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The Joe Rogan ExperienceThe Joe Rogan Experience

Joe Rogan Experience #1951 - Coffeezilla

Stephen Findeisen, also known as Coffeezilla, is a YouTuber whose channel focuses on exposing scammers, fraudsters, fake gurus, and their deceptive financial schemes. www.youtube.com/@Coffeezilla

Joe RoganhostStephen Findeisen (Coffeezilla)guestGuest (unidentified, brief third voice)guest
Jun 27, 20243h 4mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:00 – 0:14

    Meet Coffeezilla & why scam investigations matter

    1. NA

      (drumbeats) Joe Rogan podcast. Check it out. The Joe Rogan Experience. Train by day, Joe Rogan podcast by night. All day. (instrumental music)

    2. JR

      Nice to meet you, man.

    3. S(

      Hey, thanks a lot, man.

  2. 0:14 – 2:02

    Crypto exchanges and tokens: the on-ramp to “magic internet money”

    1. JR

      I appreciate what you do. What you do is a very valuable service 'cause you go so deep on some of these scammers. It's like, it's so important, 'cause there's so many people that just, they don't really understand what's going... Like, the FTX thing, for example, the best one, 'cause I was so in the dark about this thing. I was like, "What is happening?" Like, "What are they doing?" Try to break it down for us. Like, what... First of all, what is a... It's a crypto exchange, right?

    2. S(

      Yeah, that's right.

    3. JR

      So how does, how does that work?

    4. S(

      So the first question is when you get in, when you learn about crypto, you're like, "It's this magic internet money."

    5. JR

      Magic.

    6. S(

      How do you get some of that? How do you get some of that magic-

    7. JR

      (laughs) Right.

    8. S(

      ... internet money? Uh, well, you have to go somewhere to buy it. And so it's a crypto exchange is where you kinda go. You put your f- fiat on, your dollars or whatever, euros or whatever, and you put it into this crypto exchange. They have a bank and they work with that bank. Then they exchange that money for some type of crypto token. There's a lot of different tokens out there. And-

    9. JR

      Explain tokens 'cause I don't understand tokens. I know there's crypto and there's tokens. Like, what is the difference between the two?

    10. S(

      Yeah. Tokens like is the individual, you can think of currency, right? So it's like the individual-

    11. JR

      Okay.

    12. S(

      So Bitcoin is, you know, you have Bitcoin. Then you have... It's one of the cryptocurrencies. You have Ethereum. You have Dogecoin. You have Safemoon. You have FTT, which is what FTX was using as their native token. So a lot of these guys, you'll start a crypto exchange, and then you'll launch your own token that people can invest in, sort of like they're investing almost in your crypto exchange. And so that was actually one of the ways that FTX really perpetuated their fraud. I, I, I can break it down. How much do you know about the FTX situation?

    13. JR

      Let's break it down for people that don't know about it.

    14. S(

      Yeah.

    15. JR

      So...

    16. S(

      Let's do it.

    17. JR

      Okay.

  3. 2:02 – 3:01

    Why FTX was offshore: leverage, opacity, and weak regulation

    1. S(

      So FTX was this, uh, crypto exchange located out in the Bahamas, which is a great place to put your, uh-

    2. JR

      Why do they do it in the Bahamas?

    3. S(

      Because it's unregulated. So the problem with doing stuff in the United States or, you know, some, m- something like Europe or something like that is you're, you are subject to all these regulations which require you to be a little more careful.

    4. JR

      Oh, those are pesky.

    5. S(

      Yeah. They're-

    6. JR

      Get those out of the way.

    7. S(

      ... they're annoying. So like-

    8. JR

      We don't need that.

    9. S(

      ... like the famous example is like, Coinbase is in America and they have to file all these forms. They have to be... They're a regulated entity. They're a publicly traded company so they have to report everything. So if you're offshore, you can kinda not do any of that. You can play fast and loose and, you know, for some people, they think that's better. They can offer, let's say, like, 100X leverage. Like, you have a dollar, I'll let you trade with $100. And that's, that's gonna be, like, one reason you come to my offshore exchange because I can offer you more leverage than the guys who are, like, you know, Coinbase or something like that.

    10. JR

      Right.

  4. 3:01 – 7:01

    Sam Bankman-Fried’s rise and the core fraud: customer deposits to Alameda

    1. S(

      So FTX launches... Let's start with who Sam Bankman-Fried is. He's kind of at the center of all of this. Sam Bankman-Fried is this guy who comes... He's the son of two, uh, Harvard lawyers. Then he comes up, prep school. He's kind of like, um, built for success, right? He goes to MIT, goes to Jane Street as this quantitative trader, and then he goes into the crypto space and he launches FTX. Or sorry-

    2. JR

      He's very young, right? How old is he?

    3. S(

      I think he was... He, he is young. I'm not... Maybe you can look that up, Jamie.

    4. JR

      31.

    5. S(

      31. Um, he launches Alameda Research first, which is just like this trading firm, which basically the idea here is, "We have some ideas. We're gonna raise a little bit of money and we're gonna do these trades that are profitable in crypto." So the way he first made his money was he did something where he bought, uh, bitcoin in, uh, the US and then he sold it on these Japanese exchanges where it was worth more. So this, there, he was, uh, arbitraging this difference in prices. And then after he made his money that way, he launches FTX in 2019. And that's a crypto platform where honestly you can make a lot more money than just with a trading firm. So FTX quickly skyrockets in popularity. They bring on people like Tom Brady to promote it, Larry David in the Super Bowl. They kinda get buy-in from all these big sort of names and also reput- reputable people like BlackRock, Sequoia Capital. They all invest in this guy. Kevin O'Leary famously promoted it for like $18 million.

    6. JR

      They gave him $18 million to promote it?

    7. S(

      He says he lost it on the platform. He says the 18 million was on FTX or whatever and he never, he never got a dollar out of it, but that was the, what the deal was for. So they were paying everybody to promote this FTX ex- crypto exchange and the idea was is this is the next, uh, the next big thing, right? And this is where you're gonna make money. There was a lot of fear of missing out, or FoMO, in the, in the markets at the time. You know, everyone thought, "Oh, cryptos, you have to get in now," right? "Because if you get in now, you're gonna make some money." And so people invested in FTX thinking that this is going to be, uh, a safe platform, this kid is smarter than everyone else, he's the son of Harvard lawyers, we just sort of can't lose. And nobody paid attention to some of the red flags that were going on until ultimately it was too late. It turns out he was pilfering FTX, the customer deposits, and was using it in Alameda Research, which was his trading firm, to try to make extra money, and he lost it.

    8. JR

      And so this is all because it's unregulated? Like, if he was doing this... Like, Coinbase can't do this. Is that correct?

    9. S(

      Yeah. Coinbase is much more heavily scrutinized. They actually have to file, uh, with the SEC. They have to say what they have, where they're putting their money. They're subject to more regulation about, like, how they take care of customer deposits. One of the big things with FTX was they told people, "Hey, you put your money with us, we're not gonna touch it. We're not gonna move it." That's what FTX said in their terms of service. So one of the really, uh, big problems was they actually weren't doing that but nobody knew because nobody had a look at their books. Like, it was very opaque. Nobody knew what was going on behind the scenes. So even though they said, like, "We're not gonna touch your money,"-As soon as you deposited Bitcoin, I mean, I talked to some of the insiders at Alameda. They said they had this, uh, backdoor system to where they could see you, Joe, deposit a Bitcoin on FTX. They could grab that Bitcoin and start trading with it immediately.

    10. JR

      Whoa.

    11. S(

      Even though they were never supposed to be able to touch your money, obviously. That was the whole point is like, "You deposit with us. We're not gonna do anything with your money. It's your money." It's like a depos- like we're... It's almost like a bank.

