0:13

Hello, and welcome to What Goes Up, a weekly

0:16

markets podcast. My name is Mike Reagan. I'm

0:18

a senior editor at Bloomberg.

0:19

And I'm Wildona Hirik, across Acid reporter with

0:21

Bloomberg, and.

0:22

This week on the show, well WELDNA. I'm

0:24

not sure if listeners quite understand

0:27

what our work environment is at Bloomberg.

0:29

We're all in this sort of open area.

0:32

There's not even cubicles, there's just

0:34

desks, no knocks, tweets, so no privacy

0:36

none, and as a result, you can

0:38

often overhear other

0:41

conversations, other reporters conversations,

0:43

and I guess it's kind of rude to eachstrap,

0:45

but I mean.

0:46

I do it.

0:47

Yeah, we all do it.

0:48

I listened to your lunch orders.

0:51

But a lot of times what you overhear,

0:53

what you eaveschop on is super boring. You know, oh,

0:56

why did the stock market go Monday? And I'll

0:58

say, not boring? Sure, why is the market up today?

1:01

What do you think of this stock? You

1:03

know? What does this economic

1:06

data mean for the market. That's where thing. It's

1:08

very mundane stuff. But about a decade

1:10

ago, I was sitting near a guy in next

1:13

row over from me, who

1:15

was on the phone. I'd say ten hours a day,

1:18

heavy Boston accent. He

1:21

was the most fun reporter

1:23

to eavesdrop on I've ever had

1:25

in my career. Everyone else's asking about,

1:28

you know, the latest earnings and

1:30

you know, what does the java's claims

1:33

number mean? And this guy would be talking

1:35

about scam artists, crime

1:37

and strip clubs and drugs.

1:40

Wow. I wish

1:42

I had recorded some of these interviews. It was the most

1:44

entertaining reporter evesdropping

1:46

I think I've had in my career.

1:48

I can only imagine. I'm so jealous. I'm

1:50

dying of jealousy right now because I'd love to hear some

1:52

of this stuff.

1:53

Well, don't be too jealous, because we

1:55

have him. We have him on the show this.

1:56

Week because he wrote a book that was I

1:58

read a lot.

1:59

Of books, not to you know, Oh,

2:01

I know you do.

2:02

I read a lot of books, but this was like the best

2:04

book I've read this year. It was so fun.

2:06

I read it so fast. Maybe one of these

2:09

days we'll let our audience know what book it. Who

2:11

the guy is without further ado,

2:14

it's Zeke Fox. He is our

2:16

Bloomberg colleague, and he's the

2:18

author of the brand new book number go

2:21

up. Inside Crypto's wild rise and

2:23

staggering fall. Zeke, I'm so

2:25

happy you could join us. Thank you so much for coming.

2:27

Thanks for having me and for putting up with my

2:29

really loud conversations all those years.

2:32

And I apologize for Eves wrapping on you all those years,

2:34

but no, it is possible.

2:35

I'm sorry. Yeah, no, he's not sorry.

2:37

What was like do you remember any of the well,

2:40

so, Zeke was pretty

2:42

famous as an investigative journalist

2:44

in our circles in the financial world, long

2:46

before Crypto, and I think the probably

2:49

the stuff I was Eves dropping on

2:52

might have been like the payday lender scams.

2:54

Uh, one of the first things you really

2:57

started digging deep into.

2:58

If I'm not mistaken, I mean, I have to admit

3:00

that, like you said, it's impossible, everyone's going to hear

3:03

it. And I talk pretty loud. I can't

3:05

control myself. But also I know that everyone's

3:07

listening.

3:08

I want to sit next to you. I'm going to request

3:10

it.

3:10

Every new retrader should have to spend like a

3:12

month's sit next to Zeke and just listening

3:14

to how he interviews. It's a work of art.

3:16

I learned a lot from Max Abelson,

3:18

who would sit near me. It was also very

3:21

like a loud talker and was

3:23

great at inter getting these billionaires to

3:25

tell him all their secrets. He would be really

3:27

interested in their stories, but also he wouldn't

3:29

let them off the hook. He'd be like, don't just tell me

3:31

that the new CEO of Goldman Sachs is

3:34

a nice guy? Like how is he nice? Was

3:36

he nice to you last Thursday? What did he do that

3:38

was so nice? How did his eyes look while

3:40

he made that nice statement?

3:42

Okay, so you have your famous

3:45

in the newsroom and outside the newsroom for these

3:48

strings of very interesting,

3:50

intriguing stories, very interesting characters.

3:53

Mike mentioned the payday lenders. You have so

3:55

many. But so your new focus

3:58

is crypto, and I want to ask Q

4:00

what made you go down the crypto rabbit hole?

