Coffeezilla: SBF, FTX, Fraud, Scams, Fake Gurus, Money, Fame, and Power | Lex Fridman Podcast #345

Lex Fridman 0:00 Do you think he is incompetent, insane, or evil? The following is a conversation with Coffeezilla, an investigator and journalist exposing frauds, scams, and fake gurus. He's one of the most important journalistic voices we have working today, both in terms of his integrity and fearlessness, and the pursuit of truth. Please follow, watch, and support his work at youtube.com/coffeezilla. This is the Lex Fridman Podcast. To support it, please check out our sponsors in the description, and now, dear friends, here's Coffeezilla.

Lex Fridman 0:38 How do you like your coffee? Dark and soul-crushing? That was the, uh, number one question on the internet.

Coffeezilla 0:44 (laughs)

Lex Fridman 0:44 Do you like your coffee to reverberate deeply through the worst of human nature? Is that how you drink your coffee?

Coffeezilla 0:50 I've gone through a lot of phases on coffee.

Lex Fridman 0:52 Yeah.

Coffeezilla 0:52 I used to, in college, I would go super deep into, you know, grinding fresh beans, all of that kind of stuff, water temperature exactly right, and then I hit a phase where I was just, it was the maintenance dose, then I went to, like, espresso because I could get a lot more in.

Lex Fridman 1:11 Yeah.

Coffeezilla 1:11 And now I go through phases of, like, sometimes I like it with a little oat milk, sometimes a little half and half and sugar if I'm feeling-

Lex Fridman 1:17 Oh, you've gotten soft in your old age.

Coffeezilla 1:19 I've gotten a little, I, I have. But hey, if I'm doing a SBF interview, it's black that day, nothing less.

Lex Fridman 1:25 Yeah.

Coffeezilla 1:25 Just black, no sugar.

Lex Fridman 1:26 The lights go down. Wha- what do you actually do in that, in those situations, like, uh, leading up to a show? Do you get hyped up? Like, how do you put yourself in the right mind space to explore some of these really difficult topics?

Coffeezilla 1:39 I think a lot of it's preparation and then once it happens, it's mostly fueled by sort of adrenaline, I would say. Um, I really deeply care about getting to, like, the root cause of some of these issues because I think so often people in positions of power are let off the hook, so I really care about holding their feet to the fire and it translates into, like, a lot of energy the day of. So I, I never find myself, like, funny enough, I usually drink a lot of caffeine leading up to the interview and then I try to drink, like, minimum the day of because I have so much adrenaline I don't wanna be, like, hyper stimulated.

Lex Fridman 2:17 I have to say, uh, of all the recent guests I've had, the energy you, you had when you walked into the door... (laughs) Was pretty intense.

Coffeezilla 2:26 I'm excited!

Lex Fridman 2:26 ...was crazy.

Coffeezilla 2:26 Are people not excited that you're here?

Lex Fridman 2:29 (laughs) I don't know. I think they are scared.

Coffeezilla 2:30 Hey, you're a big deal, Lex.

Lex Fridman 2:31 I th- I think they're scared.

Coffeezilla 2:31 I mean, I don't know if you know.

Lex Fridman 2:32 I felt like you were gonna knock down the door or something. You were very excited. Um, (laughs) like that just energy. Um, it was terrifying because I'm terrified of social interaction. Anyway, uh, speaking of terrifying-

Coffeezilla 2:43 You ch- you chose a good living of interviewing people for... (laughs)

Lex Fridman 2:45 Face your fears, my friend.

Coffeezilla 2:47 There

Coffeezilla 2:48 you go.

Lex Fridman 2:48 Uh, so let's talk about SBF and FTX. Who is, uh, Sam Bankman-Fried? Can, can you tell his story from the beginning as you understand it?

Coffeezilla 2:57 Yeah. So Sam Bankman-Fried is a kid who grew up sort of from a position of huge privilege. Both his parents are lawyers. I believe both of them were from Harvard. He went to MIT, went to, like, or sorry, backing up a bit more, he went to, like, this top prep high school, then to MIT, then he went to Jane Street, and after that he get, started a trading firm in, I think, 2017 called Alameda Research with a few friends. Some of them f- were from Jane Street, some of them worked at Google, and they were sort of the smartest kids on the block, or that's what everyone thought. They made a lot of their money on something called the Kimchi Premium, or at least the s- the story goes, which just to explain that, uh, the price of Bitcoin in Korea was substantially higher than in the rest of the world, and so you could arbitrage that by buying Bitcoin elsewhere and selling it on a Korean exchange. So they made their money early doing kind of smart trades like that. They flipped that into market making, which they were pretty early on that, um, just providing liquidity to ex- an exchange, and it's what's, it's a strategy that is considered delta neutral, which means basically if you take kind of both sides of the trade and you're making a spread, like a, a fee on that, you make money whether it goes up or down. So in theory, there shouldn't be that much risk associated with it. So Alameda kinda blew up because they would offer these people, you know, people who are giving out loans, they'd say, "Hey, we'll give you this really attractive rate of return and we're doing strategies that seemingly are low risk, so we're a low risk bet. We're these smart kids from Jane Street, and you can kind of trust us to be this smarter than everyone else," kind of thing. Uh, around 2019, Sam started FTX, which is an exchange. Uh, specifically it specialized in derivatives, so, like, margins, kind of more sophisticated crypto products, and it got in with Binance early on. So Binance actually has a prior relationship to FTX, which we'll explore in a second 'cause they're gonna play a role in FTX's collapse actually. Binance is the number one, uh, crypto exchange and they are led by, uh, he's called CZ on Twitter, I don't wanna butcher his full name, but, um, really smart guy, has played his hand really well and built up a quite large exchange, and Binance was funding a bunch of different, like, startups, so they funded, they helped invest into FTX early on. They invested 100 million. So these guys were kind of like teammates early on, SBF and CZ, and FTX quickly grew. They got, like, especially in 2020, 2021, they got a lot of endorsements. They got a lot of credibility in the space, and eventually FTX actually bought out Binance. They gave them $2 billion dollars, so pretty good investment for, for CZ in a couple years. Um, and now lead that up to 2022, what happens?... Luna collapse, Three Arrows Capital collapse, which if you don't know, there's just these kind of cataclysmic events in crypto, uh, led by some pretty risky behavior where the Luna was a token that promised really attractive returns that were unsustainable ultimately, and it just kind of spiraled. It did what's called a, uh, stable coin death spiral, which we can talk about if we need to.

Lex Fridman 6:14 Stable coin death spiral. I, I can't wait till that, like, actually enters the lexicon, like a Wikipedia page on it, like, uh, e- economic students are learning it in school.

Coffeezilla 6:23 Yes.

Lex Fridman 6:24 It's like a chapter in a book. Anyway, um, look, I mean, this is the reality of our world. This is a really big part of our, of the economic system, is cryptocurrency, and stable coin is part of that.

Coffeezilla 6:34 Yeah. It's weird because on the one hand, cryptocurrency is supposed to somewhat simplify or add transparency to the financial markets. The idea is for the first time you don't have to wait for an SEC filing from some corporate business. You can look at what they're doing on chain, right? Um, so that's good because a lot of big financial problems are caused by lack of transparency-

Lex Fridman 6:53 Mm-hmm.

Coffeezilla 6:53 ... and lack of understanding risk. But ironically, you get some people creating these arbitrarily complicated financial products like algorithmic stable coins which then introduce more risk and blow everything up. So anyways, uh, Three Arrows Capital blew up, and all of a sudden this crypto industry which everyone thought was going to the moon, Bitcoin to 100,000, is in some trouble. And FTX seems like the only people who, besides like Binance who's also really big and stable and Coinbase, uh, they seemed like they were doing fine. In fact, they were bailing out companies in the summer. I don't know if you remember that SBF was likened to like Jamie Dimon who's the, you know, uh, CEO of Chase, who like kind of was like, "The buck stops here." Uh, you know, "I'm like the backstop," right? So SBF was supporting the industry. He was like the stable guy. So come to like around October and November, there's all this talk about regulation. Everything's been blowing up. SBF's leading the charge on regulation. And CZ, the CEO of Binance, gets word that maybe SBF is kind of like cutting him out or making regulation that would maybe impact his business, and, uh, he doesn't like that too much. They start kind of feuding a little bit on Twitter. So when it comes out, a CoinDesk report came out that FTX's balance sheet wasn't looking that good, like it looked pretty weak. They had a lot of coins that in theory had value if you looked at their market price, but for f- a variety of reasons, if you tried to sell them, they'd collapse in value. So it was sort of like this thing, a house built on sand, and, uh, a friend of mine on Twitter, he goes by Dirty Bubble Media, he released a report and he basically said, "I think these, uh, these guys are insolvent." Well, CZ saw that and he retweeted it and started adding fuel to the fire of like the speculation. 'Cause up till this point everyone thought FTX is super safe, super secure, there's no reason to not keep your money there. Tom Brady keeps his money there, whatever. And CZ kind of fuel- adds fuel to the fire by saying, "Not only am I retweeting this adding kind of like validity to this speculation, but also I'm going to take the FTT that I got," which part of their balance sheet was this FTT token, which is FTX's like proprietary token, and Alameda and, uh, FTX controlled a lot of it. They were using this token to basically be a, a large amount of collateral for their whole balance sheet. So it accounted for this huge amount of their value, and the CEO of Binance had a huge chunk of it as well. And he said, "I'm gonna sell all of it." And the i- the fuel that that introduced to the market is if he sells all this FTT and this FTT is underwriting a lot of the value of FTX...

Lex Fridman 9:43 Does FTT s- almost approximate like, uh, similar things if you were to buy a stock in a public company? Is that kind of like a stock in FTX?

Coffeezilla 9:51 It sort of was this proxy because what FTX was committed to doing was sort of like buying back FTT tokens. They would do this-

Lex Fridman 10:01 Ah.