    12. JR

      Right.

    13. S(

      Like, you deposit with a bank. Your bank, uh, isn't supposed to go ahead and take your money and go start trading with it unless, you know, obviously we have FDIC insurance, stuff like that. But like, they didn't have that. They had... They just take your money, go trade with it, and that's where the disaster started.

  5. 7:01 – 15:14

    The ‘backdoor’ and the Twitter Spaces confrontation: catching the narrative shift

    1. JR

      I really enjoyed you catching him on Twitter Spaces. I really enjoyed that. I listened to that whole thing 'cause, because before that, you have this guy who's this, you know, whiz kid who, you listen to him talk, he has an answer for everything. He's so articulate. He's so knowledgeable. Like, I listened to previous interviews before he got busted, and then when you have him on, there's a lot of, "Um, I, I wasn't aware. Uh, I'm not sure. Uh, I don't... I'm not aware of that. I don't know." There was all this hemming and hawing and a lot of "ums" and "ahs," and, and you just kept on him. It was amazing that he... First of all, it was amazing that he felt like he could do something like that. Like, why would he publicly communicate?

    2. S(

      This is one of the... (sighs) This is why it's so interesting to me to look at fraud. Like this is why it fascinates me as well as I think it's an important thing to expose. But like, I'm interested in the characters who perpetuate fraud because they're such interesting psychological case studies. Sam Bankman-Fried, you could probably write a whole book about the fact that this guy, he got away with lying so long and perpetuating this image of himself as this generous billionaire, y- you know, he's sort of the next Warren Buffett, that when everything goes wrong, he thinks he can reestablish control because he's so smart. He is such a good liar that he's like, "I can just lie my way out of it." So, I think that's why he ultimately talked. His idea was, "If I lied my way into it, I can sort of lie my way out of it."

    3. JR

      Mm-hmm.

    4. S(

      And this is what he did. So, I... Prior to this, I'd interviewed him twice before, and I had kind of gotten hamstrung with the like, you know, he's just so good at dodging stuff. You'd ask-

    5. JR

      Did you interview him before the scandal?

    6. S(

      No, not before the scandal.

    7. JR

      So it's like, as it was going down.

    8. S(

      As it was going down, he goes on all these Twitter Spaces. He doesn't want to... He's doing interviews with everybody. I ask him, and, uh, he doesn't want to talk to me, so he... But he's going on these Twitter Spaces. So I keep... I like, was tracking when he'd go on a Twitter Space, and I would contact the people ahead of time. I said, "Hey, at the end, when you're like, ready for this thing to go down," because I know as soon as I get on, it's gonna end pretty quickly after. I said, "Let me on. Let me ask him some real hard questions." Because all these guys are like, "Sam, you know, we appreciate your transparency." All these... Kind of kissing up a little bit.

    9. JR

      Mm-hmm.

    10. S(

      But I was just like, "Somebody has to ask him some real questions." So, I had two prior little Twitter Space interactions with him, and he kept getting away with the fact that he blamed all the wrongdoing of FTX on Alameda Research. And he said, "I don't control Alameda Research," even though he was the owner. He's no longer the CEO as of 2020. He hands it to this, uh, a girl he actually had a relationship with, Caroline Ellison, right? And she supposedly controlled it. He said, "She did everything. I don't have access to the book." Like, I basically knew nothing. So, anytime you'd call him out on an issue, you'd say, "Where's the money?" He goes, "Well, it's... I don't know. It's gone. It's Alameda Research. Ask Alameda." So, by the third interview, I'd studied him, and I said, "Okay, how do we get down to FTX's responsibility in this whole thing?" And I kept coming back to, it was the terms of service that said, "You cannot move..." Like, "When I deposit with you, you're not gonna touch my money." And I said, "Sam, if that's true, where's the money of all these people? You... There's no... There's no Ethereum left. There's no Bitcoin left. You don't have the real tokens anymore. You just have your sort of nonsense, uh, FTT tokens, the tokens you invented." And he said, "Oh, uh, well, you know, there were some margin trading accounts." And I'm like, "No, but there were people who didn't trade with margin. There are people who just put their money with you, and they... All they wanted was they wanted to store some Bitcoin with Tom Brady. They wanted to be alongside Tom Brady." So, he's like, "Well, uh, well, you know, there was fungibility between wallets." And it's like, "Well, what's fungibility mean?" It means whether you were a guy withdrawing who had... who was this degenerate day trader, or you were a grandma with... who just put one Bitcoin on there, or, you know, more likely the grandson, he treated all the accounts the same. So, when everyone came running for the money, they just withdrew until nothing was left. And ultimately, because they had lost billions of dollars, it left billions of dollars in credit claims, basically. They didn't have the money. And so now, it's trying to be sorted out by the guy who literally unraveled Enron, and he says... This lawyer, this lawyer goes, "It's worse than Enron."

    11. JR

      (sighs) I watched the CEO, the new CEO talk about it-

    12. S(

      Yeah.

    13. JR

      ... about him trying to-

    14. S(

      That's, that's John Ray.

    15. JR

      Yeah.

    16. S(

      Yeah, yeah, yeah.

    17. JR

      Trying to unravel it, and it's amazing. It's amazing that things with this amount of money can get this far sideways before anyone knows what's going on.

    18. S(

      This is the problem with offshore, uh, offshore accounts and stuff. Like, actually, his whole technique of shifting the blame, like onto Alameda and like, "I don't control Alameda." I've seen something very similar. I'm investigating this Ponzi scheme that's offshore, and like, one of the first things the guy does is he controls it, but he renounces ownership. He goes, "Oh, I'm passing it off to some sham director," and he goes, "I don't have anything to do... I don't know." "Where's the money?" "I don't know." But he controls everything.And so, it's like this is the, this is the tactic of these offshore companies is, like, you put the right people in charge who are gonna take the fall, you resign, and then you blame it on them later when everything goes wrong. His problem, though, is Caroline Ellison flipped on him.

    19. JR

      So, she definitely flipped on him.

    20. S(

      She was smart. Yeah, yeah. She, she cooperated. The, uh, her, and I believe Gary Wang were big executives. They're cooperating, they plead guilty. They're cooperating with the feds. I mean, they did the smart thing, which is, something like this happens, you shut up. You don't say anything.

    21. JR

      Right.

    22. S(

      And then you point at your boss. I mean, that's basically what they did.

    23. JR

      Oof.

    24. S(

      Which they for sure did stuff wrong too.

    25. JR

      Yeah.

    26. S(

      You did not get to that level and not know that things were wrong.

    27. JR

      Well, reading her tweets about amphetamine use were, was pretty wild too. The whole scene was wild. The fact that they were all living together and fucking each other in this giant penthouse, this $40 billion penthouse. The, the, the things, it's insane. It's really... I almost wish it wasn't a scam. I've said this before because I was, I was kinda... I root for nerds to, like, be that successful, that you're just completely living outside the norms of society, just fucking each other on amphetamines and making billions of dollars. Like, it sounds like a, a great story if it wasn't illegitimate.

    28. S(

      Yeah, that's... I mean, ultimately, that's the problem. Like, Sam was just hopped up on amph- amphetamines playing League of Legends-

    29. JR

      (laughs)

    30. S(

      ... while an investor calls. Like, at the time that was seen as this charming, like-

  6. 15:14 – 22:42

    Social proof as the superpower of scams: celebrities, VCs, and FOMO

    1. JR

      So bizarre. It's, it's just so bizarre that so many people got duped, and I felt the same way about Bernie Madoff. You know, I'm not a, a f- financially aware person. I'm not, I'm not into the market. I don't, I don't follow these things. So, when I see something like that go down, I'm like, how did he get Steven Spielberg? You know, how did, how does someone like a Bernie Madoff or a Sam Bankman-Fried, how does he get these people to do this? And in the FTX case, how much of it was getting celebrities to endorse the platform?