4:03

Resisted looking into crypto?

4:06

Like you said, I have always really liked scams,

4:08

and people would tell me crypto is

4:10

perfect for you, But there's something about it that

4:12

I didn't like it, because I like

4:15

when you've got like a kind of complicated scam

4:17

and you have to look through all the paperwork and figure

4:19

out like the loophole they're using and

4:21

with crypto, they're just like, hey, buy

4:24

my new coin, and then like suddenly

4:26

they're a billionaire. I got into it like everybody

4:28

else through Fomo. I

4:30

had this fuddy who

4:33

we have like a group chat, and he

4:35

was texting us all about something he called

4:37

doggy coin. And this is like the height of

4:40

the pandemic. Dudes, you got to get some of

4:42

this doggy coin. It's so funny. It's going

4:44

to go up, and I'm

4:47

like, it's dogecoin. And

4:49

this already went viral, like several years ago.

4:52

They made fun of it on the Daily Show. It

4:54

was not even funny to begin with. This will never happen

4:57

again. But like he was right, doge

4:59

coin went up and he made a

5:02

fair amount of money. And he's sending us pictures

5:05

from Disney World. He's like, he

5:07

said, I'm freaking nostra damis.

5:10

You know, if you had listened to me and bought dogecoin,

5:13

you'd all be rich now in Disney

5:15

World, Yes, which would be a I do

5:17

not want to go there, so all.

5:19

The prices are like extortions.

5:21

Yeah, he must have made a lot of money.

5:23

This primed me to be like, you know what I really

5:25

want to prove I am still right. This

5:27

stuff is dumb. I'm going to look

5:29

into it. And then I Joel

5:32

Weber, the editor of BusinessWeek, came

5:34

by and was like he had

5:36

an idea for a crypto story, and

5:38

like in the past I might have turned it

5:40

down, but this time I was like, no,

5:42

I'm going to look into it. And once

5:44

I did, like the first part

5:47

of it was to go to one of these crypto conferences, and I

5:49

was just like, as soon as I started, I

5:51

was like, oh my god, this is a crazy

5:53

world. Whatever you think about crypto, these

5:55

people are making like billions of dollars. This

5:58

has got to be like one of the craziest things happened

6:00

in the history of finance. It turned into

6:02

like a two year trip down the rabbit hole. By

6:04

the end, I was in like Cambodia.

6:06

As one does. Yeah. But so that initial

6:08

story from Joel was about

6:11

tether, which listeners who are

6:13

unaware it's a stable coin, which

6:15

is a crypto coin that's meant to track

6:18

the US dollar exactly one to

6:20

one, no more and no less than. The idea is

6:22

that he maybe you made a bunch of

6:24

money in crypto, and now you want to

6:27

store it in US dollar or stable

6:29

value, or you want to move it from one exchange to the

6:31

other, or whatever you want to do.

6:33

You want to keep it in that one dollar increment.

6:36

So Joel came here about tether, and

6:39

that put you onto the trail of a guy named

6:41

Brock Pierce. So talk

6:43

to us about brock Pierce, and you're sort of pursuit

6:46

of him to find him and

6:48

ask him about what's going on with Tether.

6:50

The best resume I've ever seen of anyone in

6:52

finance. He started off early. He was

6:54

a child actor. He's in

6:57

the Disney classic The Mighty Ducks

6:59

and he plays the

7:02

coach Gordon Bombay in a flashback

7:04

when he misses this crucial penalty shot

7:06

that haunts him decades later.

7:08

Away.

7:08

Oh no, it's right at the beginning of the movie. Don't worry,

7:11

So he went on. It wasn't just like this one movie.

7:13

He started in one called First Kid. He had kind

7:15

of like a Macaulay Culkin look. But

7:17

then he quit acting. As

7:20

a teenager, he gets hired at this dot

7:22

com startup called den. He's

7:24

given like this great title, two

7:26

hundred and fifty thousand dollars a year salary.

7:29

What happens at Den truly bizarre.

7:32

Not even sure it's appropriate to talk about in this podcast.

7:35

You'll have to read about it. Yeah, But by the end

7:37

of it, he's fled to Spain with the founder

7:39

of Den, and he's

7:41

gotten really into massively multiplayer

7:44

online games. He ran

7:47

a virtual item trading companies. Basically,

7:49

you want to get ahead quick in this game everquestor

7:52

World of Warcraft, you could pay real money

7:54

to buy the megasword and then you know,

7:57

bump up to level seventeen really quick. This

7:59

would be big business, and

8:02

he eventually hired Steve Bannon randomly

8:05

to be like the chairman of the company.