Coffeezilla 10:01 ... thing called the buy-and-burn. I think there was some amount of sharing in the revenue fees of FTX. It was kind of this convoluted thing. In my opinion, the exact value of FTT was speculative from the beginning.

Lex Fridman 10:13 Mm-hmm.

Coffeezilla 10:13 And it was clear that it was very tied to the performance of FTX, which is important because, we'll get to later, FTX sort of built their whole scaffold on FTT which meant that this scaffold was very wobbly, because if FTX loses a little bit of confidence, then your value goes down. When your value goes down, you lose more confidence, and this goes dow- so it was kind of like this thing that, this flywheel that when it was going well, you got huge amounts of growth. When it's going bad, you get a, uh, exchange death spiral (laughs) sort- so to speak.

Lex Fridman 10:49 Actually, this structure, it's a pretty non-standard structure. Did the, uh, architects of its initial design anticipate the wobbliness of the whole system? So putting fraud and all those things that happened later aside, do you think it was difficult to anticipate this kind of FTT, FTX/Alameda Research weird dynamic?

Coffeezilla 11:11 No, because I think sophisticated traders always think in terms of diversification and correlation. So if you're trying to... The way to think about risk in investing is like if I invest in you, Lex Fridman, and then I also invest in some product you produce, those, those, the performance of those two things will be pretty correlated.

Lex Fridman 11:33 Yes.

Coffeezilla 11:33 So whether I invest in you or I invest in this product that you, like, are completely behind, I'm not de-risking, I'm basically counting all on you doing well, right?

Lex Fridman 11:42 Mm-hmm.

Coffeezilla 11:42 And if you do bad, my investments do very bad. So if I'm trying to build a stable thing, I shouldn't put all my eggs in the Lex Fridman basket unless I'm positive that you're gonna do well, right? And these people...

Lex Fridman 11:53 As your financial advisor, I would definitely recommend-

Coffeezilla 11:56 Yeah. (laughs)

Lex Fridman 11:56 ... you do not put all your eggs in this basket.

Coffeezilla 11:58 Right. And so you can think about it like if I know that, these people were trained to think like this, and so the idea that you could start this exchange, you're worth billions of dollars, and you underwrite your whole system by betting...... m- putting most of it on your own token is, is insane. And what, and what's crazy is we'll later find out that they were basically taking customer assets, which were real things, like Bitcoin and Ethereum, with, with risks that were not so correlated to FDX, and they were swapping them out. They were using them to go, go basically gamble those and putting FTT in its place as "value." So they were increasing the risk of the system in order to bet big, with the idea that if they bet big and won, we'd all be singing their praises, if we bet big and lo- if they bet big and lost, I don't know if they had a plan, but I think they were, I think they were being extremely risky and there's no way to avoid their knowledge of that.

Lex Fridman 12:55 So when you say customer assets, it's, "I come to this crypto exchange, I have Bitcoin or some other cryptocurrency," and it's, this is a, a thing that has pretty stable value over time. I mean-

Coffeezilla 13:07 Yeah, relatively.

Lex Fridman 13:08 ... as crypto relative-

Coffeezilla 13:09 Relatively.

Lex Fridman 13:09 ... relatively so.

Coffeezilla 13:10 Yeah.

Lex Fridman 13:10 And I'm going to store it on this crypto exchange. And that, that's the whole point. This is, um... Uh, th- so this thing, to the degree that crypto holds value, it's supposed to continue holding value. There's not n- there's not supposed to be an extra risk inserted into the thing.

Coffeezilla 13:27 Right. And FTX was pretty clear from the beginning that they wouldn't invest your assets in anything else, they wouldn't do anything else with it, they wouldn't trade it. That's what made FTX so, such like a horror story for investor confidence, is basically they made every signal that they would not do anything nefarious with your tokens. They would just put them to the side, put them in a separate account that they don't have access to, and they just kinda wait there until the day that you're ready to withdraw them.

Lex Fridman 13:58 Mm-hmm.

Coffeezilla 13:59 Uh, that's explicitly what they told their customers. So going back to the story a little bit, CZ then says, "Hey, I'm selling this token that underwrites the value of FTX." There's a total panic. SBF during this time makes, said, says several lies, such as, "FTX assets are fine. We have enough money to cover all withdrawals." Um, and a day later, he basically admits that that wasn't the case. They don't have the money. They're shutting down. And then a few days later after that, they declared bankruptcy. There's, I should be clear, there's Alameda Research, FTX International, and FTX US, which is the US side of things.

Lex Fridman 14:38 Mm-hmm.

Coffeezilla 14:39 These are three different entities. All of them are in bankruptcy. And it's not clear to the extent that they were commingling funds, but it's clear that they were commingling funds to some extent, so they kind of were t- taking from each other, and that is where the fraud happens, right? Because if, going back to our earlier analogy, if you're supposed to set funds aside, and I find out you were using it to go make all these arbitrage trades or do market-making or all these activities you were known for for your like hedge fund trading firm thing, that's a huge problem because you, he basically lied about this.

Lex Fridman 15:13 Mm-hmm.

Coffeezilla 15:14 And, uh, especially when he's saying explicitly that, "We have these things, we have these funds," and these things turn out to be lies, well, again the question of fraud comes in, and it's just like, there's no way he didn't know. So the obvious question might be, well, why isn't he locked up? Why, why is he running around? And it's because, um, really his story is that he didn't know any of it. He found out that they had, to steel man his position, he would say he was totally disconnected from what Alameda was doing. He had no idea that they had such a large margin position, that they'd had an accounting quirk and that accounting quirk hit $8 billion, from, um, from his view. And so when he was saying that they had money to cover it, he was saying that truthfully to the best of his ability, and he just was so distracted at the time that he made a series of increasingly embarrassing mistakes, and now he owes it to the people to right those wrongs by publicly making this huge apology tour. So you might have seen him on, I mean he's been talking to nearly everyone, um, about basically how he's just, didn't know what he was doing, he's the stupidest man alive. Uh, that's basically it.

Lex Fridman 16:28 So what, what, what are some interesting things you've learned from those interviews?

Coffeezilla 16:34 I think I've appreciated why you don't talk in that position. Uh, most people wouldn't talk. Most people would listen to their legal counsel and, and not talk. I do not think he's, any lawyer worth their salt would tell him to talk, because right now I think the danger of what he's doing is he's locking himself into a story of how things happened, and I don't think that story is gonna hold up in the coming months. Because I think it's impossible, from the insider conversations I've had with Alameda Research employees, with FTX employees, it's impossible to square what they are telling me, with no like incentive to lie, with what SBF is telling me, with every incentive to lie, which is fundamentally that he didn't know they were commingling funds, he didn't know they were gambling with c- customer money, and it was basically this huge mistake, and it's Alameda's fault but he wasn't involved in Alameda, a company

Coffeezilla 17:28 he owned.

Lex Fridman 17:28 So like a compassionate but hard-hitting gangster that you are, uh, recent- very recently you interacted with SBF on... Uh, I like how you adjust (laughs) uh, the suspenders as you're saying this. Um, (laughs) you interacted on Twitter Spaces uh with SBF, and uh, really put his feet to the fire, uh, with some hard-hitting questions. What did you ask and what did you learn from that interaction?

Coffeezilla 17:56 Sure. I should say first, this was not a willing interaction. I mean, I thought that was kind of the funny part of it, 'cause I've been asking him for an interview for a while. He's been giving interviews to nearly everyone who wants one. Big channels, small channels. Um, he didn't give me one, but I managed to get some by sneaking up on some Twitter Spaces and DMing the people and like being like, "Hey, can I come up?"... so I didn't get him to ask everything that I wanted, because he, like, would leave, sometimes (laughs) , uh, you know, after I asked some of the questions. But really what I asked was about this eight billion, and h- zooming in on the improbability of his lack of knowledge, um, it's sort of like if you, if you run a company and you know the insides and outs, and you're the top of your field, top, top in class, and all of a sudden it all goes bust and you say, "I had no idea how any of this worked."

Lex Fridman 18:48 Yeah.

Coffeezilla 18:48 "I didn't, I didn't know," it's like the guy who runs Whataburger saying, "I didn't know where we sourced our beef. I didn't know where we," that's a Texas example, actually.

Lex Fridman 18:56 Thank you, I appreciate that.

Coffeezilla 18:56 Uh, let's, let's take it, like, worldwide. Walmart, like, "I didn't know we used Chinese manufacturers." It's like, that's impossible. To become Walmart, you have to know how, like, how your supply chain works. You have to know, even if you're at a high level, you know how this stuff works.

Lex Fridman 19:12 Can I do a hard turn on that, and go-

Coffeezilla 19:14 Sure.

Lex Fridman 19:14 ... as one must, to Hitler? Uh, H-Hitler's writing is not on any of the documents around, as far as I know, uh, on the final solution. So in, in some crazy world, he could theoretically say, "I knew, I didn't know anything about the death camps," uh, so there's this plausible deniability, in theory. So that's, but that, most people would look at that and say, "Eh, it's very unlikely, you don't (laughs) know."

Coffeezilla 19:43 Well, especially if all the insiders are coming out and saying, "No, no, no, of course he knew. He was directing us from the top." I mean, um, what was clear, what's interesting about the structure, and, like, I love the nitty-gritty.

Lex Fridman 19:53 Sorry, we're back to SBF.

Coffeezilla 19:55 Yeah.

Lex Fridman 19:55 We went to Hitler-

Coffeezilla 19:55 Sorry, sorry.

Lex Fridman 19:56 ... now we're back to SBF.

Coffeezilla 19:57 Sorry, I wanted to turn us as fast as possible away from Hitler.

Lex Fridman 20:00 (laughs)

Coffeezilla 20:00 Um, I, yeah (laughs) , I-

Lex Fridman 20:03 Apologies. So the insiders in what? Alameda Research?

Coffeezilla 20:05 Alameda Research.