    2. S(

      Huge. This is what I wanted to say, like, the more I study this stuff, and you start to have repeat occurrences. Like, I just cover stuff all the time, and, and you see echoes of the same thing. I just had somebody just a couple days ago, I was interviewing for this, for this news scheme we're looking at, and he said, "You know, I never understood how Bernie Madoff got people, 'cause it seems so preposterous, and then I fell for something very similar." And what I notice with all of these things, the thread is you believe... You know it's kind of too good to be true, but the social proof is overwhelming and it overwhelms your kind of, like, alarm bells. So, the social proof is a combination of things. So, first of all, it's like, it's this guy who drives a Toyota. So, you go like, "Well, why does he need to scam me if he's driving a Toyota?" Right? Then it's like, uh, which Sam Bankman-Fried did. Then it's like, okay, Tom Brady backs him. Well, Tom Brady's gotta have some guys who are looking into this. And then it's like, well, BlackRock backed him. Well, BlackRock definitely had some guys who looked into it.

    3. JR

      Right.

    4. S(

      And Sequoia Capital, they said he was, uh... Might be one of the first, like, trillionaires or whatever, like, like he's such a great entrepreneur, they think he's such a genius. I actually, it might've been one of the A1Z guys, or, uh... I'm blanking on the name right now. But-

    5. JR

      A1Z? What is that?

    6. S(

      No, no, no. I'm sorry. Uh, I, I'm blanking on... It's this famous... (laughs) I've gotta remember it right aft- after I get out of here. It's one of the famous, um, like, uh, investment funds. They invested in a bunch of NFT projects. Marc Andreessen, I think, is the guy who runs it.

    7. JR

      Hmm. Jamie's looking it up. I thought I knew it off the top of my head, and now I don't wanna say the wrong one. A16Z.

    8. S(

      A16... A1Z. A16Z. I can't... It was one of those. Sequoia or A616Z. One of them wrote this glowing review of Sam, basically saying he's gonna be one of the first trillionaires. Um, so all these guys basically, a lot of these people backed Sam with the highest endorsements. And so if you're just an average person, you're thinking, "Well, how much more due diligence can I do than all these other guys? All these other guys buy into him."

    9. JR

      Right.

    10. S(

      And like, and then they themselves are kind of also looking at each other being like, "Well, that guy did it." Like, what... It's the hottest deal around, right? Uh, Kevin O'Leary is in. So, so you kind of think you're swimming safely with, like, other savvy investors, and that's what ultimately gets you to buy in. Bernie Madoff is very similar. I mean, he was, uh, you know...... really well-regarded in Wall Street. So, when people invested with him, they didn't... They knew the, like, returns were insane, but it wasn't like he was some random fly-by-night guy. He was well-respected in the Wall Street space. People thought he might take over the SEC after, like, the current person had stepped down, they thought he was gonna take it over.

    11. JR

      Whoa.

    12. S(

      Like, he's one of the leaders at the NASDAQ. I mean, he was one of the go-to guys. And so you thought, "Well, I invest with Bernie, like, I can't lose." It's like almost, you know, betting on the house, like, 'cause the house always wins, right? So, when FDX was taking off, it just seemed like everyone who was a someone was backing him. So, then it was okay, and then I think a lot of these people deferred to their other friends. They're all saying, "It's okay. Let me put money in." And it's just a huge case study that just because other people fall for something doesn't mean you're safe. Like, you have to do... I hate to say "do your own research" 'cause that's such an-

    13. JR

      Moo. (laughs)

    14. S(

      ... overused, like, scammy phrase. It's actually such, like, a phrase, like, that, you know, it, it's almost useless.

    15. JR

      Chemtrails.

    16. S(

      But let me, let me say this: if it's too good to be true, if they're offering market returns that you wanna believe in, you go, "Man, I wanna believe this is real," don't invest. Like, that's a bad idea.

    17. JR

      People were calling bullshit, though. Just like there were calling... there were, there was a few people-

    18. S(

      Yeah.

    19. JR

      ... that were wary, that were calling bullshit on Bernie Madoff, and there was, there was a few people that were standing out and saying, "This- none of this makes sense."

    20. S(

      Right.

    21. JR

      And who were those people?

    22. S(

      So, there were a few people. Um, there was a Matt Levine interview with, uh, Sam Bankman-Fried. He didn't call him a fraud outright, but he's like, "Hey, it seems like you're in the Ponzi business, and business is good."

    23. JR

      Whoa. And what did he say to that?

    24. S(

      He's like, "Well, you know, like, think of it like a box." And, you know, you tell a bunch of investors, you know, "Hey, if you put money in this box, we can get some money out. We can give th- you this yield." He starts explaining, like, this thing that sounds exactly like a Ponzi scheme. And so ultimately, Matt Levine is like, "Uh, yeah, this doesn't really make a lot of sense." But again, it stops short of, "This is a fraud," because, you know, no one knew. There's a bunch of backing. So, I made a video at the time being like, "This crypto CEO just def- describes a Ponzi scheme." And that video has aged so well because it's like, people are like, "Oh, it was all true!" Um, but, like, but people were outright calling it a fraud, like Mark Cohodes. He's a famous short seller. Um, he was calling that a fraud early. I have a buddy of mine, um, he goes by Dirty Bubble Media on Twitter. He's like one of the A- Anon Twitter accounts. He was calling it a fraud. You know, there were things that were coming out, like, questions about, you know, "Okay, they say have- they have all this money. Where? Where on chain is it?" So like, the blockchain, everything's publicly, you can see it, right? It's all at some address. And so people were asking like, "Where's... You say you have all this Bitcoin, where's the Bitcoin? You say you have all this Ethereum, where's the Ethereum? And why are s- why is so much of your balance sheet made up of your own tokens?" It's a big question. So, one of the things that FTX had done, and a lot of companies were doing at the time but FDX was sort of the worst offender, is... Let's say I give you a l- like, let's say I give you a loan, Joe. So, an unsecured loan would be I give you a million dollars and I don't ask for anything. So, if you default on that loan, I'm out a- out a million. Another way is I ask for, "Okay, I'll take some equity in the studio if something goes wrong," right? So I cover my butt if, if you default on it. Now, this is what was going on in crypto. They're called collateralized loans. But what FTX was doing was they were saying, "Hey, like, we'll take a million dollars from you, but instead of giving you collateral like dollars, or like, or like a, like some asset, we'll give you FTT tokens," which is their own invented coin. And that should have value if anything goes wrong. And people were accepting that as value. But the problem is when at- the exact moment FTX can't pay you back is the exact moment that FTT becomes worthless.

    25. JR

      Mm-hmm.

    26. S(

      So, you think you have all this collateral. You think you have this backstop, because on the books it's worth, you know, X dollars. Let's say it's like, worth $5 a coin. But what you're not realizing is the real risk is when FTX can't pay you back, they probably can't pay anyone back. Everyone loses confidence. Everyone sells their FTT tokens. No one wants to buy it. It's worth nothing.

  7. 22:42 – 26:59

    How FTX unraveled: token-backed collateral and Binance’s trigger

    1. JR

      So, how did this all fall apart?

    2. S(

      Great question. So it's really interesting because it was like a battle between FTX and one of their competitors, Binance. So, uh, the, the owner of Binance is, I think it's Changpeng Zhao. Uh, he goes by CZ on Twitter. I probably butchered his name. But he was actually originally sort of an ally of Sam. So, he invested in FTX early on, put 100 million in, and eventually got paid out like $2 billion.