8:08

They made a big I think they sold

8:10

it to Did they sell it to Goldman

8:12

Sachs or Goldman Sacks broker the deal. Anyway, he

8:15

gets out of this deal rich, and he sees

8:17

the potential of making real money from the virtual

8:20

world, and he becomes

8:22

one of the earliest

8:25

investors in crypto. There's

8:27

some debate over how much credit he gets, but he's a

8:29

co founder of Tether,

8:31

which was this first stable coin. So

8:33

when I went to go look into Tether, the big mystery

8:36

was like, by the time I'm looking into it, Tether

8:38

claims that they have fifty billion dollars in

8:40

the bank somewhere, but they won't say where. So

8:42

I'm trying to find this fifty billion dollars. And

8:45

at the time, people are really worried about

8:47

this. Jim Kramer's on TV being like this

8:50

could crash everything, Like where's Tether's

8:52

money? They won't say. Even Janet Yellen held

8:54

a meeting of all the top financial regulators

8:56

where they're like, where's

8:58

Tether's money, What's gonna happen? What does this mean

9:00

for financial market? Yeah,

9:03

So as I started to look into it, I

9:05

just couldn't believe that this coin

9:07

that was seemingly so important basically

9:09

appeared to be like the central bank of crypto, a

9:11

key point in the infrastructure holding all

9:14

these schemes together, had

9:16

been founded by the Mighty Ducks

9:18

guy. So in the book I

9:20

talk about I went down to a

9:22

crypto conference in Miami and went

9:24

to a

9:28

party at Brock's house or

9:30

a house he'd rented for the conference, and

9:32

it was truly just like the

9:34

weirdest scene, like everyone's just sort

9:36

of milling about, getting like drunk, drunker and drunker.

9:39

Brock's not there, And when After I spend

9:41

like a whole day there, Brock shows

9:44

up and then immediately disappears. I catch

9:47

up with him at another conference in the

9:49

Bahamas. I hear from a friend of mine

9:51

is like, hey, last night, I was at the craziest

9:53

party on this yacht. It was this mega yacht

9:55

that this crypto billionaire bought from this Russian

9:58

oligarch. And she's just showing me her

10:00

Instagram. She shows me this video of him

10:03

jumping off the yacht and I'm like, oh my god, Brock's

10:06

here. So I text him. I'm like, can I come

10:08

to your yacht? He sends

10:10

a speedboat to the sequel.

10:13

Yes, it was very I'm not gonna lie, it

10:15

was very cool. So when we finally

10:17

talk and get into it and talk about Tether,

10:21

at this point he's sold his stake

10:24

in the company, he says for no money,

10:27

and he it turns out to be kind

10:29

of like a dead end, like he doesn't really know where this fifty

10:31

billion dollars is. But he's

10:33

a really compelling interview. When we started

10:36

talking about like the mystery and how does he have any

10:38

clues about how to find Tether's money. But he's

10:40

like that do not mess this one up. This could

10:42

be your big chance, and I'm like, I totally

10:45

agree, But also, what's going on here, Brock, I.

10:47

Don't think you guys are thinking of the chance and

10:49

the same sort of outcome.

10:52

Yes, I think what he was saying is that Crypto is

10:54

going to do huge things for the world, and if I'm just going

10:56

to be like another hater, that's how it wouldah.

11:06

Teather ends up being the crux

11:08

of the book. I would say, so much revolves

11:10

around Tether and coming

11:12

things just leading you back to Tether. But

11:15

one of maybe the more interesting

11:17

avenues was with this character

11:20

named Vicky, who I

11:22

like to call your pseudo girlfriend, maybe

11:25

because that's an interesting way to put

11:28

it. So tell us who Vicky is, how

11:30

that relationship developed, and then what that

11:32

led you to. And this is I mean, really,

11:35

this was like such a great part of the book.

11:37

One of the questions I have as throughout

11:39

my two years is who's using tether.

11:43

One of the people I find who's using it a lot I

11:45

won't get is Sam Bankman freed for

11:47

his exchange FTX. But another thing

11:49

I hear about is people crooks are using

11:51

this for like money laundering, and then one

11:54

day, I get one of those random messages

11:56

that like everybody gets. It's just

11:58

like a text mess and it's just

12:00

like, hey, David, like how's it

12:03

going. And I'm like, I'm

12:06

not David.

12:07

And everyone else ignores these text

12:09

messages. Yeah, it's like I

12:11

think we got a story here.

12:13

Yeah, I'm like I was kind of like, you

12:15

know what, let's see where this goes. And

12:17

so I wrote back. I was like, I'm not David, I'm Zeke,

12:19

but like, who are you? And she says

12:21

she's Vicky, and Vicky

12:23

from New York, right from New York. Yes,

12:26

and we kind of become pals.