Lex Fridman 20:06 Alameda Research.

Coffeezilla 20:06 What was interesting is that there was this sort of one-way window going on between Alameda and FTX, where FTX employees didn't know a lot of what was going on. Alameda insiders, and I would say by design, knew almost everything that was going on at FTX. Um, and so I think that was really interesting from the perspective of a lot of the so-called f- like, what you could, what he's trying to ascribe to as, like, failures or mistakes or ignorance and negligence, when looked at closely, are much more designed, and they sort of don't arise spontaneously.

Lex Fridman 20:46 Mm-hmm.

Coffeezilla 20:46 'Cause, like, let's say, so there's this thing in banking, and, like, trading, where if I run a bank and you run, like, a trading firm, we need to have informational walls between us, 'cause there's huge conflicts of interest that can arise, right? So the negligent argument might be that, like, "Oh, we just didn't know. We're sort of these dumb kids in the Bahamas, so we shared information equally." But when you see a one-way wall, that starts to look a lot different, right? If I have a back-end source of looking at, or sorry, you're the trading firm, so you have a back-end way to look at all my accounts, and I have no idea that you're doing that, that all of a sudden looks like a much more designed thing. When it would be plausible, let's say, going t- to- to use another- another analogy too, if you're saying, "Look, I co-mingled funds 'cause I was so bad at corporate structures," you would expect those companies to have a very simple corporate structure, 'cause you didn't know what you were doing, right? But what we see with FTX and Alameda is they had something like 50 companies and subsidiaries, and this inco- impossibly complicated web of corporate activity. You don't get there by accident. You don't wake up and go, "Oh, I designed, like, this watch that ticked a very specific way, but it was all accidental." If you really didn't know what you were doing, you'd end up with a simple structure. So even just, like, from a fundamental perspective, what SBF was doing and, like, the activities they were engaging in were so complicated and purposely designed to obfuscate what they were doing, it's impossible to subscribe to the negligence argument. And I wanna quickly say too, like, I don't think a lot of people have honed in on this, there was insider trading going on from Alameda's perspective, where they would know what coins FTX was going to list on their exchange, and there's a famous effect where, let's say you're this legitimate exchange, you list a coin, the price spikes.

Lex Fridman 22:41 Mm-hmm.

Coffeezilla 22:42 Insiders told me it was a regular practice for Alameda insiders to know that FTX was going to list a coin, and as a company, buy up that coin so they could sell it after it listed, and they made millions of dollars. How do you do that accidentally?

Lex Fridman 22:56 Yeah. And that's, that's illegal, right?

Coffeezilla 22:59 Totally illegal.

Lex Fridman 23:00 Right.

Coffeezilla 23:00 So that's illegal from, like, an, if an individual does it, it's illegal, it's fraud. What if a company is systematically doing it? And you can't tell me that FTX or someone at FTX wasn't feeding that information about, to Alameda, or somehow giving them keys to know that, and that would happen at the highest level, it would happen at S- SBF's level. And this is why his arguments of, "I was dumb, I was naive, I was sort of ignorant," are so preposterous, because he's dumb and ignorant the second it becomes criminal to be smart and sophisticated, right?

Lex Fridman 23:35 Mm-hmm. But then also coming out and talking about it, which is, um ...

Coffeezilla 23:39 It's a bizarre move.

Lex Fridman 23:40 It's a bizarre and almost a dark move. Uh, w- can you tell the story of the eight billion? You mentioned eight billion. What's the eight billion? What's the missing eight billion?

Coffeezilla 23:48 Yeah, so it's really interesting, because it's sort of like wire fraud. It, you're sort of, he's sort of copping to, like, smaller crimes to avoid the big crime. The big crime is you knew everything and you were behind it, right? The smaller crimes are, like, (laughs) a little wire fraud here, little wire fraud there. So what the eight billion is, is that FTX didn't always have banking. It's hard to get banking as a crypto exchange. There's all these questions of, like, where's the money coming from? Is it coming from money launders? So for a variety of reasons, it's always been hard for exchanges to get bank accounts, so before...... when FTX was just getting started, they didn't have a bank account. So how do you put money on FTX? Well, they would have you wire your money to their trading firm. Their wiring instructions would go to their trading firm. It's easier to get banking as a trading firm. So you'd put your money with the trading firm, and then they'd credit you the money on FTX.

Lex Fridman 24:38 Mm-hmm.

Coffeezilla 24:38 Okay, first of all, this is a whole circumvention of all these banking guidelines and regulations. That's the first, like, thing that I think is illegal. But basically what SBF argued is that there was an accounting glitch, error, problem, where when you'd send money to Alameda, even though they'd credit you on FTX, they wouldn't safeguard your deposits. Like, your deposits would go into what he called a stub account, which is just like some account that's not very well labeled, um, kind of like a placeholder account. And he didn't realize that th- those were Alameda's funds or they were playing with those funds, and that they basically should have safeguarded that for customers. That's his explanation. It's preposterous because it's eight billion dollars, but anyways, um...

Lex Fridman 25:25 Just poor labeling of accounts.

Coffeezilla 25:27 Of an eight billion dollar account. I mean, it's like-

Lex Fridman 25:30 What's a billion between 20...

Coffeezilla 25:31 A billion (laughs)

Narrator 25:32 This is like-

Lex Fridman 25:33 I, I do this all the time in programming.

Coffeezilla 25:34 This is the craziest thing. Like, he was talk- he was talking to me, and at one point in the conversation, he's like, "Yeah, I didn't have precise kno-" 'Cause he said, "I didn't have knowledge of Alameda's accounts." And I said, "Well, Forbes, a month ago, was getting detailed accounting of Alameda." And he goes, "Oh, that wasn't detailed accounting. I just knew I was right within 10 billion or so." What is that error margin?

Lex Fridman 25:57 (laughs)

Coffeezilla 25:57 $10 billion for a company that is arguably never worth more than 100 million.

Lex Fridman 26:03 Yeah.

Coffeezilla 26:03 N- probably never, never even worth more than 50 billion. Your error margin is 10 billion dollars? You have to be, this is a guy who is sending around statements that, like, there was no risk involved. And you're telling me he had a error margin of $10 billion? That is the difference between, like, a healthy company and a company so deep under water you're going to jail. So it, i- you have to believe that he is impossibly stupid and square that with the sophistication that he brought to the table. It's an, I, I think it's an impossible argument. I, I, I don't even think it's-

Lex Fridman 26:36 Okay. Do you think he is incompetent, insane, or evil? If you were to bet money on each of those.

Coffeezilla 26:45 Incompetent, insane, or evil?

Lex Fridman 26:48 Insane, meaning he's lying to everyone, but also to himself, uh, which you could, which is a little bit different than incompetence.

Coffeezilla 26:57 He's not incompetent. So the, I think he's some combination of insane and evil, but it's impossible to know unless we know deep inside his heart how self-, like, diluted he is versus a calculated strategy, and I think if you look at SBF, he's such a, I think he's a fascinating individual. Just, I mean, you know, he's a horrible human being. Let's start there. But he's also somewhat, um, interesting from a psychology perspective, because he's very open about the fact that he understands image and he understands how to cultivate image, the importance of image, so well that I think a lot of people, even though they've talked about it, aren't emphasizing that enough when interacting with him. This is a man whose entire history is about cultivating the right opinions at the right time to achieve the right effect. Why do you think he would suddenly change that approach when he has all the more reason to cultivate an image?

Lex Fridman 28:01 So he is extremely good naturally or, uh-

Coffeezilla 28:06 I don't know if he's good, but he's like, he's a w- hyperaware.

Lex Fridman 28:10 So he's deliberate in cultivating a public image and controlling that public image.

Coffeezilla 28:15 For sure. You, you know about the, like, Democrat donations. Like, he, he knew to donate to the right people, $40 million. He says on a call that we released with Tiffany Fong, he says on a call that he donated the same amount to Republicans. There's speculation on whether this is true, because he's a liar, whatever. So caveat there. But he said he donated to Republicans the same amount, but he donated dark, because he knew that most journalists are liberal and they would kind of hold that against him. So he wanted all the, all the sides to be on, in his favor, in his pocket, while simultaneously understanding the entire media landscape and playing them like a fiddle by cultivating this image of, "I'm this progressive, woke billionaire who wants to give it all away, do everything for charity. I drive a Corolla," while living in a million dollar penthouse, multimillion. Um, but, but that was sort of the angle. He, he understood so well how to play the media, and, um, I do- I think he underestimated when he did this how much people would put him under a deeper microscope, and I don't think he has achieved the same level of success in cultivating this new image, because I think people are so skeptical now. No one's buying it. But I think he, he's trying it. He's doing it to the best of his ability.

Lex Fridman 29:32 But it has worked leading up to this particular wobbly situation. So before that, wasn't there a public perception o- of him being a, a force for good, a financial force for good?

Coffeezilla 29:44 100%. Yeah. Somebody from Sequoia Capital, you know, wrote this glo- glowing review that he was gonna be the world's first trillionaire. There are so many pieces done on he's the most generous billionaire in the world, that, um, he was sort of like the steel man of, you know, it's possible to make tons of money. This is like the effective altruism movement. Make as much money as you can as fast as you can and then give it all away. And he was sort of like the, the poster child for that. And he did give some of it away and got a lot of press for it. And I think that was kind of by design. I want to address a real quick point.

Lex Fridman 30:18 Yes.

Coffeezilla 30:18 A lot of people have said that, like, Binance played a role. And while they catalyzed this, insolvency......is a problem that will eventually manifest either way. So I don't put any blame on CZ for basically causing this meltdown. The, the underlying foundation was unstable and it was gonna fall apart at the next push. I mean, he just happened to be the final kind of like, uh, I don't know, the straw that broke the camel's back.

Lex Fridman 30:48 Yeah. The catalyst that revealed-

Coffeezilla 30:49 But yeah-

Lex Fridman 30:50 ...the fraud.

