Sam Bankman-Fried's altruism failed

One of the main ways that Sam Bankman-Fried (also known as SBF) gained credibility was by finding a way to take the famous "greed is good" line from "Wall Street" and try to make it true.

Why it matters: SBF wasn't just the face of the crypto industry; he was also the standard-bearer of the effective altruism (EA) movement. That, too, has been damaged by his downfall.

How it works: As a recent glowing profile of him from one of his investors put it, SBF adopted a philosophy, EA, whereby "he was going to get filthy rich, for charity’s sake." (Annoyingly, the profile has now been taken down, but you can read it here or just ask me for the PDF.)

• By pledging to give away all his wealth and ostensibly abnegating any material luxuries, SBF created a world where he had no real fear of losing money.
• Or, as the same profile put it: "If the amount won multiplied by the probability of winning a bet is greater than the amount lost multiplied by the probability of losing a bet, then you go for it."

The catch: SBF seems to have been bad at actually giving his billions away, beyond a few relatively small political donations.

• His philanthropy, the FTX Future Fund, claims it has "committed over $160 million" in grants — but it's unclear how much of that was actually paid out.
• The fund's entire staff has now resigned.

Between the lines: SBF was a hedge-funder at heart — someone who turns money into more money. In his mind, the opportunity cost of giving away money today was enormous, since he could turn it into much more money tomorrow.

• When SBF did spend real money, on things like arena naming rights, SuperBowl ads, or speaking fees for former heads of state, it was aimed at generating growth for FTX. That helped to create a $32 billion valuation for his exchange — paper wealth that was effectively impossible to donate to good causes.
• Weirdly, SBF also seems to have invested hundreds of millions of dollars in external VC funds over which he had no control.

Be smart: If your purpose in making lots of money is to give it away, then it makes sense to find a job with a high disposable income.

• If giving away your money hurts your ability to make more money, that raises huge ethical and philosophical conflicts.

SBF did try to retain moral clarity in his dealings with investors and the public. But even that fell through when crisis hit.

What they're saying: "Right now, my #1 priority--by far--is doing right by users," SBF tweeted on Thursday, adding that he would "give anything I have" to make that happen.

• The tweets are consistent with SBF's earlier letter to shareholders in FTX, where he said that "Our first priority is to protect customers and the industry" and that it was "non-negotiable."

The catch: SBF's tweet on Thursday came only after an earlier tweet thread, on Monday, where he said that “FTX has enough to cover all client holdings. We don’t invest client assets (even in treasuries).”

• That tweet has been deleted, probably because it's simply not true. The WSJ has reported that FTX lent more than half of its customer funds to its sister company Alameda, and Reuters earlier reported that FTX had transferred at least $4 billion of its funds to Alameda.
• That would explain why FTX had to pause withdrawals on Tuesday morning — it simply didn't have client assets on hand.

The big picture: SBF's moral priorities don't actually matter here. With FTX in bankruptcy, customers will have to fight for recovery against all of the company's other creditors.

The bottom line: As SBF tweeted on Thursday, "I f*cked up, and should have done better."