12:28

And she doesn't

12:31

immediately let on to what her angle

12:33

is. She's just telling me about herself,

12:36

asking me what I like to do about my life.

12:38

She asked me to send her a picture.

12:41

It sounds like the typical catfishing scheme

12:43

at first. Yeah, it's not quite that right.

12:45

I was kind of playing along and waiting for this to happen.

12:48

And what it is that she starts to let on that she's

12:50

a great crypto trader, like she's

12:52

learned some tricks from like her uncle or something.

12:55

After like days of chatting

12:57

and where I finally had to be like, Vicky,

13:00

I need one hundred grand so I can get a Tesla. And

13:02

then she was like, I'll let you in on my secret. And

13:05

this is what I really wanted, what I was waiting for. She

13:07

has me download like a crypto trading

13:09

app that I had to like, she had

13:11

structured me how to sideload it on my iPhone,

13:14

like it wasn't from the official app store, and

13:17

it looked like pretty legit. But

13:20

this is how the scam works. They get you

13:22

to buy tether

13:24

on a regular trading app like coinbase,

13:27

orcrypto dot com, and then send

13:29

it to this special app

13:31

where you're gonna learn how to use the like short term

13:34

nodes, and like, once you've sent

13:36

the money to it

13:38

was called zbxss, it

13:41

appears to be in your account and everything, just like it

13:43

would be on a normal app, and like if you

13:45

make trades, they'll show you gains. They might even

13:47

let you make a small withdrawal, but like, really,

13:49

once you've sent the tether over to zbxss,

13:52

it's gone. So at

13:54

this point I feel like I've gotten her

13:56

tether address, and I feel like

13:59

I've let this go on long enough, and I'm

14:01

like Vicky, I have to tell you, Like I'm an investigative

14:03

reporter. I've been looking into these kinds of

14:05

crypto scams and how they use teather, and

14:08

I've heard some like disturbing things about what might

14:10

be going on, which I'll get into. Can we talk

14:12

about can we get real here? And then Vicky

14:15

just said oh no, no, no, no, it's not what

14:17

you think, and she disappeared.

14:20

I'm shocked.

14:21

Yeah, So this is the real crazy part,

14:23

which is that I learned from reports

14:26

out of Cambodia that a

14:29

lot of the people who run these kinds of scams

14:31

are themselves victims. And

14:33

it sounds like some sort of Quanon

14:36

conspiracy theory, but they're victims

14:38

of human trafficking. And there's actually

14:41

these whole office

14:43

towers, floor after floor of people

14:46

who've been let's say they've been lured

14:49

from say like Vietnam, with the offer of like a

14:51

good job and like customer service. Then

14:53

when they get there, they're trapped. They're

14:56

told they can't leave, they're beaten, they

14:58

get electric shocks, other forms

15:00

of torture, and they're just made They're given

15:02

like ten phones each and made to like try

15:05

to lure people into scams from around the world.

15:07

So I suspected

15:10

that Vicky was like one of these people, and

15:12

I wanted to, Like I

15:15

was hoping she would tell me more about like her working

15:17

conditions, or that even I might be able

15:19

to, like somehow help

15:21

her.

15:22

But no Dice.

15:23

So I start to go down this rabbit

15:26

hole of these other people who've looked

15:28

into this, and there's actually this crazy

15:30

organization of people who've been scammed

15:32

who, instead of trying

15:34

to get revenge, have made it their mission

15:37

to help these human

15:39

trafficked scammers. Through them,

15:41

I meet a lot of experts are working on this. One

15:43

guy tells me that a

15:46

crypto tracing expert, he estimates that

15:48

this accounts for like that ten billion

15:50

dollars has been lost

15:52

this way and all using

15:55

tether. From these guys, I get

15:57

connected with a YouTuber in Vietnam

15:59

who's his thing that he

16:01

pays ransoms to help people get out of these

16:04

scam compounds. He connects me with

16:06

some of the victims

16:07

who he's helped rescue,

16:10

and I start talking with them with a translator

16:12

about their experiences. And I meet

16:14

this one guy, Twee, who

16:17

had just gotten out of one of the most famous

16:19

compounds in Cambodia. He

16:21

tells me about just like horrific

16:23

things like this. He's in this compound

16:25

that holds some people, say like five or six thousand

16:28

people.

16:28

Wow. And it's all in Cambodia.

16:31

Yes, and Seannookville in southwestern Cambodia,

16:34

and it's it's called Chinatown.

16:37

It's run by like Chinese gangsters.

16:40

So I've made arrangements with two reporters

16:43

in Cambodia who had really been instrumental

16:45

in exposing this problem and bringing it to light,

16:48

and went over to out

16:50

there to meet some of these victims and

16:52

to see some of these compounds myself.

