Last Week Tonight with John Oliver
Season 10 Episode 9
Aired on April 23, 2023
Main segment: 2021–2023 Cryptocurrency crash (Collapse of Terra-Luna, Bankruptcy of FTX, Bankruptcy of Celsius Network) (“Cryptocurrency II”)
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Our main story tonight concerns cryptocurrency. The only word that makes Elon Musk nut immediately. We first covered crypto five years ago when I was ten years younger, and since then, a lot has happened including, unfortunately, this video from just last year, promoting the general concept of trading crypto.
♪ Hello It’s me ♪
♪ Would you like to learn about ♪
♪ Exchanging cryptocurrency? ♪
♪ We’ll go over Everything ♪
♪ ‘Cause you got coins ♪
♪ From different blockchains ♪
♪ And want to do some trading ♪
I mean a lot to dislike about that. From her choosing to parody a song by one of our greatest singers while having a voice that I can only describe as a no-chair turn. To wearing those earrings which scream, “I do my best shopping at airports.” To the fact that her name is Randi Zuckerberg, and yes, she is Mark’s sister. Meaning that, incredibly, she is the cool one in that family.
(AUDIENCE LAUGHS)
And that wasn’t even the only song that she did. She also did this one, about how everything with crypto was gonna go great.
♪ We’re all gonna make it ♪
♪ Yeah! We’re all gonna make it ♪
♪ We’re all gonna make it Everyone ♪
Yep, “We’re all gonna make it in crypto” is a phrase that’s aged about as well as, “Welcome aboard the unsinkable Titanic.”
(LAUGHTER)
Those videos came out when crypto fever was still near its absolute peak. Stadiums were getting named after crypto companies, Matt Damon and Lebron James did commercials for crypto.com. And celebrities from Larry David to Tom and Gisele, pre-divorce but post-love, hyped a crypto exchange called FTX that was run by a 29 year-old supposed genius named Sam Bankman-Fried, AKA SBF. He was on the cover of Forbes, Fortune, with one calling him, “The next Warren Buffet.” And others calling him, “JPEG Morgan.” And Sequoia Capital, one of the biggest venture capital firms, had a 213 million-dollar investment in the company. But since then, to put it mildly, there has been an implosion. Which really broke through to public consciousness just before last Christmas.
CBS REPORTER: In a span of 24 hours, Sam Bankman-Fried was whisked by federal agents in the Bahamas to New York City, where he faced a judge and walked out of a federal courthouse after posting bail on a 250 million-dollar bond. Which prosecutors believe is one of the largest in US history. Right. SBF was arrested for defrauding his customers out of billions of dollars. And to be honest, it seems like the courtroom sketch artist may have been one of them because this is one of the rudest illustrations I’ve ever seen. The whole innocent until proven guilty thing clearly doesn’t apply to the side of the law with the coloring pencils.
(LAUGHTER)
SBF’s arrest was a big deal. And as his company imploded, some like CNBC’s Jim Cramer were furious. That guy is a clueless idiot. He’s a pathological liar. He’s a conman. We’re talking about nearly four years of getting away with financial murder, just because they could. Wow. Those are some harsh words there from the squawking parrot on every pirate’s shoulder. Especially as, just a year earlier, Cramer was saying this. Tonight, we’re going to educate ourselves with Sam Bankman-Fried. Well, Sam, I gotta tell you, it’s an honor to have you because you’re pretty much a visionary. Yeah. Not great, but also, not surprising. After all, this is the same guy that proclaimed that… …literally days before it folded. Told his viewers to buy Netflix right before it lost almost 70 percent in five months. And once, and this is true, said that Google, Facebook, and Twitter should hire Keven Spacey as a spokesperson. Jim Cramer is the only person who could look you in the eye, say, “You are going to die tomorrow,” and give you an immediate sense of calm knowing that you’re gonna live for another 50 years.
