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Column: Silicon Valley VCs Wanted to Believe SBF's Lies
webfinance.yahoo.com·finance.yahoo.com/news/column-silicon-valley-vcs-wanted-1...
Tangentially relevant to AI safety as a case study in how motivated reasoning, weak oversight, and misaligned incentives can enable large-scale harm; the SBF/FTX saga intersects with the effective altruism and AI safety funding communities.
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Importance: 22/100opinion piececommentary
Summary
A Los Angeles Times column examining how top Silicon Valley venture capital firms like Sequoia Capital failed to perform adequate due diligence before investing hundreds of millions in FTX, enabling Sam Bankman-Fried's fraud. The piece critiques investor excuses post-conviction and explores the broader culture of motivated reasoning that allowed the scam to flourish.
Key Points
- •Sequoia Capital claimed it was 'deliberately misled' by SBF, despite being one of the most sophisticated investors in the US with $28.3B under management.
- •Public pension funds and major firms including BlackRock, Tiger Global, Lightspeed, and SoftBank also invested without adequate due diligence.
- •The column argues investors engaged in motivated reasoning, wanting to believe SBF's narrative rather than rigorously scrutinizing his claims.
- •SBF's conviction on seven fraud counts highlighted systemic failures in investor oversight within the crypto and VC ecosystem.
- •The episode raises questions about accountability structures and incentive misalignments in high-profile tech and crypto investments.
Cited by 1 page
| Page | Type | Quality |
|---|---|---|
| EA Epistemic Failures in the FTX Era | -- | 84.0 |
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Column: Silicon Valley VCs wanted to believe SBF's lies. Now they want you to believe their excuses
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Michael Hiltzik November 8, 2023 8 min read Crypto scammer Sam Bankman-Fried, on one of his numerous appearances in a Manhattan federal courthouse before his conviction on seven criminal counts Nov. 2. (ED JONES / AFP via Getty Images) Sequoia Capital wants you to know that it was "deliberately misled and lied to" by convicted cryptocurrency scam artist Sam Bankman-Fried during the discussions that led to its $213.5-million investment in Bankman-Fried's firm, FTX, last year.
That's an extraordinary admission, given that Sequoia is one of Silicon Valley's oldest and largest venture investing firms, with an estimated $28.3 billion in assets under management. Yet that's what Sequoia partner Alfred Lin, who was involved in advancing the FTX investment, asserted following Bankman-Fried's conviction on seven fraud counts Thursday.
"Today’s swift and unanimous verdict confirms what we already knew," Lin tweeted that day: "that SBF misled and deceived so many, from customers and employees to business partners and investors, including myself and Sequoia."
It's hard to understand how people who sell themselves as the most sophisticated financial investors in the United States could be so thoroughly fooled by a guy in cargo shorts.
Dennis Kelleher, Better Markets
It may be tempting to think that the Bankman-Fried verdict put the FTX saga to rest. But that would be a mistake. For one thing, Bankman-Fried won't be sentenced until March, and also may face yet another trial next year, on federal charges including bank fraud and bribery.
What's more important is examining how Bankman-Fried managed to gull the nation's ostensibly most sophisticated investors into bankrolling his firm — which, as testimony at his trial and discoveries by FTX's post-bankruptcy chief executive have shown, was built on quicksand.
Sequoia was not alone. Public pension funds in Alaska, Washington State and Ontario, Canada, had direct or indirect investments in FTX. So did respected money managers and venture investment firms such as BlackRock, Tiger Global Management, Lightspeed and Softbank.
There's scant evidence that any of them performed the due diligence — a focused inquiry into a prospective investmen
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