16:55

Yeah, you know, and this is a scam that sounds like

16:57

it's really would only be made possible

17:00

because of crypto and because of the sort

17:02

of you know, no border transactions

17:05

that are allowed with crypto.

17:06

That's really what made me think it was

17:09

so interesting, because I

17:11

yeah, like there've always been these kinds of scams,

17:14

but there haven't been such a

17:16

first of all, I mean, the Crypto's story

17:18

makes it very plausible that or at least

17:20

mildly plausible, that someone like Vicky might

17:22

have some secret trading secret.

17:24

I mean, in the crypto world, like people are getting

17:26

ridy. Everyone's suffering from fomo. Like

17:28

you said, you know, everyone's thinking,

17:32

you know, should I be in? Should I be in this asset

17:34

class? Everyone else's seems to be making

17:36

money. It's it's perfect timing for

17:38

a scam like that.

17:39

I feel weird just even thinking about it, but I'm getting

17:41

what I would get to Cambodia with these reporters,

17:44

mech Doron, Danielle Keaton Olsen, who

17:46

had brought this Chinatown problem to light.

17:49

Right at the entrance to Chinatown, there

17:52

was a cash exchange

17:54

store and I could still see their like

17:56

faded sign where they offered to trade

17:59

tether for cash. And

18:01

like I'd spent like years looking ato crypto,

18:04

I'm not seeing any place where it's actually used in

18:06

the real world. But then, like in panom Pen,

18:08

I went to a currency

18:11

exchange place to advertise teather. Outside

18:13

I saw a bunch of these and

18:16

I, you know, I had some tether on my phone,

18:18

zapped it over to this Chinese guy working

18:21

behind the counter. He gave me US dollars,

18:23

no questions asked, and finally I'm like,

18:25

oh, like this is what crypto is good for.

18:28

That's another part of the book that I wanted

18:30

to ask you about. Where you go to this money exchange

18:32

and this man comes in with flip

18:34

flops and pajama pants. He

18:36

has this big plastic bundle of

18:39

one hundred dollars bills. Ye.

18:41

So this currency exchange

18:43

was in the capital in Panompen and

18:45

the capital of Cambodia, in a sort

18:48

of Chinese neighborhood. So

18:51

the boss was

18:53

Chinese. This other Chinese guy walks

18:56

in kind of like hungover and

18:58

just walks out with Yeah, this brick

19:01

of hundreds that a clerk told me later

19:04

was fifty grand. This is the Teather

19:07

exchange. And I since I sent some

19:09

tether to the exchange place, I got

19:11

their wallet address and was able to see that they

19:13

were making big transfers every day.

19:15

And this is just one of many exchange

19:17

places. And I visited another

19:20

town that was reportedly home to

19:23

a lot of these scam compounds

19:25

with forced labor. It

19:27

was the first place I saw in Cambodia. I crossed

19:29

the border, I got off the bus. I'm

19:32

at this town that's full of like scam compounds

19:34

where I've seen videos of like workers

19:37

getting beaten and right

19:39

in the parking lot of one of these

19:41

casinos. I see a little booth

19:44

that's advertising trade

19:46

your dollars for tether, Trade your tether for dollars,

19:48

And I was just like, I don't know, it's not evidence of

19:50

anything, but I'm.

19:51

Like, so, you know, I think throughout

19:54

the crypto boom, many people were

19:56

where released suspicious that yeah, it's

19:59

frequently you crypto is frequently used

20:01

to facilitate scams like this or make sort

20:04

of this new version of these scams

20:06

possible. But what caught a

20:08

lot of people by surprise, I think fil

20:10

Donna and I included, and then many

20:12

in the press, is that some

20:15

of the players who were considered, you

20:17

know, the righteous leaders of

20:19

this movement were scam artists

20:22

too, allegedly. And obviously the

20:24

name that comes to mind is Sam Bankman Freed.

20:27

He really seemed to have the world convinced

20:29

that he was just sort

20:32

of this honest programmer who's building

20:34

the infrastructure for crypto

20:36

and you can trust him. He testified

20:39

before Congress. You met Sam a

20:41

few times in the

20:43

Bahamas, and I think one

20:45

time in Miami too. It just talked to us

20:48

about meeting him, your first

20:50

impressions and just kind

20:52

of your reporting process with SBF.

20:55

I met him first time at

20:57

this first crypto conference I went to in

20:59

Miami. He was there to have the

21:01

Miami Heats arena named after

21:03

his company. He was not like quite

21:06

so famous yet, and I just wanted to ask

21:08

him some questions about tether But

21:11

as soon as I met him, I'm like, this guy is a

21:13

really fascinating character in himself.