    3. JR

      Whoa.

    4. S(

      Yeah. Some of it was in this FTT token, though. So they have a bunch of FTT, right? And so it's like November was when all this stuff went down, and a report comes out from CoinDesk where it shows FTX's balance sheet. It shows actually what tokens they have. You know, for one of the first times it was kind of really everyone could- got to look at it all at once in one place. And people noticed, like, "Wait a second. A lot of their assets are just their own tokens." Like, they had a CRM token which they controlled most of, FTT. So it looks like, if you just look at their assets, it looks like they're covering their liabilities. They owe customers 10 billion, looks like they have 10 billion. But like most of this 10 billion is just their own tokens. So, CZ takes this opportunity to kind of spread some, you know, sort of, uh, information about that. He says, "Hey, we're actually gonna sell most of our FTT that we got from that deal, and we're going to sell it. We don't know if- we don't know what's going on there." And all of a sudden it starts this firestorm because people were like... There was al- already all this worry. In the past, that summer, there had been a bunch of companies that collapsed and people had never thought FTX... It was kind of the first time anyone thought FTX could maybe not have the money. So CZ says, "Hey, maybe they don't have the money. I don't know, whatever, I'm just gonna sell some- sell like $2 billion worth or..."

    5. JR

      But he knew what he was doing.

    6. S(

      Oh, for sure.

    7. JR

      For sure.

    8. S(

      He's a shark.

    9. JR

      Right.

    10. S(

      He's a- he's a shark. He knows what he's doing.

    11. JR

      What was the conflict between the two of them that led him to do that?

    12. S(

      The conflict was... It's a great question. The conflict was ultimately that, uh, Sam was trying to get some regulations passed, and he knew... Every- all the crypto people were trying to control regulations to favor their individual business situation. And so CZ felt like he was being cut out in Washington. And I think there was, like, a tweet from Sam saying, like, "Oh," like, "I'll see you the next time you're in Washington," or something like that. But like, it was kind of a dig because he knows CZ can't go to Washington. Like, he's a- he would be, he'd be afraid of being indicted or... I don't really understand why he can't go, but he can't go to America. So, Sam was meeting with regulators. CZ felt cut out, like he was basically gonna get a bad deal with regulators. They were all trying to... Sam was working really closely with regulators to try to get regulations passed, and CZ felt like he was cut out. So, that stirred up this, like, battle between them. And ultimately, Sam goes, "Oh, you won, like, our battle." And people were like, you know, is it a battle when you lose billions of dollars of customer money? Like, well, how can you view this as a battle? Like, but he viewed it as, like, we're sparring partners. Like, and you won this round or you won the war.

    13. JR

      Because he thinks this is gonna go on forever.

    14. S(

      I- I-

    15. JR

      Initially. He thought he was gonna be able to figure out a way to pull all the- the company's assets together and-

    16. S(

      I think he thought that.

    17. JR

      ... make everybody sound and repay everyone and go back to making money again.

    18. S(

      I don't think he thought he would repay everyone, but everyone thought like, oh, we'll just enter Chapter 11 bankruptcy, we'll restructure the company, we'll reopen. We'll, uh, we'll just turn all the debt into new FTT tokens and pay everybody out.

    19. JR

      Oh. That's what he thought? He's on- he's on amphetamines, right? So he can't be thinking totally clearly and probably overly confident.

    20. S(

      Yeah, it's- it's pretty clear he didn't see, like, the full scope of the situation, especially at first. Um, it seemed like he thought, you know, he was like saying FTX US was fine, and then FTX US went bankrupt, and he's the one who put it into bankruptcy. And then he's telling everyone, "Oh, no, no, the money's actually still there." I mean, he was constantly giving a conflicting narrative of what's- was going on. Now he's still, like, trying to say he did nothing wrong. Um, he- he maintains he's innocent and right now, actually, the

  8. 26:59 – 31:29

    Political influence and campaign finance: donating to both sides, some in the dark

    1. S(

      big, like, kind of scandal now is they're finding a bunch of campaign finance violations because he was trying to influence politics, US politics. I mean, it's- it's insane how deep FTX's influence went from the Bahamas reaching into the United States, while technically not really being regulated by the United States.

    2. JR

      Yeah, they were the number two donor to the Democratic Party.

    3. S(

      That's right, but-

    4. JR

      Also to the Republicans.

    5. S(

      This is what's wild. So-

    6. JR

      Yeah.

    7. S(

      ... Sam knew publicly in our current American climate, like, it's kind of like, okay, it's a little bit chic to be donating to Democrats. You can do that without too much, you know, negative press. But if I'm the number three donor to the Republican Party, that's gonna be a bad look. So, he decides to donate dark to a Republican, like, to Republicans. And part of the accusation is he knowingly did this through one of his, uh, executives, Ryan Salami or some- I think that's his last name. Uh, Salami. I don't know, I just don't know how to pronounce it. But he was like, yeah, the number three donor to the Republican Party. But it was all orchestrated through Sam. Sam wanted to basically influence politics by just donating, donating, donating. And the idea is you donate to both sides, you can never lose, right?

    8. JR

      Yeah.

    9. S(

      If you have- if you're- your hand's in both pockets. But publicly, he's just like, he's donating to Democrats because he says, "Oh, I'm like this, like, you know, I care about all these issues."

    10. JR

      Yeah.

    11. S(

      But it's like even more cynical than just buying one party is buying both, lying about it, so that you can get all the good press of like, caring about all these social issues while also not caring at all. And ultimately, one of the ways, like even some of the- the candidates they donated to were through like a third employee we didn't even know about and they were like donating through him for like all these, um, LGBTQ+ causes. And it was through a guy and the guy was like, "I feel a li- little uncomfortable with this." And they said, "Well, we don't have anyone trustworthy at FTX we can donate through who's gay, so like, can you- can you do this?"

    12. JR

      (laughs) So someone had to be gay to do it? Like...

    13. S(

      No, they- no, basically they were like, "We need someone trustworthy we can trust to do this, so hey, you're gonna be the guy. Like we- we're just gonna do a few transactions through your name." That just came out in a press release. It's the new charges. He was basically like a- they call them straw donors, 'cause it's like if I give money to you to give money to a politician on my behalf, you're a straw donor. You're not really a donor. So, Alameda was using customer funds to pay off politicians in order to try to get favorable regulation for, I guess, offshore crypto exchanges, right?

    14. JR

      And so these campaign finance, th- these violations, like what exactly, like what- what's- what are the regulations in terms of like what you're allowed to do and donate and how did he violate them?

    15. S(

      So, I think- I think the big violation was you're not supposed to... Like, if you're Alameda Research and you're funneling money through a personal investor, that I think is the problem. They're actually- campaign finance laws, I've heard, are pretty weak. I forget the name of the law, but it was passed in like the early 2000s, uh, 2010s maybe, where it actually became very easy to donate dark where it's like you can donate through super PACs, political action committees, and you can donate as much as you want and you don't have to be... Your name has to appear nowhere. And so that's actually what he said in one of the interviews. He goes, "No one believes me when I said I donated dark because no one believes anyone would be... Like, everyone wants the credit for donating."

    16. JR

      Mm.