Coffeezilla 30:50 ...but it's like I don't, I don't think he's culpable for FTX's like malfeasance in how they handled accounts, if that makes sense.

Lex Fridman 30:58 So what, what, what role did they play? Could they have helped alleviate some of the pain of, um, uh, investors, of people that held funds there?

Coffeezilla 31:09 Yeah. I, I mean, probably. Uh, I don't know. I, I would see some kind of weird obligation, like with the two billion they made on FTX. Remember, they got two billion. Some of it in cash, some of it in, some of it in FTT tokens, so I don't know how much actual cash they have from that deal, but they have billions from the success of what seems to be a fraud. It seems to have been a fraud for early on. They had the back door as early as 20, early 2020 from what I can tell.

Lex Fridman 31:39 So the, the back door between FTX and Alameda?

Coffeezilla 31:41 Alameda.

Lex Fridman 31:41 Alameda Research.

Coffeezilla 31:42 Yes, yes.

Lex Fridman 31:42 Uh, do you think CZ saw through who SBF is? What he's doing?

Coffeezilla 31:50 No. I think, I think CZ is like... He's a shark. I think he's, he's good at building a big business. Um, I don't-

Lex Fridman 31:58 Like a good shark or a bad shark? I don't know.

Coffeezilla 32:00 I don't know. I think sharks just eat. I mean, I, I don't, I don't know. I think, uh-

Lex Fridman 32:04 My relationship with shark has... Like in Finding Nemo, there's a shark in that.

Coffeezilla 32:07 Sure.

Lex Fridman 32:08 I don't know. So-

Coffeezilla 32:08 I think like Jeff Bezos is a shark.

Lex Fridman 32:10 Okay.

Coffeezilla 32:10 So whether... People have loaded connotations of like how they feel about Jeff Bezos. I mean, I, I would say like I think CZ's a ruthless businessman. I think he's cold, he's calculated, he's very, um, deliberate, and I think, uh, what he should do in this position is forfeit the funds that he profited from that investment, because largely, I think it was, um... It's owed to the customers. There's so much hurting out there. So I think, I think they could do a lot of good around that. Um, I don't know if they will, 'cause I don't know if he sees it in his best interest. I think that's probably how he's thinking. But yeah, I, I think, uh, they could've helped or they c- could still help there.

Lex Fridman 32:51 Who do you think suffered the most from this so far?

Coffeezilla 32:55 The little account holders. This is always true. So one of the big temptations with fraud, I've covered a lot of scams, frauds, is everyone looks at the big number. Everyone, that's the headline, billions of dollars, the top 50 creditors are what everyone thinks of first. Uh, but quickly when you dig down, you realize that most people who lost $10 million, I mean I'm sure that's terrible for them, I wish them to get their money back, but, uh, it's usually the people with like 50,000 or less that are most impacted. Usually they do not have the money to spare. Usually they're not diversified in a sophisticated way. Um, so I think it's those people. I think it's the small account holders that I feel the worst for, and unfortunately, they often get the least press time or airtime.

Lex Fridman 33:36 That, that's the really difficult truth of this, is that especially in the culture of cryptocurrency, there's a lot of young people who are not diversified. They're basically all in on a particular crypto, and it just breaks my heart to think that there's somebody with 50,000 or 30,000 or 20,000, but the point is that money is everything they own.

Coffeezilla 33:59 Right.

Lex Fridman 33:59 And now...

Coffeezilla 34:01 Now what?

Lex Fridman 34:02 Their life is basically destroyed. Like, you know, imagine you're 18, 19, 20, 21 years old. You saved up, you've been working, you saved up, and this is, this is it. This is basically destroying a life.

Coffeezilla 34:16 What's so brutal about this is that this all comes on the back, the entire crypto market comes on the back of... Comes from the deep t- distrust of traditional finance, right? You had 2008, everybody lost trust in the banking systems, and they lost trust that if those banking systems acted in a corrupt way, that they would receive the justice. It turned out that the banks received favorable treatment, people didn't. So people lost faith in the, the structure of our financial system in a way that is we're still feeling the reverberations of it. And so when crypto came along, it was like kind of this way to reinvent the wheel, reinvent the world for the, the like sort of lowly and the like less powerful and kind of level the playing field. So what's so sad about events like this is you see that fundamentally a lot of the, the power structures are the same, where the people at the top, uh, face little repercussions for what they do. The people at the bottom are still getting screwed. The people at the bottom are still getting lied to, and law enforcement is way behind the ball.

Lex Fridman 35:23 Do you think this really, uh, damaged people trust in cryptocurrency?

Coffeezilla 35:28 For sure. Way bigger than, uh, Luna. Way bigger than Three Arrows Capital. It's because of who SBF was. It's not just the dollar figure behind it. It's because he wooed so many of our media elites who should've been calling him out or at least investigating him and not rubber stamping him. It's an indictment of our financial system. Even our most sophisticated people in BlackRock, in Sequoia, who didn't see this coming, who also rubber stamped him. Um, and you just wonder like, if you can't trust the top people in crypto who are supposedly the good guys, the guys saving crypto... A month, just a month ago or two months ago, he was the guy on Capitol Hill that was talking to Gary Gensler, to all the top people in Washington. He was orchestrating the regulation of crypto. If that guy is a complete fraudster, liar, psychopath, and nobody knew it until it was too late, what does that mean about the system itself that we're building?

Lex Fridman 36:32 So you are one of, if not the best f-... like, fraudster investigators in the world. Did you sense, did you, uh, was this on your radar at all, SBF, i- in the, over the past couple of years? W- were any red flags g- going off for you?

Coffeezilla 36:49 Yes. So funny enough, like, one of my videos from six months ago or so blew up because, um, I gotta give a lot of credit to Matt Levine of Bloomberg, great journalist, great finance journalist, and I wanna say, when I, like, talk about media elite, there are people doing great work in these mainstream institutions. It's not a monolith. Just like independent media isn't all doing great work and all of corporate media is bad or whatever. There's, like, these overarching narratives that I don't subscribe to. So Matt Levine's a great journalist. He, he did an interview with SBF where he got Sam to basically describe a lot of what was going on in DeFi, but at kind of a larger philosophy around crypto, and he described a Ponzi scheme, where he des- described this black box, it does nothing, but if we ascribe it value, then we can create more value and more value and more value, and it kind of was this ridiculous description of a Ponzi scheme, but there was no moral judgment on it. It was like, "Oh yeah, this is great. We can make a lot of money from this." And Matt is like, "Well, it sounds like you're in the Ponzi business, and p- and business is good."

Lex Fridman 37:48 Mm-hmm.

Coffeezilla 37:48 And I made a video about that. I said, "This is ridiculous. This is absurd." Whatever. "It's obscene." But, um, I didn't explicitly call SBF a fraud there, and I think if, if I'm being, I think I saw some of it, but like many people, I think a l- a lot of us were kind of like... I think a lot of us missed how wrong everyone could be at the same time.

Lex Fridman 38:19 Mm-hmm.

Coffeezilla 38:20 I did notice leading up to the crash what was happening and I, and I called it out a day b- a day or a day and a half before it happened, 'cause I saw my friends post, uh, Dirty Bubble Media, and this was the first real look into the heart of their finances, 'cause they were this black box. You just kinda had to evaluate them without knowing much. And once we got a peek under the hood of what their finances were, I realized, oh my gosh, these guys might be completely insolvent. So I made a tweet about it. I hope some people saw it and got their money out. Um, but pretty quickly after that, I caught the narrative of what was really going on at Alameda, that it was basically this Ponzi scheme they, that they had built.

Lex Fridman 39:04 Do you ever s- sit like Batman in the dark since you fight crime and wonder, like, sad, just staring into the darkness and thinking, "I should've caught this earlier"?

Coffeezilla 39:16 Yeah, I think-

Lex Fridman 39:18 In your, in your, uh, $10 billion do- 10-

Coffeezilla 39:20 $10 million.

Lex Fridman 39:21 $10 million.

Coffeezilla 39:22 We're, we're working our way there. Um-

Lex Fridman 39:24 With, with a bunch of cocaine on the table.

Coffeezilla 39:25 Sure, like, it- it's never enough. It's never enough. Like, you always could be catching stuff sooner. You always could be doing more.

Lex Fridman 39:33 I mean, the fascinating thing you said is that one of the lessons here is that a large number of people, influential, smart people could all be wrong at the same time in terms of their evaluation of SBF.

Coffeezilla 39:47 This is, this is one thing that I don't understand too, is like, I think it's one thing to not see something. I think it's another thing to, like, rubber stamp or explicitly endorse. I feel like a lot of people didn't look too close at SBF because I think a lot of the warning signs were there, but my feeling is if you're a Sequoia, if you're a BlackRock, wouldn't you do that due diligence? I mean, like-

Lex Fridman 40:14 Yeah.

Coffeezilla 40:15 ... like before just endorsing something, especially in the crypto space. This is just why I don't do any deals in the crypto space ever, 'cause it's impossible to know which ones are the, gonna be the, like, big hits or the big frauds or, you know, whatever. Um, but if you're gonna make that bet, if you're gonna make that play, you would think that you would do all the research in the world and you would get sophisticated looks at their liabilities, at how they were structured, all that stuff, and that is the most shocking part, is not that, you know, people missed it, because you can miss fraud, but that there was so much, so many glowing endorsements like, "This guy is not gonna be that thing. We explicitly endorse him." I saw a Fortune magazine, he was called the next Warren Buffett. It's just crazy.

Lex Fridman 40:59 D- do you think it's possible to have enough, like, Tom Brady, uh, endorsements that you don't really investigate? So like-

Coffeezilla 41:05 Yes.

Lex Fridman 41:06 ... that there's a kind of momentum-

Coffeezilla 41:07 Yes.

Lex Fridman 41:07 ... like societal, social momentum.