21:16

He's twenty nine years old, he's

21:18

worth like twenty billion. But

21:21

what really gets me going is that he

21:23

tells me about I mean,

21:25

his shop worn story about effective

21:28

altruism. But like, when

21:30

this guy was a teenager at MIT,

21:32

and I've talked with other people who knew him,

21:35

like, I don't think this is made up.

21:36

He was.

21:38

He was a vegan, he was an activist. He was

21:40

like handing out animal cruelty pamphlets.

21:43

Then he meets this philosopher who's

21:45

they're talking about life. Sam is like,

21:47

how could I do something good for the world, And

21:50

a philosopher is like, I got an idea.

21:53

Yeah, I mean, anyone can give out pamphlets. How

21:55

about you get rich and give the money away? And

21:57

he called this earning to give. He

22:00

he decides to do that and then ten years

22:02

later when I meet him, he's

22:04

legitimately one of the richest people in the world.

22:06

See Ke, You've got one of the best BS detectors

22:09

in the world. It feels like that, at

22:11

least at the beginning, was genuine. Do you think

22:13

this altruism?

22:15

Yeah, So, now that

22:18

FTX has been revealed to be like

22:20

a fraud and that users lost so

22:23

much money, he's about to go on

22:25

trial. A lot of people have questioned, did

22:27

he ever believe any of that? Was it a scam from the start?

22:30

I kind of think that it was true,

22:33

that he really did want to make money to give

22:35

it away, and that in

22:37

fact, his belief that he was a

22:40

good person who was going to do good things

22:43

for the world may have led him to

22:45

take risks to do

22:49

fraudulent things because he was like, if it's

22:51

going to make me rich, is justified, because I

22:53

might save the world from the evil robots

22:55

that are coming. But yeah, so when I met him,

22:58

I was suspicious of Crypto, but

23:00

I did not think I thought it was a bit weird

23:02

that he's supposedly this great guy, but he's running

23:05

what's essentially like an offshore gambling

23:07

parlor where like I think people are all going

23:09

to lose their money because like even day trading

23:12

is a bad idea, like it's proven to be a money

23:14

loser.

23:14

But I mean, you can be an honest broker

23:16

running an offshore gambling parlor.

23:19

Right I so immediately though, I was really taken by

23:21

his idea, because, like you were saying, I've always talked

23:23

with these scammers. I've actually even

23:26

sort of had this idea that it

23:28

would be kind of cool if somebody ran

23:30

a scam for good and gave them

23:32

money to charity. And one

23:34

of our first like in depth conversations

23:37

I was talking with Sam, he hadn't given very

23:39

much money away yet because and

23:41

he was like, listen, I've given away like a hundred

23:43

million, but it's hard for me because so much of my

23:46

net worth is locked up in the

23:49

valuation of his private company, which

23:51

I thought was like, come on, you can't borrow against

23:53

it. But whatever, it was at least like a

23:55

plausible excuse. But I was like,

23:57

Sam, you have so much credibility

24:00

the crypto world. You

24:02

could do a scam right now. You

24:04

could probably make like several billion dollars

24:07

give it away right now. Wouldn't that be

24:09

better? Than like whatever you're

24:11

working on. If what you're working on is too slow,

24:14

and he was just like,

24:16

I think I could make more money in the long run, being

24:19

honest that checked out. I

24:21

was like, you know, you're probably right, even if

24:23

you could make a few billion with a scam. I

24:25

later went to go visit him in the

24:27

Bahamas after FTX

24:31

had collapsed, but before the cops got there,

24:33

and he told me he was like, there was one thing

24:36

I wasn't totally

24:38

straightforward with you about the first time we met.

24:41

You know, I told you my net worth was twenty billion.

24:43

If you like really looked at my networth

24:46

on paper, it was more like one hundred billion. He

24:48

had so much money

24:52

of but all in these random

24:54

coin cryptocurrencies, some of which

24:56

like he'd invent it. But I don't

24:58

know. I think they the people, these guys really all

25:00

got caught up in the

25:03

craziness.

25:03

And who wouldn't. I don't know, Zeke,

25:19

your stories are so crazy that for

25:22

the first time ever on Booker's Up, I think we're gonna

25:24

skip our craziest things and just

25:26

keep hearing more of Zeke's fat.

25:28

Yeah, because it pales in

25:30

comparison to some of this stuff that

25:32

we're hearing. So the book, Like you

25:34

just told us like three or four great stories, there's

25:36

so many more in the book. And

25:39

what struck me is that you took part in

25:41

a lot of this, like you actually did, you know,

25:43

like the trading with and texting with Vicki.