    17. S(

      "No one believes that I just...... do it on the sly. And that, that's ultimately what he was doing. But it also looks like he was donating through some of his executives. And I mean, the whole thing was shady all the way down. Like, I, th- so, it, the person's not named in the report who was donating to, um, Democrats. We know the one republic donating to Republicans was Ryan Salame. Um, but that person eventually said, "Well hey, can we restructure all this money that went through me like a loan so that we can, you know, say that I took a loan out and I was donating, so we didn't violate any laws?" They never ended up doing that. But like, it was very clear the internal conversations were they knew they were committing fraud. They knew they were doing things wrong, and this idea was, "Well, no one's gonna catch us." Right? "Nobody's ultimately gonna find out, um, what we're doing here."

  9. 31:29 – 37:31

    Is another FTX out there? Binance scrutiny, proof-of-reserves, and hidden liabilities

    1. JR

      How many more of these are out there in the world?

    2. S(

      As big as FDX? Uh, we don't know. I mean, there's only a few that are bigger. Like, there's Binance, very opaque company. We don't exactly know-

    3. JR

      And what has happened to Binance since FDX went down? Because it seems like they received a- additional scrutiny, right? 'Cause now people are starting to look at it, and I saw that their value went down considerably.

    4. S(

      Yeah, Elizabeth Warren, uh, wrote a letter to them. They're, they're being looked at much more closely. I mean, ultimately all of these things are so opaque, eh, in the sense that y- you can know their assets. So, it's like a big thing recently in crypto. They'll say, "Hey, we're gonna show you proof of reserves." What does that mean? They mean, "We'll show you on chain all our assets. You can check yourself." Like, "I have a billion dollars in USDC." Well, that's great, but it doesn't matter if I have a billion dollars in crypto, Bitcoin, whatever, if I owe $2 billion.

    5. JR

      Right.

    6. S(

      That's what ultimately matters, is how much do you have in deposits that you owe out? And so with Binance, we don't really know. The only one we have a little bit more of a look into is Coinbase. It seems like they are, you know, legitimate. But, um, o- so much of the problem with crypto is we don't know how much of this stuff is money laundering. We don't know how much of this stuff is, like, outright the proceeds of criminals. I mean, we know that these criminals do launder their money through a lot of these crypto exchanges, uh, through mixers. It's just sort of this big mess right now, and we're waiting for regulators to figure it out. Finally, regulators have stepped on the scene, but, um, you know, right now it's just this kind of wild, wild west of you're just having to trust these shady offshore entities that they're telling the truth. Binance says they're fine. They show proof of reserves, but what are their liabilities, you know? It's hard to know. Um, so people really just take you at face value, and they, they have to trust that, like, "Oh, other people are invested, so I guess I'll jump in too."

    7. JR

      And that's why the celebrities are important, and that's why-

    8. S(

      Huge part of it.

    9. JR

      ... the connection to BlackRock is important.

    10. S(

      Huge part, yes, because they're the legitimacy that says, "Hey, I'm, you know, I too am safe because Tom Brady's got his money there, so I can put money there."

    11. JR

      So, is, the lure is like how Bitcoin used to be worth very little, and then one time it was, with the high of Bitcoin. It was like 70,000 or something like that?

    12. S(

      60 plus, yeah, yeah.

    13. JR

      So, that, that's the lure. The lure is you buy in for pennies, and one day you're insanely rich. I'm sure you know about that one guy who lost a hard drive and who's, uh, paying people to go through a landfill-

    14. S(

      Yeah.

    15. JR

      ... to try to find his hard drive 'cause there's billions of dollars worth of Bitcoin on that hard drive.

    16. S(

      Yeah, people lose, people lose their crypto keys all the time. I mean, it's kind of an interesting idea where you go, "I'm gonna get in before everyone else," but a lot of people found out about crypto the same time the mainstream media, everyone else did. So, by the time they're actually investing-

    17. JR

      It's too late.

    18. S(

      ... it's, it's too late. Um, I think the, like, most fair case you could make about crypto is sometimes national currencies aren't a great idea and you want an alternative. So like Turk- look at the Turkish lira, right? The inflation rate, I think, is like 75% or something like that. Like, it's like, it's an unimaginable, it's just out of control inflation, and if you hold onto your Turkish lira, you're in for a bad time, because every day it's getting less valuable. So, the question is what do you do if you're in that country making money? If you wanna store your money somewhere else, how do you store it?

    19. JR

      Hmm.

    20. S(

      So, there's this idea of, like, these alternative currencies that are kind of interesting, um, and then there's some arguments that, like, hey, if you're someone like me, I have, um, two employees, and both of them are overseas. Like, one of them is in London. One of them is in Ukraine. And so for me, I have to pay them, and you know, I have to do this wire transfer, and it's kind of expensive to do these, like, you pay all these fees for wire transfers. So, the idea is like, okay, well if you have crypto, those wire fees can go down, and instead of taking, you know, maybe a day or something, it'll take, like, five minutes or three minutes.

    21. JR

      Hmm.

    22. S(

      So, so I don't wanna give off the idea that, like, there's nothing here, but the problem is, is that with the lack of regulation and the ability to send peer-to-peer, which means, like, you and I can just send money to each other directly, no middle man, there's also a really huge opportunity for fraud, scams, and basically, like, you know, shell, shell games-

    23. JR

      Hmm.

    24. S(

      ... where you're hiding the money.

    25. JR

      Yeah.

    26. S(

      You're saying, "Oh, invest in this. This is gonna become valuable later," but you actually own a bunch of that token. Then you sell it off, and then the plot- price plummets. So, you thought you had a bunch of money, but actually it's worth nothing. Like, there's all these new scams that have emerged as a result of people getting interested in this idea of an alternative money system. Um, I mean, yeah, e- e- especially in our modern age, I mean, it seems like you can understand where they're coming from, the average person. They're like, "Look, I've been screwed by the banks every time the, the government's printing a bunch of money."... where do I go, right? You can understand the appeal, but it's just like, you went from the, you know, the arms of one huckster to another. Like, it's just like-

    27. JR

      Hmm.

    28. S(

      ... it's just like, ed- almost to something worth, worse. Um, there are reasons that our banks have a bunch of anti-money laundering laws. There's a reason that they have all sorts of finance laws. It's not for, it's not for their safety, it's for your safety. I mean, it's like, they need to, you know, fight... Like, one of the best ways to fight crime is at their wallets, like, you know, like take away their banking. And, uh, crypto has just really revitalized that because, you know, now, if you're, if you're some criminal, laundering money has just never been easier.

  10. 37:31 – 49:32

    Crypto crime plumbing: ransomware, mixers, and why traceability breaks

    1. S(

    2. JR

      Hmm.

    3. S(

      Instead of taking $100,000 across the border or wiring it, where it can get held up by a bank, now I can just send you a 100K, it's gonna take me five minutes.

    4. JR

      So, that's why when people, like, uh, kidnap people's data and things along those lines, they, they'd like to get paid through crypto.

    5. S(

      Ransomware, yes.

    6. JR

      Yeah.

    7. S(

      Yes. 100%. Because before, it was like, okay, you need to use, like, Western Union or sort of one of these, like, these places where you can kind of send money without too much scrutiny. But even Western Union has been kind of, they've been getting kind of pinched a little bit, like, "Hey, you guys got to stop allowing all of this." But in crypto, there's, there... Because there's no middleman, because there's no one who controls, uh, like, Bitcoin, like no one can say, like, no to a transaction, now it's like there's, there's nothing to stop you from sending that money. And then, and then you can take that money and you can send it to what's called a mixer, which is, uh, this, like, fancy language for, for a way to, like, s- anonymize your transaction. Like, you put it, you put $100,000 into this little mixer and then it sends $100,000 out later and nobody knows where that money came from.

    8. JR

      What, what is a mixer? How does that work?

    9. S(

      I- it's interesting. So, the most famous example is Tornado Cash. They've recently been, uh, shut down. But-

    10. JR

      (laughs)

    11. S(

      ... the idea was, yeah.

