and Web 3 on the first ever Mafia Metaverse for the crypto generation. More to be announced!
Crypto mafias join the gang here:
Called my Senators
@SenJackyRosen
and
@SenCortezMasto
about the crypto-killing amendment and they said this was by far the
#1
issue they were getting calls about. This is working. Call your representatives today, before they vote tomorrow.
In early stage technology investing, a 6x and $120M valuation isn't missing a winner, you just missed the seed round.
If you really think something is a winner, you would buy the Series A right now.
6/ Now at $70m mkt cap and $120m FDV, they've shown me that winners can come from anywhere.
Do I own any $COVER? No.
Will I buy some now? Probably not.
But I do think of it as the one that got away, and I hope I'll remember this lesson in the future.
The cryptocurrency boom means a tax headache like never before. TaxBit just raised a $100M from Paradigm and Tiger Global to help.
My exclusive on Utah's largest ever Series A, a picks-and-shovels biz in the crypto gold rush, in
@Forbes
:
3) Some background on Hack VC: we invest in early-stage crypto startups, focusing on infrastructure. We manage $300M+
We believe in fundamentals and deep research. We are in it for the tech (fr tho)
@eriktorenberg
@rabois
@jaltma
I call this the Coinbase is Down Problem. The more desperately you need your engineers to fix your overloaded site, the less incentivized they are to come to work.
6) We want:
- A researchoor. Technical Web3 or cryptography background preferred. Open to other analytical experience like HF / equity research
- A huntoor. Dive into crypto communities, build a thesis, hunt for deals
- Ambitioon. We want a core team member to scale with us
7) If this sounds like you, apply above to be our Research/Investment Partner.
We are also offering a $10K referral bonus (paid in UST) if you find us someone for the role, or help pressure your friend to join us. Slide into our DMs with ideas.
@juliankoh
@beondeck
Disagree about cost - at $1500 for 8 weeks
@beondeck
is less than a hundredth the cost of b school, and maybe more like a thousandth the cost of YC since no equity. They’re massively undercharging.