Coffeezilla 41:09 Yes. I think that's the problem. I actually think that's hugely a blind s- like a, a blind spot of our society is we have all these heuristics that can be points of failure where, like, a rule of thumb is if you go to an Ivy League, well, you must be smart, right? A rule of thumb is if your, both your parents are Harvard lawyers, you must not, you must know the law. You must, like, kinda be sophisticated. The rule of thumb is if you're running a, a billion dollar exchange, you must be somehow somewhat ethical, right?

Lex Fridman 41:39 Mm-hmm.

Coffeezilla 41:40 And all of these heuristics can lead to giant blind spots where you kinda just go, "Oh, we'll check. Like, I don't really..." It's a lot of energy to look into people and if enough of those rules of thumb are met, we just kind of check them off and put them through the system. So, uh, yeah, it's been hugely exposing for sort of, like, our, our blind spots.

Lex Fridman 41:57 And you don't know wh- maybe how to look in, for example, there's a few assumptions. Now there's, a lot of people are very skeptical of institutions, of government and so on, but f- um, perhaps too much so.

Coffeezilla 42:08 I agree.

Lex Fridman 42:09 But for some part of history, there was, uh, too much faith in government.

Coffeezilla 42:14 Yeah.

Lex Fridman 42:14 And so, uh, right now, I think there's faith in certain large companies. There's distrust in certain ones and trust in others. Like, uh, people seem to distrust Facebook, extremely skeptical of Facebook.

Coffeezilla 42:25 Mm-hmm.

Lex Fridman 42:26 But they trust, I think, Google with their data. I think they trust Apple with their data-

Coffeezilla 42:31 Sure.

Lex Fridman 42:31 ... much, much more so. Like, search? People don't seem to be, Google search, like, "I'm just gonna, I'm gonna put-"

Coffeezilla 42:38 Throw it in there.

Lex Fridman 42:38 Have you ever looked at your Google search history? Your Google search history has got to be the, some of the darkest things.

Coffeezilla 42:44 Oh.

Lex Fridman 42:45 (laughs)

Coffeezilla 42:45 I don't think I've ever looked at my Google search history.

Lex Fridman 42:47 You should.

Coffeezilla 42:48 I'm pretty careful with, uh, like-...browser hygiene and, uh, stuff like that, because I think it's-

Lex Fridman 42:56 Well, Google Search history, unless you explicitly delete, is there. I recommend you look at it. It's fascinating. Look, because it goes back to the first days of you using Google Search history.

Coffeezilla 43:05 Fun fact, actually, about that... No, no, no. I, I, I am, I am aware of that.

Lex Fridman 43:09 Yeah.

Coffeezilla 43:09 Um, I just mean for, like, certain sensitive topics, where, like, I'm investigating some fraud and-

Lex Fridman 43:14 Yes.

Coffeezilla 43:14 ...I go sign into their website, right? Log in. I won't use, like, a traditional browser. I'll use a VPN and I'll, like, put it on, like, Brave or something like that.

Lex Fridman 43:22 You log in, your Ukraine account is Lex Fridman.

Coffeezilla 43:25 Yeah, exactly.

Lex Fridman 43:25 (laughs) And you start-

Coffeezilla 43:26 Exactly, exactly.

Lex Fridman 43:27 ...investigating. Uh, you mentioned effective altruism.

Coffeezilla 43:29 Yes.

Lex Fridman 43:30 You know, SBF has been associated with this effective altruism, which made me look twice at EA.

Coffeezilla 43:35 Sure.

Lex Fridman 43:35 And see, like, "Wait, um..."

Coffeezilla 43:39 I-

Lex Fridman 43:39 "...are th- what's, what's going on here?" Uh, is this... Was this used by SBF to give himself a good public image, or is there something about effective altruism that makes it easy to misuse by bad people? What do you think?

Coffeezilla 43:56 Yeah, it's interesting. He could have endorsed a wide range of philosophies, and I guess you just have to wonder, "Are all those... Would those philosophies also be tainted if, um, he had gone bad?" I guess, effective altruism is sort of unique because he used it as part of his brand. It wasn't like he was... He described himself as a consequentialist and, like, that ended up mattering. It was like he described himself as an effective altruist, and he used that part of the brand to lift himself up. I guess that's why it's getting so much scrutiny. Um, I think the merits of it should speak for themselves. I mean, I don't personally... I'm not personally an effective altruist. Um, I personally am motivated by giving, in part, emotionally. And, for some reason that I can't exactly describe, I think that's somewhat important. I don't think you should detach giving from some personal connection. I, I f- I find trouble with that. And, and like I said, it's for reasons I can't describe, because effective altruism is sort of the most logical, ivory tower position you could possibly take. It's like, "Strip all humanity away from giving. Let's treat it like a business, and how many people can we serve through the McDonald's line of charity, uh, for, like, the dollar," right? Um, I just personally don't resonate with that, but I don't think the entire movement is, like, indicted because of it. Typically, most people who care about giving and charity, on the whole, are nice people, and are... So I can't speak for the whole movement. I certainly don't think SBF indicts the whole movement, even though I personally don't sub- subscribe to it.

Lex Fridman 45:33 Yeah. Th- that... It, it made me pause, reflect, and step back, like, um, about the movement and about anything that has a strong ideology. So, if there's anything in your life that has a strong set of ideas behind it-

Coffeezilla 45:48 Mm-hmm.

Lex Fridman 45:48 ...be careful.

Coffeezilla 45:50 Yeah, I mean, look, (sighs) I kind of feel like what it teaches me, and what I kind of think about when I think about systems, is that no system saves you from the individual. No system saves you from the individual, their intentions, their, their lust for power or greed. I mean, I think one of the great ideas is the decentralization of power, and like this is why I think democracies are so great. It's 'cause they decentralize power across a wide range of, like, interests and groups, and that being an effective way to kind of try as best as you can to spread out the impact of one individual. Because one bad individual can do a lot of harm, as, I mean clearly, as seen here. But, um, now I don't think it has anything to do with ideology because it's not like being an effective altruist made Sam Bankman-Fried a fraud. He was a fraud who happened to be an effective altruist, if that makes sense.

Lex Fridman 46:53 Well, th- that's what... So there is something about... Yes, no system protects you from an individual, but some system enable or serve as better catalysts than others for, uh, for the worst aspects of human nature. So, for example, Communist ideology. I don't know if it's the ideology or its implementation in this... in the, in the 20th century. It seemed like such a sexy and powerful and viral ideology-

Coffeezilla 47:18 Mm-hmm.

Lex Fridman 47:18 ...that it somehow allows the evil bad people to, like, sneak into the very top. And so, like, that's what I mean about certain ideas sound so nice that allow... Like, "The, the lower classes, the workers, the people that do all the work, they should have power. They, they have been screwed over for far too long. They need to take power back." That sounds like a really powerful idea, and then it just seems like with those powerful ideas, evil people sneak into the top and start to abuse that power.

Coffeezilla 47:48 Yeah, I think... I mean, I don't have a lot of probably big brain political takes, but what I can say is that you can never get away from both the system and the individual mattering. For sure, some systems incentivize some behaviors in certain ways, but some people will take that and go, "Okay, all we need to do is design the perfect system, and then these individuals will act completely rationally or responsibly, in accordance to what our incentives say." That's not true. You could also say, "All we have to do is focus on the individual, and all we have to do is just create a society which raises very well-adjusted people, and then we can throw them into any system with any incentives and they will act, like, responsibly, ethically, morally," and I also don't think that's true. So incentives are real, but also the individual ultimately plays a large role too. So, yeah, I don't know. I come down sort of in the middle there.

Lex Fridman 48:39 And some of that is just accidents of history too, which individuals finds which system, you know? Uh-

Coffeezilla 48:46 You become the face of that.

Lex Fridman 48:48 Yeah, with FDX versus, uh, Coinbase versus Finance, wh- which individual g- which, which kinds of ideas and, uh, life story-... come to power. You can s- a- th- that matters. It's, it's kind of fascinating that history turns on these small little events done by small little individuals, that, um, you know, Hitler as a failed artist or you have FDR or you have, uh, all these different characters that do good or do evil unto the world, and it's like single individuals and they have a life story, and it could have turned out completely different. It's, I mean, it's the flap of the butterfly wings. So yeah, you're right, it, we should be skeptical as attributing too much to the system or the individual. It's all like a beautiful mess. (sighs)

Coffeezilla 49:34 The Lex Fridman podcast.

Lex Fridman 49:37 (laughs) Yeah.

Coffeezilla 49:37 That's like a, that was like a Lex line. I've, I've heard, I've, I've heard quite a few episodes and that's like such a Lex line, "It's a beautiful me- beau-

Lex Fridman 49:43 All right.

Coffeezilla 49:43 ... beautifully said.

Lex Fridman 49:44 All right.

Coffeezilla 49:45 Sorry, I'm a fan of the show.

Lex Fridman 49:46 All r- okay, all right, I love you too. Uh, all right.

Lex Fridman 49:50 Can you think of possible trajectories, how this FTX, SBF saga ends? Uh, and which one do you hope for? Do you hope that SBF goes to jail? That's the individual. And in terms of the investors and the customers, what do you hope happens, and what do you think are the possible things that can happen?

Coffeezilla 50:12 So A, yeah, I definitely think SBF should go to jail. Um, for nothing else, for a semblance of justice, the facsimile of justice to occur for all the investors. Um, I also think there are people probably several steps down the chain that probably knew, at least Caroline Ellison. You can have questions about sort of their, you know, Dan Friedberg, who I'd love to talk about as well, um, there are a lot of people in that room who I think knew. I think we do so much of like the one guy is all to blame, let's throw everything at him, when clearly this was a company-wide issue. So everyone who knew, I think, should face the same punishment, which I think should be jail for all of those people. Um-

Lex Fridman 51:00 In part to send a signal to anybody that tries this kind of stuff in the future?

Coffeezilla 51:04 Yeah, absolutely.