    12. JR

      Just the idea of putting your money into Tornado Cash.

    13. S(

      Yeah, it's wild. (laughs)

    14. JR

      It's... Uh, y- is there a better analogy for losing your house? (laughs)

    15. S(

      I- you know what's funny? Yeah, yeah. (laughs)

    16. JR

      You know? I mean, good Lord.

    17. S(

      The, the idea of these mixers was you'd anonymize your transactions. So like, uh, let's say I put, like, one... Let's say I have Ethereum. One Ethe- uh, well, one Ether into this mixer, right? This pool of money. A bunch of people are putting one Ethereum into this thing.

    18. JR

      Mm-hmm.

    19. S(

      So all this money is going in and then you basically wait. And as you're waiting, Ethereum's going out everywhere, a bunch of people are withdrawing, right? Because they're also taking their money out.

    20. JR

      Right.

    21. S(

      By the time you withdraw, there's nothing tying your Ethereum to your particular address, to, like, this random external address, because you, you sent it to a different one. So before, it's like, if I send you a dollar and then you send that dollar on, we can easily trace that back to me, right? It's like here, here. But if I send a dollar to you and everyone's sending you a dollar, and then you're sending a dollar to all these other wallets, then it's impossible to know which of those new wallets my dollar's from.

    22. JR

      (laughs)

    23. S(

      It's like, it's just crazy... It's a crazy idea-

    24. JR

      Wow.

    25. S(

      ... that these, uh, basically nerds in cryptography thought of, which is, it's almo- it's brilliant. I mean, it, it is brilliant because it is basically... Uh, it's almost impossible to trace. But ultimately the outcome of that is like, "Yeah, I encrypt all your data. Joe, send me... I know you're, you're this successful podcaster, I want you to send me $10 million or your data's lost forever." And you're like, "Call the, call the police." And you go, "Hey, track this guy." And they're like, "To what?"

    26. JR

      Hmm.

    27. S(

      "To a Bitcoin wallet? To a-"

    28. JR

      Yeah.

    29. S(

      "... Ethereum wallet? What, what are we tracking here?" And then it goes to some mixer somewhere and then we don't know where it goes after that.

    30. JR

      So, when Sam Bankman-Fried was working with regulators, when he was trying to impose regulations or encourage regulations, how could that have benefited him as opposed to finance? Like, what, what could they have possibly done to make it easier or more profitable for him?

  11. 49:32 – 57:19

    How Coffeezilla became Coffeezilla: from engineering to exposing grifts

    1. JR

      How did you get involved in what you do?

    2. S(

      It's a- it's a weird thing. Um, so-

    3. JR

      So when did you start your YouTube channel?

    4. S(

      So I started it a few years ago, um, 2018, 2019.

    5. JR

      And what was the first video?

    6. S(

      I started as sort of like an interview show, nothing about scams. Um, I had a channel before it. I had- so, I went to school for chemical engineering and hated it. I was miserable. I was like, "I do not want my life to be earning 2% more of, you know, uh, of a bottom line for Exxon Mobil." Or- or any chemical, I just wasn't interested. I was like, "That's not my life." So, I always wanted to sort of, um, you know, have a voice. And so I started a YouTube channel, just doing random videos. I didn't- I hadn't really found my footing. But throughout my entire life, I'd kinda had this relationship with like hucksters and fraud, where, you know, when I was in high school, my mom got thyroid cancer, very treatable kind of cancer, and she's fine. But at the time I watched her as she's like gets this diagnosis, gets swept up with all these hucksters who are telling her that the way to treat thyroid cancer is not surgery. "You can just treat it naturally. Just don't worry about- hey, don't listen to the, you know, the doctors. Don't listen to your general practitioner. You can just treat it with like colloidal silver."

    7. JR

      Oh, Jesus.

    8. S(

      Or with just- just put a bunch of garlic cloves in the pot. I still remember, her house like reeked. They- she would put 60 cloves of garlic in-

    9. JR

      Ugh.

    10. S(

      ... like in a stew, and she would drink it up 'cause she thought th- that would make her better. Ultimately, my dad, uh, convinced her, like, "You gotta get the surgery." Like, "This ain't- this ain't gonna fly. You have to, you know, ultimately get the surgery." Uh, which thankfully she did, and she's fine now. She takes medication to replace the hormones her thyroid would generate. But I saw my mom kinda get swept in this thing that I knew was nonsense, but it's sort of like hard. You kinda have to disprove every single- like there's always a new like health guy telling you that there's some new alternative discovery, whatever. And I was like, "This is kinda weird." And I was like, "Why do they hate doctors so much and it always seems to like end up with a sales pitch?" Like it never was like, "Hey, let me just give you this free thing." It was like always like there's something- there's a catch.

    11. JR

      Mm-hmm.

    12. S(

      So I didn't really know what I was looking at at the time. Then I would go to college and all my friends get into MLMs, multi-level marketing, you know, sort of like-

    13. JR

      Mm-hmm.

    14. S(

      ... just like the, like, "Hey, you're gonna get rich." So I was always getting invited to these like get rich seminars. And, uh, and I'd go 'cause it was like my friends like said, "Hey, we have to get somebody, you know, you wanna go?" And I was like, "Sure I'll go." I was like kind of fascinated. And you'd see these guys, you know, they're like, "Hey, don't work a nine to five job. Like be free like me." And I'm like, "You're here on a Sunday at like 5:00 PM. How free are you really?" Like, you're just like- you're just kinda grifting here. And so- but I'd- but you'd see 'em in nice cars and so I was like, "What is th- what am I looking at?" And then as I'm doing my YouTube show, I'm like- I get fed a bunch of ads, like get rich quick schemes. Like you've got a bunch of people, you know, flexing in their Lamborghinis telling you, you know, they're like 25 years old telling you, "You wanna get rich by 25 or 22? I'll show you. Ma- I made a million dollars. I'm a millionaire by the time I'm t- 23 years old. Just buy my course. My course is, you know, $2,000. Pay me $2,000, I'll teach you to get rich quick." So I saw all this and it all- that- my experiences up to that point, it kinda led me to like, "I wanna say something, but why is nobody saying anything?" It just seemed like there was this, you know, these people pitching this stuff and nobody was talking about it. So I made this random video just basically screaming about, you know, all these scammers online. And unlike my previous work, which kinda had reson- like it- it had gotten some reactions, but not much. What I noticed is the- it resonated with people beyond the views. If that makes sense.

    15. JR

      Mm-hmm.

    16. S(

      Like I was just like there was something different about the reaction to it. Like and, you know, victims would reach out to me. They'd be like, "Hey, I'd been scammed by this guy and I didn't realize what was going on and you showed me, you know, sort of like how the whole, uh, scheme worked." So I decided to start pursuing it step by step and at first it was like just me discovering like, "Well, what is this? Well, how does this scheme work? Okay, so I buy this course and then what? W- what are you saying in the terms of service that means that I can't sue you? You have all these terms of service that basically say none of what I'm saying is true." Like they say they can get- get you rich in the sales pitch and then in the terms of service they said, "Results may vary." What's that about?

    17. JR

      Mm-hmm.

    18. S(

      I mean, ultimately it's like- and so I realized like, oh, they- there's this sophisticated way that they're preying on my psychology and they're setting it up with like, "I used to be broke like you." Well, that's a strategy.

    19. JR

      Mm-hmm.