(LAUGHTER)
But FTX has been just one of the many dominoes that fell in the crypto world. Over the past two years, the market value… And there are small investors who got badly hurt by all of this. One in five Americans has invested in, traded, or used cryptocurrency. And you can find countless stories of people losing most of their life savings in the recent implosions. Underscoring that everyone in crypto was never actually going to make it. No matter how much Randi Zuckerberg scream-sang otherwise. So tonight, we thought we’d take a look at what’s been happening in the world of crypto by looking at three of the biggest collapses over the past year. Each of these companies was founded on the promise that they would replace some part of our financial system. There is Terra, a cryptocurrency, Celsius, a crypto bank, and FTX, a crypto trading platform. In theory, they were supposed to be our next dollar, our next Bank of America, and our next stock exchange. But in reality, they are fiascos. And before we start, we’re not gonna be discussing the merits or the technology of the blockchain. We did that five years ago, it’s still on the internet. You can go watch it there, or not. Not watching this show is always a strong option for you. But, just as a reminder, every single crypto coin is just something someone with a laptop made up. That is true for all of them. Like Dogecoin, Catcoin, Pandacoin, Furrycoin, CumRocket, ElonSperm, and MonkeyJizz. Those are all real by the way. We were going to come up with a fake one as a joke but then we saw MonkeyJizz and it felt like a hat on a hat.
(LAUGHTER)
To the extent any of these coins have value, it’s based on whether people believe they do. Which often comes down to their confidence in the person or group who made the coin. And that basic fact makes the crypto business very attractive to a certain type of person. One columnist who’s covered this intensively sums it up like this… And the story for all three companies that we’re gonna look at tonight is one of confidence gained, and then squandered. And let’s start with Terra. Which was a cryptocurrency launched in 2018 by a brash South Korean entrepreneur named Do Kwon. People had faith in Terra, in part because Kwon exuded confidence. Here he is on Twitch responding to a question about the volatility of companies in his space. I wonder how many of these companies you think are entering the space just because it’s hot and there’s a lot of funding versus the ones that will still be here like two to five years later. Oh, 95 percent they’re gonna die.
Yeah?
95 percent they’re gonna die. But, uh… yeah, there’s also entertainment in watching companies die too. I mean that’s pretty cocky, but I guess he is kinda right. There can be entertainment in watching a company die. Incidentally, I believe that’s the new slogan for Max. Hey, do you like HBO but want ads for the Property Brothers and also don’t like HBO? Max! There’s entertainment in watching a company die. Kwon’s company made something called a stable coin. The idea of which is that unlike something like bitcoin, it would always be worth a stable amount. So, one unit of Terra, or UST, would always equal one US dollar. And the way they guaranteed this was truly absurd. Because rather than simply collecting a dollar for every unit of Terra that it issued, which would make sense, it instead tied its value to a different coin, Luna, which it had also made up and said that it would turn Luna into Terra and Terra into Luna with a special algorithm. And if that sounds both complicated and stupid to you, it is. Here is how the company explained it. And just know, you don’t need to understand anything that’s happening here because it doesn’t make sense.