Lex Fridman 51:05 A harsh, harsh punishment.

Coffeezilla 51:05 I mean, one of the big things that you saw, like okay, take a microcosm of all of this action and just look at like the influencer space, right? There's a ton of deals that were done that I've covered ad nauseum about influencer finds out they can make a lot of money selling a crypto coin. The first thing they wonder is, "Am I gonna get caught? If I do this, is there a consequence?" And if the answer is no, then it's a pretty easy decision as long as you don't like have any moral scruples about it, which apparently none of them did, or a lot of them didn't, I should say. So as soon as somebody steps in and regulates, that math changes, and all of a sudden there's a self-interest reason to not go do the bad thing. So for ex- and I can give a concrete example of this. There was a NFT, the first ever NFT sort of like official indictment or the DOJ released this press release that they're charging these guys who ran a NFT project, that they didn't follow through on their promises, they made all these promises, lied, and then ran away with the money. First ever consequence for anyone in the NFT space, that day that that press release came out, I saw several NFT, um, projects come back to life from the dead. Why? Because all those founders are freaking out and they realized, "We scammed people. We have to go at least make it, make it look like we're doing the right thing," right? Even just, so that's on the optic side, but there's also tons of people who now go, "Oh, the basically law enforcement is on the scene. We can't do the same thing." So there is a very pragmatic reason to, for this punishment. It's very much just because people work it into their math of, "Should I commit fraud?" And the last several years have been very, um, sort of it's been like a little bit of a nihilistic landscape where no one was getting punished.

Lex Fridman 52:57 Mm-hmm.

Coffeezilla 52:57 And so there was this question of you're almost an idiot if you didn't take the deals. Um, so I think it's really important, extremely important for kind of law enforcement to play a role, regulation to play a role to make it harder to commit those crimes, and if you commit those crimes, there's actual real world punishment for it. To your point about like what's gonna happen to the investors, I think that was-

Lex Fridman 53:19 Mm-hmm.

Coffeezilla 53:19 ... kind of your question, it's tough because the, if the money's not there, the money's not there. I mean there's gonna be, the guy, they got the best in class guy, the, it's the guy who ran the dissolving of Enron, so I mean, I can't imagine someone better equipped to run a complicated corporate fraud like dissolution. But yeah, it's, it's, it's tough 'cause everyone's gonna get probably, I don't know, 10 cents on the dollar, maybe less.

Lex Fridman 53:44 I wonder if there's a way to do a progressive redistribution of funds. So it, I just-

Coffeezilla 53:49 Sure.

Lex Fridman 53:49 ... I'm just really worried about the pain that small investors feel.

Coffeezilla 53:52 I think-

Lex Fridman 53:53 You know?

Coffeezilla 53:53 Yeah. I think, um, there's a lot of thought around that. I forget if, if they actually do do this. I mean there, I know there's a lot of law about like you can't treat creditors differently. You have to treat them all the same.

Lex Fridman 54:07 Mm-hmm.

Coffeezilla 54:08 So I think it'll be some kind of proportional payback. It's certainly not gonna be that the guys at the top get, you know, a significant amount of m- their money back and the rest get nothing. Unfortunately I think there's such a small amount of assets that back this whole thing in the end, and that value is actually declining every day because it was inextricably tied to FSBF. It was like the FTT tokens, which now what are those worth? The Serum tokens, that was his project or the project they made, what is that worth? Basically nothing. So you know, it's a very, it's a hard situation and you know, there's a bigger ethical concern which is FTX US, it's unclear how backed it was, but it was clearly more backed than FTX International. Do you take all that money and throw it into a big pot and give people money back?... or do you give the US people back their amount of money, which is probably gonna be significantly more, and leave everyone internationally out in the cold? And to add to that ethical issue, let's say you're a liquidator and you're US-based. There's a tremendous question, like legal questions about, you know, how do you ethically do that? It's not, it's not clear. There's a tremendous incentive to, to just favor the US people over everyone else 'cause it's our country, America, whatever. But, um, I don't know if that's necessarily fair. It's- it's really hard. It's like, it's impossible.

Lex Fridman 55:32 And some, uh... I forget where you said this, but one, one of the... I mean, it probably, uh, permeates a lot of the investigations you do-

Coffeezilla 55:41 Mm-hmm.

Lex Fridman 55:41 ... which is this idea that it's really sad that the middle class, in most situations like this, get fucked over. So the, the IRS, uh, go after the middle class, they don't go after the rich. It's basically everyone who doesn't have a lot of leverage in terms of lawyers, money get fucked over.

Coffeezilla 56:02 Yes, and then they're the ones... Like, it's always the rich and powerful who get the favorable treatment. As a, like a microcosm of this, it's a funny story. So one of the big criticisms of crypto, and I think rightly so, is the irreversibility of the transaction. So if I accidentally send a transaction somewhere, it's gone, right?

Lex Fridman 56:22 Yeah.

Coffeezilla 56:23 So crypto.com accidentally sent a lady $10 million, and now they want the money back, and they're suing her. But the funny thing is, is if you are on crypto.com and you send... Let's say I accidentally send you money and I come knocking on your door, "Lex, I didn't mean to send you, you know, like, uh, $1,000. I need my money back," or if I go to crypto.com and I said, "Hey, I sent that to the wrong person. Can you reverse it?" They'll say, "Screw off, no way." If I go to court, they'll kill me in court 'cause they're gonna go, "Look, this is how the blockchain works." But then they do it. They do the exact same thing. They send this lady $10 million. They're suing her and they're gonna win. Now, it's... Now what's in court is not whether they get the money back. It's should she be liable for theft, I believe. So... And that's in... just another case of the same rules apply differently to different people, whether you have the money to back you or not. It's a very sad thing. And that's why I think people like you need journalists fighting for the little person. We really need it. And it's kind of like this unfortunate thing where that's the most risky thing to do, like legally. You should not be doing that. But, um, I think it's important to do.

Lex Fridman 57:33 It's the ethical thing. It's the right thing to do.

Lex Fridman 57:36 Uh, what do you think about influencers and celebrities that supported FTX and SBF? Do they... should they be punished?

Coffeezilla 57:43 Yeah, I think, I think they should take a huge reputational hit. I mean, I think they should be embarrassed. I think they should be ashamed of themselves. (laughs)

Lex Fridman 57:51 But it was really hard to know, sorry to interrupt, th- for them to know... Like for example, I- I think about this a lot.

Coffeezilla 57:57 Yeah.

Lex Fridman 57:58 It's like, who do I... Because I don't investigate, you know, like a (laughs) sponsored by Athletic Greens, okay? It's a n- nutritional drink. Should I investigate them deeply? I don't, I don't know. You just kind of use reputational, like it seems to work for me. Should I, like, uh, invest in them deeply?

Coffeezilla 58:16 I think, I think it really depends on... I think your credibility hit will depend on what domain you're an expert in.

Lex Fridman 58:23 Okay.

Coffeezilla 58:23 If you're sponsored by a robotics company and you're an expert in robotics-

Lex Fridman 58:28 Sure.

Coffeezilla 58:28 ... if that company turns out to be a disaster and a fraud, then you should have looked more deeply. We're talking mostly about... Like I hold Tom Brady a lot less accountable than financial advisors, financial influencers because that is their world of expertise, and you treat their recu- rec- recommendation differently proportionally to what you think their expertise is. So in some ways I don't actually think... Tom Brady, I'm sure he reached a lot of people. I personally didn't feel at all moved by his recommendation 'cause you know it's just money. But when you hear somebody who should be an expert in that thing endorse a product in that space, you hold that opinion to a higher standard, and when they're completely cata- cataclysmically wrong, it's gonna be a different level of, of accountability. And I think rightfully so. When, um, Jim Cramer in- was saying Bear Stearns is fine, he made that terrible call in Be- with Bear Stearns in 2008, he was rightfully reamed for all of that, even though it could be considered that like, "Well, you know, did he have all the information? Maybe not." But he's a financial advisor. He does this for a living. If you go on and you make a big call and you turn out to be wrong and people lose tons of money, you are going to take a hit, and I think rightfully so. But no, I don't think these people should go to jail or anything like that, like.

Lex Fridman 59:44 Oh, but it's such a complicated thing. I mean, I just feel it personally myself. I get it, but you still feel the burden of the fact that your opinion has influence. I know it shouldn't. I know Tom Brady's opinion on financial investments should not have influence, but it does.

Coffeezilla 59:59 Right. Right.

Lex Fridman 59:59 That's just the reality of it.

Coffeezilla 1:00:01 Right.

Lex Fridman 1:00:01 That's a real burden. I didn't know anything about SBF or FTX. It wasn't on my radar at all.

Coffeezilla 1:00:07 Mm-hmm.

Lex Fridman 1:00:08 Um, but I could have seen myself like taking them on as a sponsor. I've seen a lot of people I respect, uh, Sam Harris and others, like talk, talk with SBF, uh, like he's doing good for the world. So I could see myself being hoodwinked-

Coffeezilla 1:00:22 Yeah.

Lex Fridman 1:00:22 ... ha- having not done research. And the same thing, it makes me wonder. Like I- I don't want to become cynical, man. Uh, but it makes you wonder.

Coffeezilla 1:00:30 Sure.

Lex Fridman 1:00:30 Who are the people in your life you trust that are like... that could be the next SBF or, or worse, big powerful leaders, Hitler and all that kind of stuff. Um, to what degree do you want to investigate? Do you want to, uh, hold their feet to the fire, see through their bullshit, call them on their bullshit? And also as a friend, if you happen to be friends or have a connection, how to help them not slip into the land of fraud? I don't know. All of it is just overwhelming. So-

Coffeezilla 1:01:00 Yeah, I mean, I mean, we should be clear, like finance is sort of a special space where-...you're talking about people's money. You're not talking about whether pe- someone takes a bad supplement, or like a supplement that is just, they're $50 out, right? I think the scale of harm-

Lex Fridman 1:01:18 Yeah.