25:46

You also try to buy your own NFT so

25:48

you can get into a party that

25:51

you ended up not having to need the NFT

25:53

for, right, And I'm just wondering about like

25:55

your real world interactions with the

25:57

crypto industry, the crypto space,

26:00

the people who are part of this space,

26:03

and maybe some of the

26:05

shortcomings of what

26:08

you experienced. You know, when you sent Vicki

26:10

one hundred tether you actually sent eighty

26:12

one tethers because the fees

26:15

were so high that they exchange

26:17

took and et cetera. There was just so

26:19

much of your experience

26:21

being a part of this.

26:22

Yeah, it was instructive

26:25

to try to use crypto myself,

26:27

and I was kind of shamed into it because

26:30

crypto people were always like, you can't,

26:32

you're biased, you don't have crypto, you haven't tried

26:34

it. How do you know about crypto? So

26:36

I finally was like, all right, fine, you got me, I'm

26:38

gonna try it. And I bought a

26:40

very expensive NFT one

26:43

of these cartoons that go for like hundreds

26:45

of thousands of dollars. Mine was only twenty

26:48

thousand. It was like a picture

26:50

of a melting monkey.

26:52

When I read this part of it, I literally was like, don't

26:54

do it, don't do it.

26:56

Yeah, if you get

26:58

one of these, you're allowed to go to ape Fest,

27:00

which is like a week long festival. But it

27:03

was very instructive. This kind of boring

27:05

part of just like buying

27:08

this ape because the process

27:10

of sending money from my bank to

27:13

like crypto world was just like

27:16

horrible. It was terrifying. And

27:19

when I learned essentially if you know

27:21

browser extensions like ad block, the little

27:23

icons next to the URL

27:25

box and Chrome, it was like, oh,

27:28

like my money is going to live there

27:30

and if I click the wrong button, it'll

27:32

just be gone. I'm like, this is no fun

27:35

in a crypto app. It was a really popular

27:37

one called meta Mask, and when you sign

27:39

up, they have you watch this video where they're

27:41

like, don't lose your password, we

27:43

really mean it in fact for real,

27:46

have it engraved on a piece of metal and

27:49

then bury it in your backyard, and

27:51

I'm just like, first of all, no, I'm not doing that.

27:53

I'm too lazy. And then when I got to ape

27:55

Fest, this revealed

27:57

like another problem with NFTs,

27:59

which is that they're supposed to be cool. When

28:01

I got to the club, everybody

28:04

had a board epe. Mine was the cheapest

28:06

one, and even like pimply teenagers

28:08

were like, your board ape sucks. I even

28:11

was able to confront one

28:13

of the promoters of the bard Ape Yacht Club,

28:15

who really, it's got very popular with celebrities.

28:17

One of the celebrities that was like instrumental

28:19

and giddio it going with Jimmy Fallon. He

28:22

was there, but I was like,

28:24

hey, Jimmy, check out my board ape. He

28:27

pretended to be interested. At this point,

28:29

the value of board apes had recently gone

28:31

down by like fifty percent. It had still had a

28:33

long way to go.

28:34

But maybe it was this party or a

28:36

different party where you asked somebody like, what

28:38

is the how can this be useful for the everyday

28:40

person? And the person said to you, why

28:43

are you asking me this? Like why do you care so much

28:45

about that aspect of it? It's

28:47

not that important.

28:48

He was just like, truly baffled.

28:50

That was at a party for a different NFT thing

28:52

called Degenerate Trash pandas

28:55

I tried to go to one called Solana Monkey

28:58

Business that they were costing twenty five

29:00

thousand at the time, but I wasn't ready. I

29:02

was like, I'm not paying for like a trash

29:04

Panda or like monkey business. I want

29:06

the one that Justin Bieber has. But as

29:08

soon as I got that board ape, I was like, I

29:11

have to unload this, like I couldn't sleep. I

29:13

was able to sell it after the ape

29:15

fest at only a small loss.

29:17

Zeke, let me square the circle here a little bit and bring

29:20

it back to Tether. You know, as we started

29:22

at the beginning, this is sort of what drew

29:24

you into the crypto rabbit hole. And

29:28

yeah, and you and I have talked about this before, and your

29:31

original Business Week story on Tether

29:33

is just phenomenal. You know, if I

29:36

recommend people read the book, but also go back and read

29:38

that original BusinessWeek story, and I

29:40

think you had a line in there. How Tether as

29:42

a company seems to be like, you know, it's

29:46

a carpet knitted out of red flags

29:48

basically, you know, there was so much there to be suspicious

29:51

of and rightly

29:53

so, you know, I no one knew where these

29:55

reserves were. They said they invested in

29:57

commercial paper. No one in the commercial paper market

29:59

had ever heard of them. It just seemed so

30:01

suspiciously. But the ironic

30:04

thing is that so many things fell apart

30:06

in crypto, FTX and

30:09

Terra, you know, the Luna Holy ecosystem

30:12

and all the dominoes that fell afterward.