NARRATOR: Let’s imagine the entire Terra economy as a pool. The size of the pool is determined by the total supply of UST. If more people want UST, the tide rises. And if less people want UST, the tide falls. To bring back the water level to one dollar, we can expand the pool by introducing a new supply of UST. But where does new UST come from? At Terra, we’ve designed a machine that swaps one dollar worth of Luna to one UST. Okay. Imagine if someone came up to you when you’re at the ATM and said, “Give me that money and instead I’ll give you blorps. One blorp is always worth one dollar. And the reason I can guarantee that is I’ll sell as many fleezles as it takes to make that happen. And also, I make the fleezles. You would probably say no, wouldn’t you? Immediately. But if they then said, “I do it with a special algorithm,” suddenly you might think that they know something that you don’t. Well that’s basically what happened here. And to be fair, some people did see the problem with this. In 2018, an analyst looked at Terra’s business model and said…
(LAUGHTER)
And Kwon would shame anyone who dared question his model. After a financial writer raised questions about the vulnerabilities of crypto, Kwon tweeted… And for a while, his confidence worked. At its height, Luna’s total value… The Washington Nationals entered a partnership with them. Kwon’s followers called themselves, “Lunatics.” And one of his backers even got a Luna-themed tattoo. And that is a bold move from crypto Moby there. I would say that that is the worst tattoo I’ve ever seen but I have also seen this tattoo of R. Kelly with the words, “I don’t see nothing wrong.” And that’s around five percent worse. But we now know, according to the SEC, the algorithm didn’t work as they claimed. In fact, at one point in 2021, Terra nearly collapsed. And while Kwon told people that the crisis had been averted thanks to his algorithm, saying it was… It turns out it was only saved by the… Which was quietly purchasing large quantities of Terra to restore its value. But last May, a few big trades destabilized the price of Terra, prompting a panic in which both Terra and Luna holders started selling en masse. And since they weren’t backed by anything but good vibes, both coins value were trading at essentially zero and the implosion erased tens of billions of dollars of value. As for Kwon, he now faces charges in multiple countries and he actually went on the run for a bit. But before he was caught, he managed to find some emotional support on a crypto podcast. Here he is mid-thought getting surprised by an unexpected guest. You’re… like, you haven’t slept in a while, and, like, you feel almost, um… Holy shit, is that Martin Shkreli? Hey, Do. I just wanted to let you know jail’s not that bad.
(AUDIENCE GASPS)
It’s, um– It’s not the worst thing ever. You know, so don’t fret if that– I hope it doesn’t happen, but if it does happen, it’s not that bad. Good to know.
Wow.
(LAUGHTER) I don’t think there’s ever been a more cursed Zoom call. And I’m very much including that celebrity Imagine video. And quick side note, if you’re wondering if Jim Cramer ever saw Martin Shkreli’s scandal coming, you should know that Shkreli actually… So, another ace in the hole for the Crame-game. But it’s not just cryptocurrencies that can be built on sand. The same can happen with crypto banks, which are already a bit of a misnomer. Because unlike traditional banks, they are not regulated or indeed insured. But they are firms that will hold your crypto, pay you interest, and lend it out. And that brings us to our second company, Celsius. One of the biggest crypto banks, founded by this guy, Alex Mashinsky. Now, his whole sales pitch, as you can see from these cool T-shirts, was “banks are not your friends.” Which is clearly true, but he really doubled down on that message in ads like this.
Banks are not your friends, we all know that. And we decide to create a replacement for the banking system, right? Something that acts in your best interest, a place where you can actually have your money work for you, not just you work for your money. And basically, three years since we launched the product, we’ve paid a billion dollars back to the community.
Now, despite the fact that he sounds exactly like Tommy Wiseau in The Room, Mashinsky built… And one of the ways that he did this was by promising customers would get… …interest rates on their deposits. That, first, is the average of .06 percent then being offered by traditional banks. And he’d like to say that banks could actually pay those sorts of rates if they wanted to, adding… And hey, por qué no los dos? Two things can be true. Like how Frankie Muniz can be both 37 years old and 12 at the same time. Or how The Rock can be one of the highest paid actors in Hollywood despite never actually acting. Mashinsky went out of his way to build trust among customers, holding weekly livestreamed AMAs, sometimes featuring dumb stunts, like when he started one wearing a Mandalorian mask. And on these calls, he would brag about all the great things that his company was doing for people, while occasionally engaging in the single worst attempt at a dab I have ever seen. The beauty of what Celsius has managed to do is that we deliver yield, we pay it to the people who would never be able to do it themselves. We take it from the rich, and we beat the index. Okay? That’s like going to the Olympics and getting 50 medals in 50 different fields. Okay?
(LAUGHTER)
What the fuck was that?! A heads up dab? And to be honest, why a dab at all? It’s not 2015, and you’re not a guest on Ellen. Also, you’re 57 years old! That demonstrates a lack of judgment frankly terrifying in someone supposedly running a financial institution. And yet, Mashinsky insisted… Which was just flagrantly untrue. A court-appointed examiner late found that he was making incredibly risky loans. And was also using customer’s money to pay the high yields that he’d promised, which sure sounds like the textbook definition of a Ponzi scheme. Eventually, Celsius started minting its own coin to inflate its balance sheets. A coin that its own employees said was… One even said that the whole thing was very… And at one point, the company’s former finance chief said… And what an office that must have been to work in! Finding yourself wandering over to Cheryl’s desk, like, “Hey girl, great top. Uh, quick question. Are we, like, doing crimes?