Coffeezilla 1:01:18 ...and therefore responsibility escalates depending on what field you're in. Just like I wouldn't hold Tom Brady as, like if he gives a bad football opinion, right, and he should've known better, that is a different scale of harm than a doctor giving bad advice, right? Like life sa- like he tells you a pill works and the pill kills you, or something like that. There's just le- different levels of accountability depending on the field you're in, and you have to be aware of it. Finance is an ext- you have to be extremely conservative if you're gonna give financial advice because you're playing with people's lives, and you cannot play with them haphazardly. You cannot gamble with them, you cannot play with them on a bet, 'cause you're getting paid a lot of money. It's just the nature of the space. And so with the na- with the space comes the responsibility and the accountability. And I, I don't think you can get around

Coffeezilla 1:02:04 that.

Lex Fridman 1:02:04 Who was, uh, Dan Friedberg that you mentioned? Some of these figures-

Coffeezilla 1:02:08 Yeah.

Lex Fridman 1:02:08 ...in the SBF around that, uh, are interesting to you?

Coffeezilla 1:02:10 Super interesting kind of subject, because Dan Friedberg is, uh, the former General Counsel for Ultimate Bet. Ultimate Bet is a, was a poker site where famously they got in a scandal because, uh, the owner, Russ Hamilton, was cheating with a little software piece of code they called Godmode. Godmode allowed you to see up, the guy across from you's hand. Obviously, you can imagine you can win pretty consistently if you know exactly what your opponent has. Very unethical. They, uh, I should be clear that for some inexplicable reason, I don't think they were ever charged and convicted of a crime, but they were investigated by a gambling commission that found they made tens of millions of dollars this way, for sure. And Dan Friedberg is the General Counsel. He's caught on a call basically conspiring with Russ to hide this fraud. He's saying, "We should blame it on a cons-, you know, a consultant, third party." And Russ Hamilton famously says, you know, like, "It was me. I did it. I don't wanna give the money back. Find basically a way to get rid of this." So that's Dan Friedberg's big achievement. Like that's what he's known for, he's most known for. And this is the guy they pick as their Chief Regulatory Officer for FTX. Why do you hire somebody who... I, I get it. The not formally charged and convicted, investigated, there's all the, and there's tape out there, so I wanna be clear about what's actually available evidence. But someone who's seemingly own ache- only achievement is hiding fraud, why do you hire that guy if the intention is not to hi-, is not to hide fraud? So this is a question I put to A-, you know, Sam Bankman-Fried, and his answer was, "Well, we have a lot of lawyers. Well..." And I said, "Well, he's your Chief Regulatory Officer." He's like, "Well, it wasn't... We, we did regulate a lot." And it was just this big dance of, you know, basically he's done great work, he's a great guy. And I think that tells you everything you need to know.

Lex Fridman 1:04:07 And there's figures like that probably even at the lower levels, like just infiltrate the entire organization.

Coffeezilla 1:04:12 Well, it's just like why... Yeah. Why wasn't there a CFA? Why, why wasn't there anyone in that space who could seemingly be the eyes that goes, "Holy whatever, we need to, we, we're in dangerous territory here," right? Um, so yeah. It seems very deliberate. I mean, I talked to one FTX employee that they talked about, who's told me they talked about taking, I think it was taking FTX US public, and Sam was very against the idea. And the employee, in retrospect, speculated that it might've been because you'd face so much scrutiny, like regulation wise. Like you'd have to, you know, go through a lot, like more thorough audits, all that kind of stuff, that basically he knew they would never pass. Um, so yeah. I mean, it's, it's red flags all the way down with that guy.

Lex Fridman 1:04:59 And you hope all of them get punished?

Coffeezilla 1:05:02 Everyone who knew. I mean, I think for sure there are people at FTX who didn't know. I think there are some people at Alameda who didn't know.

Lex Fridman 1:05:10 There's degrees. Sorry to interrupt, but there's degrees of not knowing.

Coffeezilla 1:05:13 Yes.

Lex Fridman 1:05:13 There's a looking away-

Coffeezilla 1:05:16 Yes.

Lex Fridman 1:05:16 ...when you kind of know-

Coffeezilla 1:05:17 Yes.

Lex Fridman 1:05:17 ...shady stuff. That's still the same as knowing, right? That might be even worse.

Coffeezilla 1:05:22 Well, yeah. Like I was talking to one insider, and we were talking about the insider trading. He, they were telling me about this insider trading, and I said, "Do you think this was criminal?" And they said, "It was probably criminal in hindsight, yes." And the question is someone who answers a question like that, what does that like mean?

Lex Fridman 1:05:41 (laughs)

Coffeezilla 1:05:41 You know? Like it was probably cr- So you're right. There, there are different degrees. I mean, I'll say at the most basic I would be very happy if everyone who had direct knowledge went to jail, which I don't think will happen, to be clear. I think a lot of people are gonna cut deals, prosecutors are gonna cut deals so they actually nail Sam Bankman-Fried. I think that's their

Coffeezilla 1:06:00 only focus.

Lex Fridman 1:06:01 What about his reputation? What do you think about all these interviews? Um, do you think they are helping him? Do you think they're good for the world? Do you think they're bad for the world? Like what, what's your sense, and like say you get to sit down, interview with him for three hours and I'm holding the door closed. What, uh, what kind of... Is that a useful conversation or not? Or at this point it should be legal and that's it?

Coffeezilla 1:06:27 I think it's useful. Uh, I mean, I think with res- it's all, it's all about how you interview him. You can interview someone responsibly, you can interview him irresponsibly. I think we've seen examples of both.

Lex Fridman 1:06:39 What's an irresponsible... I keep interrupting you rudely.

Coffeezilla 1:06:42 That's okay. No, no, no.

Lex Fridman 1:06:43 This is unacceptable.

Coffeezilla 1:06:44 No, no, no. I think it's fine. Um, there was like a New York Times interview which spends an amount of ti- any amount of time talking about his sleep, and he's like, "Yeah, I'm sleeping great." I mean, I think that's so deeply disrespectful to the victims, and especially when you're, you're not even releasing an interview live. It's like you have time to triage what you're gonna talk about. Why would you spend any amount of time talking about the sleep that a fraudster is get- getting? It's just so weird. And-

Lex Fridman 1:07:09 Well, it's in that case. I don't, I don't-

Coffeezilla 1:07:12 Sure.

Lex Fridman 1:07:13 I don't, uh, I don't think-

Coffeezilla 1:07:13 Yeah.

Lex Fridman 1:07:13 ...it turned out well.

Coffeezilla 1:07:14 I think that's, I think that's-

Lex Fridman 1:07:15 I, I think... Okay. Here's the thing-I could see myself talking about somebody's sleep or getting in somebody's mind if I knew I have unlimited time with them, if I knew I had like four hours-

Coffeezilla 1:07:27 Yes.

Lex Fridman 1:07:27 ... because you get into the mind of the person-

Coffeezilla 1:07:28 Yes.

Lex Fridman 1:07:28 ... how they think, how they see the world. Because I think that ultimately reveals if they're actually really good at lying, it reveals the depths, the complexity of the mind that through like osmosis you get to understand like this person, this person is not as trivial as you realize. Also makes you maybe realize that this person is, has a lot of hope, has a lot of positive ambition that's like, uh, that has developed over their life and then certain interesting ways things went wrong-

Coffeezilla 1:08:00 Yes.

Lex Fridman 1:08:00 ... they become corrupt and all that kind of stuff.

Coffeezilla 1:08:02 You just, that's all fine. But this was, this conversation was not properly contextualized-

Lex Fridman 1:08:07 Yes.

Coffeezilla 1:08:08 ... in the world of what he did. It, and I, you know, I've, I've asked about this interview 'cause I was like so curious. It was out, out of the New York Times and there was not much mention of fraud or jail or the, the big crimes, like misappropriation of even client assets. It was just sort of this, you know, Sam sat down with me, he's, he's under investigation but there's not much specifics and then it's like, yeah, he's playing Storybook Brawl, he's sleeping, he's... And it's just like, okay, this isn't adding-

Lex Fridman 1:08:36 Oh, yeah.

Coffeezilla 1:08:37 ... to the conversation.

Lex Fridman 1:08:37 Oh, no, no, no, no, no. Especially when the New York Times, it's like a, you should be grilling him.

Coffeezilla 1:08:41 Right. Right. Exactly. So, um, but as I've said, I mean, it's, it's all ranged the gamut and some interviews like some of it's okay and then some of it's weird, like the Andrew Sorkin interview, he asked some hard-hitting questions, which I really appreciated. And then at the end he goes, "Ladies and gentlemen, Sam Bankman-Fried," and everyone gives like a, like an ovation for Sam. I mean, the steel man of that, of course, is like they're actually applauding Andrew Sorkin, but the way you like lay it up, I wouldn't go like, "Ladies and gentlemen..." It's like an applause line. It's like, "Ladies and gentlemen, the Eagles, Elton John, Lex Fridman."

Lex Fridman 1:09:13 Yeah.

Coffeezilla 1:09:13 And so to go to... So you have this like deal book summit where you have all these important figures that are positively important and at the end you have Sam Bankman-Fried, a fraudster, and you go, "Ladies and gentlemen, Sam Bankman-Fried," everyone's applauding, that I think is a net... like, I think that's a negative. I think the way that, the optics of that just were all wrong.

Lex Fridman 1:09:32 Yeah.