30:15

Tether is still there. It's

30:17

still for most of the time worth a buck.

30:20

Walk us through sort of the story arc of Tether

30:22

from where you started into where we are

30:24

now and how you're thinking about Tether, you know,

30:27

is all these red flags what happened?

30:30

Yeah, it was very surprising. I mean

30:32

I was not alone in thinking that they were like

30:34

the most suspicious company in crypto, and

30:37

like when I published after I'd

30:39

investigated for a little while. I

30:42

mean, there's a whole backstory of it's

30:44

the boss of Tether, who's former plastic

30:46

surgeon from Milan who had like a

30:49

weird career and import export business.

30:51

But Tether was sued by New York's Attorney

30:53

General for misrepresenting its reserves.

30:56

But in twenty twenty two, in the

30:58

summer when everybody's all the other crypto

31:00

companies started collapsing, really like a

31:02

legitimately high percentage of all the people I met

31:05

in crypto their companies had were collapsing,

31:07

but Tether stayed strong

31:09

and like they still have not provided the

31:12

detailed accounting of their risk of where

31:14

they're keeping their money that the critics had

31:17

asked for. But I mean, the way

31:19

Tether works, you send

31:21

money in, they send you these Tether tokens,

31:24

and if you send the tokens back, they're

31:26

supposed to send you the money back. And

31:29

people you can tell from

31:32

looking at the blockchain people

31:35

during the crash, people did send

31:37

back in billions of dollars, billions of tokens,

31:39

like five or ten billion worth of tokens.

31:41

And if those people did not get their money, we would

31:44

have heard the complaint. Tether was able

31:46

to send back a lot

31:48

of money, Like they clearly had at least a lot of

31:50

money, and it kept growing to

31:52

where now it's seventy or eighty billion dollars

31:54

that they have. To the skeptics, they're

31:56

like, hey, just

31:59

because they had if they may have had five billion,

32:01

that doesn't mean that everything they're saying now is

32:03

accurate. The owners of Tether are like,

32:06

what more do you want from us? We redeemed like ten

32:08

billion dollars. But the real plot twist for Teather

32:11

came with interest rates. So

32:14

their business used

32:16

to be kind of a bad business. They were sitting

32:18

on all this money, but they couldn't

32:20

do anything with it.

32:21

Theoretically would be in the safest investments

32:23

sealing nothing right.

32:24

And that's where like there

32:27

were some questions early on that I think were legitimate.

32:29

Were they taking some risks with that to juice their

32:31

returns? Now they

32:34

can just put it in treasuries. It's a

32:36

small operation. And these guys,

32:38

if if their numbers now are accurate, they're

32:41

saying they are put buying treasuries and

32:43

they're earning like billions of dollars a year, like

32:45

they're one of the more If if this is all accurate,

32:48

Tether's one of the most profitable companies

32:50

in the world. Like they're making more money than

32:52

like Nike. It's and it's just like this

32:55

weird former plastic surgeon in

32:57

Italy, buddy from the importing

33:00

business. They are like the real winners

33:03

of crypto and I when I went down

33:05

to the Bahamas in

33:08

at the end when Sam bankman Fried's

33:10

company had collapsed. He was a big

33:12

user of tether, all these offshore casinos

33:14

were, and I thought maybe now he'd let me in on

33:16

the secret. I was like, so about

33:19

Tether you got, maybe now you can tell

33:21

me the big secret.

33:23

And he was like, no,

33:25

Well, don I think I'm gonna petition. Have my desk

33:28

moved back closer to Zeke? Can

33:30

you tell us what's next? What's next on the Zeke Fox

33:33

agenda?

33:34

Honestly, I've I only

33:37

I wrote this book now because I felt I'd

33:39

never felt like I'd found the right story. And I really

33:41

don't know how I'm gonna how I'm gonna match it.

33:43

He needs a vacation.

33:47

Well, Zeke Fox, author of

33:49

Number Go Up and our good friend

33:52

here at Bloomberg. We could go on for hours,

33:54

but I think I think that's gonna have to do with Zeke.

33:56

Thanks so much for your time. Really appreciate it. Thanks

33:59

Mike, Thanks.

34:05

What Goes Up. We'll be back next week.

34:07

Until then, you can find us on the Bloomberg Terminal,

34:10

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34:14

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34:16

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34:21

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34:24

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34:26

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34:31

is produced by Stacy Wong and our

34:33

head of podcasts is Sage Paulman. Thanks

34:35

so much for listening and we'll see you next week