    20. S(

      A lot of these guys were never broke, right? The- and they- it's just part of the story you have to tell to be really effective. It's like, "I used to be just like you, Joe, but then, you know, I found out that doing Amazon drop shipping is the way to make millions of dollars. And you know, I used to fail, but by these little tricks, I found out how to be successful. And if you invest with me, I'll save you time. You know, you could do it yourself, Joe, you could do it, but it what? It's gonna take you five years. Get with me and I'm gonna shortcut your success. Two months, you're gonna be making five figures a month, 10 months, maybe six figures a month. And I've done it for people before." That's the social proof. "I've shown people how to do this. You can watch them. Watch- these are real- these are real people, Joe."You can, you can do, be just like them. And so, I started watching this and I started, like, seeing it. I'm like, "Oh my gosh, this is so interesting." I start covering it, and then I start to get cease and desist letters. They don't like that. So they start to send me, they say, "Hey, you better shut up or we're gonna sue you." And I was like, "Okay. I'm not gonna stop making these videos." I just kept making the videos. And, uh, ultimately they never did. But, but I start, I start doing that and after I get, cover get rich quick schemes for a while, I start hearing about these tokens. And they're like, "Hey, selling courses..." Like, it's always the new grift. You always have to find... 'Cause people figure it out. Like, they go, like, "Oh, that actually doesn't work." Like, "Hey, sell..." Dropshipping is not actually, like, this incredible business that you thought it was that you're gonna get rich easily. So don't do that. Go do crypto. You gotta get into crypto now. And then it became NFTs for a while. But like, so I, so I started, I eventually, like, pivoted into this crypto direction and learned all about that. But it started just from a curiosity about scammers and, and, uh, I wanted somebody to say something. 'Cause I was just like, "Why, why does this make some people tens of millions of dollars and nothing happens? Why are some of these people making hundreds of millions of dollars, people are miserable at the end of it, and nothing happens?" And that, that was the start of my show.

    21. JR

      So you start just doing interviews about what? Like, you, you just, you didn't start doing this. You started doing just, like, a normal interview show?

    22. S(

      I was just doing a normal interview show with a few of my buddies, um, and it just was kinda... I, I was just trying to find my way. I was just trying to, like... Be- even before that, I had done a show where I was, like, trying to break down these topics. I was, like, researching addiction, and I was just, like, trying to, you know, make some digestible piece of media around, like, addiction, right? 'Cause like, I, I always was interested in communicating complicated ideas, um, in a digestible way. I just felt like, man, there's so much cool science out there. There's so many cool ideas out there. How do we communicate this? So I did that for a while, then I started, like, Coffeezilla was, like, this spinoff channel and I was like, "Let me do some interviews." And then it was also my place, I just threw things at the wall. So then I, that's where I threw one of my rant... Like I just, like, ranted about this thing against the wall and it kinda, like, stuck. And I just en- I just enjoyed it. I was like, "Man, screw these people," you know? Like, for taking advantage of, like-

    23. JR

      Yeah.

  12. 57:19 – 58:38

    Desperation over greed: why victims fall for scams

    1. S(

      A- and what was sick about it is, they're not taking advantage of rich people, 'cause rich people will sue you.

    2. JR

      Yeah.

    3. S(

      If you screw them over, rich people will sue you.

    4. JR

      Right.

    5. S(

      They're taking advantage of, like, people who, they're like, ah, $10,000 or $2,000, that's like, all their disposable income. And they're betting on these hucksters to dig themselves out of these situations. And one of, that's one of the things I try to tell people is, like, a lot of the success of these things is not from... It's not even about greed. It's about desperation.

    6. JR

      Hmm.

    7. S(

      When you fall for these things, a lot of times, you know, you're like my mom. Like, the reason she fell for these things is she so badly didn't want surgery that she was willing to believe anything. Right? 'Cause she's like, "You know, if you tell me, and I have cancer, and you tell me I can be better, and you tell me it's 10-, $10,000, you tell me it's a dollar, I'll pay you either way."

    8. JR

      Mm-hmm.

    9. S(

      Right? And so people are financially, they feel like they're terminally ill financially.

    10. JR

      Hm.

    11. S(

      They're just like, "I don't know how to get out of this. I feel like I have no opportunities. This guy, I'm watching YouTube, I'm trying to better myself, I'm trying to educate myself, and this guy comes on and tells me it's all a click away, right? It's all a credit card swipe away."

    12. JR

      (sighs) What has been the reaction like? What has been the most, uh, visceral or violent reaction to what you've, uh, you've done and exposed?

  13. 58:38 – 1:08:08

    Logan Paul’s Cryptozoo: NFT hype, broken promises, and missing refunds

    1. S(

      I think the biggest story we probably ever broken was either... The FDX stuff, but that was already kinda going on. It was probably the Logan Paul story.

    2. JR

      Mm-hmm.

    3. S(

      The Cryptozoo saga. Um, that was a case where, you know, it's just the classic influencer greed story where this guy launches an NFT project, does millions upon millions of dollars in sales, and delivers nothing. He promises the world a fun blockchain game that earns you money, and he, he did nothing. And the project was left abandoned and people were, like, miserable, complaining, complaining. No one says any- but they don't have a voice.

    4. JR

      I'm not aware of that. I'm, I'm kind of aware that you covered it, but I don't know the story.

    5. S(

      So the... Let me, let me back up then. So-

    6. JR

      Okay.

    7. S(

      Uh, Logan Paul is popular influencer. You know who he is.

    8. JR

      Yeah, I know who he is. Sure.

    9. S(

      Um, so he along with a lot of influencers got really interested in, like, the crypto space. And he had done a coin before that called Dink Doink, which was abandoned shortly after he promoted it, people got invested, goes to zero, right? And he says, "Well, that's not my project. That was my buddy's project." And then, like, a month later, he's like, "I actually do have a project. Excited to announce it. It's called Cryptozoo." It's a fun ga- they called it a fun game that earns you money. Basically the idea is they're gonna sell you these two things. Eggs is NFT, and then there's a coin aspect to it called ZOO tokens. Okay? So you can buy these ZOO tokens to buy the eggs, and the idea is the eggs will then hatch into animals that will earn passive ZOO tokens. So you're, you can buy eggs with ZOO tokens and then the eggs will passively earn you ZOO tokens. Does that make sense?

    10. JR

      No. (laughs)

    11. S(

      Well, don't worry. You're, you're kind of actually caught up. Uh, so the ZOO tokens-

    12. JR

      (laughs)

    13. S(

      ... were basically this passive income, you know. You basically invest up front and then you're sort of getting the tokens back out, which you can then sell, I guess. So that was the idea pitched to people, and people immediately buy in. They, $3 million in NFT sales, tens of millions of dollars in the tokens itself, the ZOO tokens. People are so excited about it 'cause it's Logan Paul. And he says this is his project. He's putting his name behind it, his backing behind it, and he's a great marketer. I mean, you gotta give the guy credit where credit is due. He's a tremendous marketer. So people ge- get all excited.... all of a sudden, the da- the hatch day comes when you're supposed to hatch these eggs, and half the hatching doesn't work.

    14. JR

      How does the hatching work? Is it on a computer model?

    15. S(

      It was on-

    16. JR

      Like, what is it?

    17. S(

      ... it was on the blockchain, so you could like, you could, your NFTs would turn into different NFTs, like they would like, they would transform into the animals. They'd go from an egg to an animal.

    18. JR

      How?

    19. S(

      Uh, it's just blockchain coding. I mean, it's just, it's just-

    20. JR

      But how do they... Is it, is it predetermined?

    21. S(

      Yeah. Yeah, it's ba-

    22. JR

      Like how does your egg become an ostrich?

    23. S(

      It's just, it's just random. It's like, it's supposed to be randomly generated, uh, animals. So you-

    24. JR

      And so you might get a rhino-

    25. S(

      ... when you hatch it, you might get, yeah.

    26. JR

      ... you might get a chicken.