Coffeezilla 1:09:32 And so I think, um, yeah, you have to be very responsible. I think it's useful, going back to how you can usefully do this, you can, even when somebody's determined to lie to you, it's always important to pin them down to a, an accounting of events because that is unimaginably helpful when it comes to a prosecutor trying to prove this guy's guilty, is if you say you didn't do a crime but you don't tell me any de- details about it, day of the trial you can basically make up any story, right? But if you tell me in detail where you were that day, I can go hunt down, you say you were with Joe, I go hunt down Joe and he says he wasn't with you, boom, you've lost credibility and now you're much more l- you're much more, um, likely to be convicted. So it's really important to get SBF's exact accounting of how things went wrong because right now he's positioning himself to throw his, uh, Alameda CEO, Caroline Ellison, under the bus. Like she did everything, she knew everything, I knew nothing. Well, if Caroline Ellison's gonna take the stand and go, "Well, I have all these text messages and this is all a lie," and then Sam Bankman-Fried is gonna be completely, you know, uh, ruined, like self ruined by his own design. So I think it's important for him to do.

Lex Fridman 1:10:45 So more like a legal type of, uh, like get the details of where he was, what he was thinking, what the-

Coffeezilla 1:10:50 I think it's like, yeah, I think it's, I think the public probably cares to get to know what happened too, and I, and again I think if you're sh- if you're careful, you can expose someone for, as they lie to you without giving into those lies, right? Like without capitulating to, "Oh, I'm just gonna assume you're correct." I think you can point to, "Well Lex, you say it happened this way but you've lied about X, Y and Z, why should we believe you?" That's a suddenly a totally different conversation than just being like, "Oh, okay, that's how it happened."

Lex Fridman 1:11:20 The thing I caught that bothered me and the thing I hope to do in interviews if (laughs) , um, if, if I eventually get good at this thing, is the human aspect of it, which is like, which I think you have to do in person, is he seems a bit nonchalant about the pain and the suffering of people that I have red flags about. And the way he's, he communicates about the loss of money, like the, the pain that people are feeling about the money, I, I get red flags. Like you're not... Uh, forg- forget if you're involved in that pain or not, you're not feeling that pain.

Coffeezilla 1:12:01 Well, he'll, he'll say he is but he'll be playing a game of League of Legends while doing it.

Lex Fridman 1:12:05 No, but I, I just see it from his face-

Coffeezilla 1:12:07 Yeah.

Lex Fridman 1:12:07 ... the dynamic.

Coffeezilla 1:12:08 (laughs) I know. I know.

Lex Fridman 1:12:08 And that's what needs to be grilled.

Coffeezilla 1:12:10 Yeah.

Lex Fridman 1:12:10 Like that little human dance there, that's... I, I mean I, um, I considered... I talked to him. I considered doing an in-person interview with him. Um, and, and that's-

Coffeezilla 1:12:24 Are you still, are you still considering it?

Lex Fridman 1:12:27 I don't know. Do you think, do you think I, I should in person?

Coffeezilla 1:12:30 I think it depends if you think you have anything to add to the conversation. A lot of people have interviewed him-

Lex Fridman 1:12:34 Yeah, there's been already... You did an incredible job.

Coffeezilla 1:12:37 Thanks. I think-

Lex Fridman 1:12:40 I, I think I would like to grill the shit out of him as a fellow human-

Coffeezilla 1:12:43 Yeah.

Lex Fridman 1:12:43 ... but not investigative-

Coffeezilla 1:12:44 No, no. I, I know.

Lex Fridman 1:12:45 ... like Coffeezilla investigative.

Coffeezilla 1:12:46 Yeah, yeah, yeah.

Lex Fridman 1:12:47 Like, like another human being, another human being who I can have compassion for who has caused a lot of suffering in the world. Like that, that grilling. Like basically convey the anger that people and the pain that people are feeling. Right? Like that.

Coffeezilla 1:13:05 Yeah. I think, I think it'd be really hard. I mean, like that guy is sort of a master dancer and what he would say at the end of it, 'cause I've listened to so many interviews of him, um, I probably am like a GPT model for Sam. I think he would do some kind of thing about like-... "Yeah. I really, um, I really, um, hear you and, um, you know, it's- it's- it's just terrible. I feel such an obligation to the people who've lost money, and, you know, it's just, it's a lot of money. It's a lot of money." You know, he'd do something like that, and it would be very superficially, like, okay, but when you gr- when you drill down to the details of what he did, it's just impossible that he didn't know. And one of the things that I wish I had asked, maybe I can talk about, like, I wish I had gone on this. It's just so hard when you're doing a live interview to kind of focus on one thing. Everyone's asked about the terms of service. So, in the terms of service, there was like, "We can't touch your funds. Your funds are safe. We're never gonna do anything with that." Anytime anyone brings that up, he says, "Oh, well, there's this other term to service over here with margin trading accounts." Remember we talked about it, it's a derivatives platform. "If you're in our derivative side, you have- you're subject to different terms of service which kind of lets us, like, move your money around with everyone else, okay? So, we treat it as one big pool of funds." And that's sort of the explanation of how this all happened is, we had this huge leverage position and we lost everything. But what no one has sort of done a good enough job getting to the heart of, is that this pool of funds never was segregated properly.

Lex Fridman 1:14:33 Mm.

Coffeezilla 1:14:33 It was all treated under the same umbrella of, "We can use your funds." There was no amount of, "We have the client deposits which were just deposited with us and not, like, used to margin trade or do anything over here. These funds over here, we have saved." They didn't. Fundamentally, they lied from the get-go about how they were treating the most precious assets, which is your customer deposits that you said you didn't invest. Clearly, you put them all over here, you YOLO gambled them, and then when everyone starts to, uh, withdrawing from here, they don't have any money over here. So, that is, like, one- one of the most fundamental things that I haven't seen anyone grill him on, and, uh, the next time if I get the chance to ambush him again, that's- that's what I'm gonna drill down on, because-

Lex Fridman 1:15:17 Uh, uh, uh-

Coffeezilla 1:15:17 ... it's impossible for that not to be fraud. There's no world where you had a pool of funds over here and now you don't have them without you somehow borrowing over here. 'Cause if you deposited one Bitcoin and I never sold that Bitcoin and it's earmarked Lex Fridman, and you come and it's not there, something had to happen, right?

Lex Fridman 1:15:39 Well, so this is so interesting. So for me, the approach that, like you said, the most important question of, uh... 'cause for you it's like, were those funds segregated? For me, the question is, as a human being-

Coffeezilla 1:15:57 Yeah.

Lex Fridman 1:15:57 ... how would you feel if you're observing that? So, like, you know, that, like, marshmallow test with the babies, like, it's the human thing, it's a human nature question. Like, uh, I can understand there's a pile of money and you, uh... The good faith interpretation is like, "Well, I know what to do with that pile of money, to grow that pile of money. Let me just take a little bit of it." Like, how willing are you to do that kind of thing? How able are you to do that kind of thing? And when shit goes wrong, what goes through your mind? How does it become corrupted? How do you d- begin to delude yourself? How do you, uh, delegate responsibility for the failures?

Coffeezilla 1:16:35 Right.

Lex Fridman 1:16:35 Like, as opposed to getting facts, st- tr- s- try to sneak into the human mind of a person when they're thinking through that-

Coffeezilla 1:16:43 Yeah.

Lex Fridman 1:16:43 ... because the facts, there's- they're start, gonna start waffling. They're gonna start, like, trying to make sure they don't say anything that gets them incriminated.

Coffeezilla 1:16:53 Right.

Lex Fridman 1:16:53 But I just... I want to understand the human being there, because I think that indirectly gives you a sense of where were you in this big picture?

Coffeezilla 1:17:01 I think... I've talked to so many people who have sort of committed some range of like outright fraud to like misleading marketing. No one thinks they're a bad person. Nobody admits that they did it and they knew they... Or almost nobody does. There's actually one funny exception, but, um... (laughs)

Lex Fridman 1:17:21 Yeah.

Coffeezilla 1:17:22 I had a guy who admitted like, "Yeah, I did it. It was wrong, and, uh, you know, but I did it and I wanted the money," (laughs) which was kind of, like, almost refreshing in its honesty. But, um, the reason I focus on, like, the facts is because unless you find a bright red line, humans can rationalize anything.

Lex Fridman 1:17:39 Mm-hmm.

Coffeezilla 1:17:40 I can rationalize any level of, like, "Well, I did this because I had the best of intentions." And if you play the intention game, you'll never convict anyone, because everyone has good intentions, everyone's honest, everyone's doing the best they can and got misleaded and got misguided and da, da, da, da. Ultimately, you have to drill down to the concrete and go, "Look, I get it. You're just like the last 50 guys that I interviewed. You had the best of intentions. It all went wrong. I'm very sorry for you. But at the end of the day, there's people hurting and there's people that- that have significant damage to their life because of you. What did you actually do and what can we prove, taking intention out of it, taking motivation out, what can we prove that you did that was unethical, u- illegal or immoral?" And, like, that is sort of what usually I try to go to because I will do those human interviews, but, um, you know, it's just like, it's just a re- it's like the same record on repeat. I mean, a lot of people go through the same-

Lex Fridman 1:18:34 I- I- I gotta... I- I'm with you, I'm with you on, uh, everything you said, but there is ways to do... to avoid the record on repeat. I mean, those are different skill set. You're exceptionally good at the investigative, like investigating. I do believe there's a way to break through the- the re- the repeat. There's- there's different techniques to it-

Coffeezilla 1:18:51 Yes.

Lex Fridman 1:18:51 ... uh, one of which is, like, taking outside of their particular story. Yes, ev- when everyone looks at their own story-

Coffeezilla 1:18:57 Mm-hmm.

Lex Fridman 1:18:57 ... they can see themselves as a good player doing good.

Coffeezilla 1:18:59 Right.

Lex Fridman 1:19:00 But y- you can do other thought experiments. I mean, there's, uh-

Coffeezilla 1:19:04 But they'll follow you. Th- they'll know what the thought experiment is like.

Lex Fridman 1:19:07 No. Well, it depends. It depends, my friend. I mean, the... (laughs) Like, uh, you know, to me, th- there- there's a million of them but- of just exploring your ethics. Would you kill somebody to protect your family? And you