(LAUGHTER)
‘Cause I’m getting major crime vibes in here. Also, have you seen our boss dab? It’s very weird!
(LAUGHTER)
When Celsius inevitably collapsed, people got hurt. Especially because in the fine print, the company’s… Meaning that when people tried to withdraw their money, they found out it legally wasn’t theirs anymore. And while Celsius and Mashinsky have not been criminally charged… And… All of which is enough to make you think that while banks are not your friends, this guy may actually be your enemy. So, we’ve got bullshit money and a bullshit bank, which brings us back to Sam Bankman-Fried and FTX. It was basically a whole bullshit trading platform. The pitch was that FTX was an exchange, where you could buy and sell cryptocurrencies, just like stocks. And its ease was emphasized in ads like this one with Steph Curry. The play, in hindsight, like a bit of a red flag.
NARRATOR: This is Steph Curry, the world’s leading expert on cryptocurrency. I’m not.
NARRATOR: Okay, quit messing around, man. Give me some tips on crypto. No.
NARRATOR: But you are an expert, right? No. I’m not an expert, and I don’t need to be. With FTX, I have everything I need to buy, sell, and trade crypto safely. Yeah, you don’t even have to understand it, just use it. Their pitch for a major money app was basically the same as the attitude that we all have towards semi-colons. You’re never 100 percent using one of those, are you? It’s a real “go with God” punctuation. Although, I will say, it kind of make sense that they’d get Steph Curry for that ad, considering that he’s already a spokesperson for Subway, a restaurant whose slogan is officially “Eat Fresh,” but spiritually, “Trust us, it’s tuna.”
(LAUGHTER)
And again, for a while, that pitch worked pretty well. FTX held a conference in the Bahamas less than a year ago that included… And appearances by… Tom Brady was even there in person too, making videos like this. What’s up guys, I’m here with my boy Sam from FTX. We’re at Crypto Bahamas Conference, we’re gonna start the day, we’re gonna do some TikToks for you guys. And, uh, it’s gonna be an amazing day, we’ll get started, we’ll do a, uh… get ready with me. Sam. Where you going, bro? Look, Sam. Sam. From one Ohio six to another, never stand that close to Tom Brady. It’s doing you no favors. There is a reason that I’ve never been photographed with Chris Hemsworth, no matter how much he begs for it. Now, the joke there was that Sam was a shy, self-effacing genius. And that’s the general vibe that he went for. It’s why he dressed like every day was laundry day, and combed his hair with a balloon.
(LAUGHTER)
Obviously, we now know that things came crashing down, but even after they did, SBF was still defensive about what he’d built.
GEORGE STEPHANOPOULOS: A lot of people look at you and see Bernie Madoff. Yeah. I mean, I don’t think that’s who I am at– at all, but I understand why they’re saying that. People lost money. When you look at the classic Bernie Madoff story, there was no real business there. The whole thing, as I understand it, I think, was just one big Ponzi scheme, right? FTX, that was a real business. Yeah, but was it, though? Because I understand that no one wants to admit that their business was a scam. It’s the same reason no parent wants to admit that their child sucks. Saying it out loud makes it real, doesn’t it? But the truth is, some kids do. Some kids are, just to put it nicely, not a fun hang. You still love them, of course. But do you like them? Exactly. But it is worth understanding just what SBF’s real business consisted of. Because it turns out, that in addition to FTX, he had a hedge fund called Alameda. And he also produced his own coin because of course he did, called FTT. And very basically, according to authorities, what he did was filled up his hedge fund’s books with the coin that he produced, using his exchange to inflate that coin’s price. And once his hedge fund had a giant stash of his own coin, he used that as collateral to take out several loans. Essentially, the feds say that he created fake money, inflated its price, and then borrowed real money against that. But wait, I’m not done. Because he was also taking money from actual FTX customers. The ones, remember, who are putting money into FTX because Steph Curry told them it was safe, and then loaning it back to his hedge fund. The whole thing was honestly pretty blatant. After everything collapsed, a new CEO came in to handle the bankruptcy. And as he told Congress, he was shocked at just how sloppy and poorly run everything was. This is really old-fashioned embezzlement. This is just taking money from customers, and using it for your own purpose. Not sophisticated at all. Literally, you know, there’s no recordkeeping whatsoever. They used QuickBooks, a multibillion-dollar company using QuickBooks.
