When FTX investor Greg Kidd met Sam Bankman-Fried in San Francisco in October, all he saw was the kooky crypto wunderkind that investors had come to love.
“He played it smooth,” Kidd said. “There was no indication that there was a problem at all.”
Bankman-Fried was speaking at an investor summit put on by FTX seed investors Race Capital.
At the conference, Bankman-Fried spoke about his enthusiasm for governmental regulation and making the crypto ecosystem more mainstream, Kidd said.
But FTX’s recent collapse has left everybody questioning Bankman-Fried’s word.
Not only did the wunderkind allegedly use $10 billion in FTX customer funds to prop up his firm’s trading arm, but an additional $1 billion in customer funds is also missing. And the enthusiasm for regulation? He allegedly messaged a Vox reporter on Twitter this week: “F*ck regulators.”
“He had confidence but with a funny kind of humility too,” Kidd said. “The humility was really disarming. All I’ll say was I was totally fooled. We wanted to believe in Sam because he was a kooky, likable kind of guy. He seduced everybody.”
Kidd is no stranger to startup investing. He’s invested in over 250 fledging firms through his venture capital firm, Hard Yaka. Some might even say he has the Midas touch, as he was a seed investor in public companies like Twitter, Square and Coinbase.
Yet he says it’s pure luck that he didn’t lose millions in the FTX collapse, unlike other investors like Sequoia and Softbank, who lost hundreds of millions.
He only invested $100,000 in FTX, because he thought its valuation was too high and that he had “missed the party.” Kidd even moved to have a company he’s cofounder of regulated in the Bahamas, partially because FTX was located there.
The big question for Kidd now is, “What was going on in Bankman-Fried’s head?”
“Somebody starts with a little hole in their balance sheet, and they’re basically good guys, then they need to take more risk to cover up the hole and then the hole is bigger and bigger and before you know it you’re in Elizabeth Holmes territory and you’ve blown past Lehman [Brothers] and Bernie Madoff. And now you’re looking like the greatest Ponzi scheme in history,” he said. “You may not have intended to do that, but the road to hell is paved with good intentions.”
Bankman-Fried was contacted for comment.
Anna Tong can be reached at [email protected]