    27. S(

      Exactly. And then you could like, crossbreed your rhino with like, a chicken and get like a-

    28. JR

      Wow.

    29. S(

      ... a ricken or something.

    30. JR

      (laughs)

  14. 1:08:08 – 1:14:01

    NFTs, digital art, and why celebrity endorsements distort markets

    1. JR

      The whole crypto space and the whole NFT space is filled with weirdos. Like, everyone that I've talked to that wants to come to me with some idea, it's always very strange. Like, when- when people have come to, you know, like, my business manager with financial propositions, they're always, it's logical. Like, it makes sense. "Oh, invest in this. This is a fund and it does this, and this is how you get a return on your investment." None of that stuff ever made any sense to me. The, I- I avoided all of it, luckily. But I was propositioned by multiple different entities about these kind of things, and I was like, "I don't know what you're saying." I don't know, like, why would anybody buy an NFT? Like, you know, "Oh, it's a non-fungible token and then you put it in a NFT wallet and you have this thing." I'm like, "But I have the same thing on my phone. I can take a screenshot of that NFT and I have it." Like, what is the thing, the physical thing? You know, it's like, I understand, like, uh, Beeple. Do you know who Beeple is?

    2. S(

      Oh, yeah, yeah, yeah, yeah.

    3. JR

      Yeah. So, Beeple made that little Gigachad thing for us. It's a piece of digital artwork.

    4. S(

      Yeah.

    5. JR

      And, you know, he has an actual museum of digital art.

    6. S(

      Right.

    7. JR

      And if you buy a piece from him, you actually get a physical piece of digital art.

    8. S(

      Mm-hmm.

    9. JR

      There's something there.

    10. S(

      Yeah.

    11. JR

      I get it. Makes sense. I, like, the- the Ape- Ape Yacht Club, whatever the fuck that is. Like, what's going on here? Like, I don't ... I have a- a friend of mine who's an artist who made over a million dollars on NFTs and I'm like, "What did you do?" And, like, he talks to me for 10 minutes and I'm like, "I don't even know what the fuck you just said."

    12. S(

      Yep. So, let me start by saying, so, uh, I work with a super talented digital artist, so he does a lot of my set stuff. So, I have a lot of respect for, you know, the challenge of a lot of digital artists, as opposed to physical artists, is like, if you're a painter, you sell your paintings.

    13. JR

      Right.

    14. S(

      If you're a digital artist, how do you-

    15. JR

      Yes.

    16. S(

      You print it out? Like, what- what do you do? So, NFTs were sort of, originally, it was like, this is for artists. Like, this is a way for a digital artist now to s- legitimately sell scarcity in their work, which previously they had no way of doing. You still can take a screenshot, but you don't own the NFT that like, sort of, the digital artist has sort of provisioned like this is the thing that matters. So, I have a lot of, like, in that way, in that one way, I- I, like, I get it. I get why people wanted it to be, you know, to become the next big thing. The problem is, it was quickly taken over as an investment vehicle. Now, it's like everybody's an art dealer and now everybody's an art expert-

    17. JR

      (groans)

    18. S(

      ... and- and now we're trying to make a buck. Right? And that, anytime you get art involved with money, things get weird. But especially when you get art involved with quick flips and returns and now we're gonna ma- all make money from this. That's when things get really weird. So, like, I feel bad, sort of, for digital artists, legitimate digital artists who really do legitimate NFT work. I don't think there's anything wrong with selling your work as a digital artist. Like, what do you expect them to do? Not everybody can go work for, like, some random YouTuber. Like, you, you know, people have to earn a living. They do legitimate work and good work. But the problem is when greed gets involved, when people get involved basically promising, you know, money. In the case of the Bored Ape Yacht Club, it's sort of like, what they, their idea was, well start like almost like a country club where the NFT is the pass for the country club and like, you can go chat with the like, holders of this Bored Ape Yacht Club. And I guess the idea is like, because it's expensive, then you get in the room with, you know, people with money. Um, but I found that whole thing weird because of the like, you know, Jimmy Fallons getting involved and like, and then all these like mainstream celebrities, you know, start promoting this thing and it's like, this is a little str- why is everyone doing it? And then you come to find out that a lot of them had their Bored Apes bought by this company called MoonPay, who is trying to like, you know, use the celebrity's likeness to push that out. And it's just like, this is a strange ... What- what's actually going on here? Is it just about the art? It doesn't actually appear to be.

    19. JR

      (sighs) I just don't understand how it worked. I don't understand how anybody looked at it and went, "This is logical. I'm gonna buy that."

    20. S(

      So, think about it th- so, think about it this way though. So, I'm sure you- you've played a bunch of games, video games, right? Have you ever played a video game where like, they have like, in-game, you know, skins and like, different, like, outfits?

    21. JR

      Sure.

    22. S(

      And so people, so, tons of businesses have been built, like the entire free to play model of Fortnite, you know, Fortnites makes millions and millions and millions of dollars. Their whole model is built on skins-

    23. JR

      Mm-hmm.

    24. S(

      ... and like, different like, in-game purchasable items.

    25. JR

      Right.

    26. S(

      You don't actually own anything. It ultimately, it just lives and dies with your computer.NFTs are sort of like, I guess the idea with NFT gaming or whatever is, like, where you would actually own, own it. Like, they, the game couldn't take it away from you. You'd have-

    27. JR

      Hmm.

    28. S(

      ... some piece of art that you'd have some ownership of that would matter. Um, again, I think the challenge is, is just like where greed and, like, marketers get involved, they sorta like ruin everything with scams and fraud to where it's very tempting, and I get the temptation to just throw everything at, go, "It's all just a fraud," right? Because you see so much of it and so much of it is just, like, kind of people trying to scam you basically for, you know, and use, especially celebrity likenesses, to scam people.

    29. JR

      Hmm. Yeah, the celebrity part is a big key in all this, right?

    30. S(

      It's a h- I mean, it's a huge part. It, this is how we get legitimacy for products now is, like, sort of like-

  15. 1:14:01 – 1:19:29

    AI deepfakes and the ‘war on reality’: scams at scale

    1. S(

      It's like you gotta find a guy to do it. Uh, so ultimately, like, and the AI stuff's scary because ultimately you'll get the AI deep faking you into, you know-

    2. JR

      Yeah, there's one of me. There's one of me and Andrew Huberman selling some supplement that's not real.

    3. S(

      Right. (laughs) Yeah, Alph- Alpha-

    4. JR

      I don't know if the supplement's real-

    5. S(

      Yeah.

    6. JR

      ... but I know the w- the commercial's certainly not real.

    7. S(

      Yeah, they, they deep faked you, and it, I think it went viral on Twitter for a bit. I, I saw it.

    8. JR

      Yeah, well everybody knew it was a deep fake, luckily, and-

    9. S(

      It wasn't quite good enough.

    10. JR

      Yeah, and then, you know, w- we tried to figure out who's doing it, and you just run into a bunch of shells. It's, like, very difficult to figure out-

    11. S(

      I'll tell you offline who's doing it. I know, I know.

    12. JR

      Okay.

    13. S(

      (laughs) I looked into it because I was curious.

    14. JR

      Oh, okay.

    15. S(

      I was curious. And, uh, you know, that same person had put out a lot of ads about, like, Kim Kardashian, had, they had deep fake of Kim.

    16. JR

      Hmm.

    17. S(

      They had a deep fake of, uh, they had one of you saying that, like, so they have one of you saying, like, "This product's great, you know, go buy it." And then there was another one where you were complaining that Andrew Tate launched it, and you thought, you were sort of like, "Andrew Tate's going after my brand."

Episode duration: 3:04:16

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