SPEAKER: QuickBooks?
QuickBooks. It’s true. They used QuickBooks. And look, I’m no accountant. I mean, I should be. I look like my most formative childhood memories were in an H&R Block. I look like I fell into a vat of radioactive itemized receipts. I look like what appears if you say “Microsoft Excel” into the mirror three times. But I’m actually not an accountant. And yet, even I know that using QuickBooks for a company of that size is absurd. That man also revealed that FTX let thousands of uncashed deposit checks sit around like junk mail and approved millions of dollars of expense reports via emoji on Slack. And I’m dying to know which emoji they used. Because we all know emojis on Slack have very specific meanings. For instance, thumbs up means, “I’m done with this conversation.” This means, “I’m too lazy to type, thank you.” This means, “I’m dying inside, don’t talk to me.” This means, “Feeling cheeky, let’s goss.” And this one means, “Look at me, (IN ITALIAN ACCENT) I’m Italian.” But I’ve yet to discover which emoji means, “Go ahead. Spend millions of dollars of company funds.” But if I had to guess, I’d say it’s probably money barf. But it is no wonder that that new CEO has said… Which is really saying something, given…
(AUDIENCE GASPS)
And if you don’t remember how bad Enron was, google it. I can’t do everything for you. Suffice to say, it’s very bad. The throughline in all three companies I’ve talked about tonight is them confidently presenting a veneer of expertise, even as, beneath the surface, they were a complete shit show. And it kind of says something that, even as they imploded, all three of the men behind them were still trying to bluster their way out of it. That interview where SBF insisted his company was a “real business” came after it had declared Chapter 11. As for Do Kwon, he spent time pushing a new Terra 2.0 coin and was finally arrested last month after a lengthy pursuit, including, at one point, him tweeting… To which they responded that he was…
(AUDIENCE LAUGHS)
And as for Mashinsky, here is audio of him trying to buck up his team at an all-hands meeting, even as his company was crumbling around him. Okay, but that’s not the same thing, is it? Celsius was supposed to be good with money. If Delta crashed four billion planes and drinking Pepsi gave everyone infinity diarrhea, then yeah, people might lose trust in them, and for pretty fucking good reason. And the thing is, there are still companies out there making all the same claims that you’ve seen tonight. And I’m not saying that they are all scams. Maybe these three are the exceptions, although they would be joining all the other exceptions that we haven’t had time to talk about tonight, from bitconnect to Quadriga, to so, so many more. But the truth is, in a financial system where the only real currency is confidence, scammers are going to thrive. And I know that we usually like to point to a solution at the end of our stories. And that often means calling for more regulation. But I’m not sure that’s a good idea here. The danger is, regulation might give this sector more legitimacy. It’d make a risky investment look safe, when it is clearly not. And that, in turn, might entice banks to start getting more involved in crypto, giving the sector even more legitimacy and also exposing all of us to its volatility. It really says a lot that one of the leading advocates for the government to strongly regulate crypto was Sam Bankman-Fried. And look, I’m absolutely not saying that we should get rid of crypto entirely. It could eventually be useful. Maybe the third time that we talk about it, we’ll all be using a digital coin to buy everything. I doubt it, but I can’t predict the future. After all, I’m no Jim Cramer.
(LAUGHTER)
But we should recognize that right now, the main thing you can really do with crypto is gamble with more crypto. This is all still a casino. So if you do want to invest, do your own due diligence, never put in more than you can afford to lose, and if you ever see someone doing this, run.
