Slave Compounds, Sam Bankman-Fried and Crypto’s Crooked Heart - with Zeke Faux
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It's April 2022 and thousands are gathered in the Caribbean city of Nassau for the inaugural Crypto Bahamas conference. A showy, neon-drenched eulogy to all things cryptocurrency. Hosted by Salt, an events firm led by Blink and You Missed It White House Com Director Anthony Scaramucci and FTX.

A ballooning crypto exchange whose CEO, Sam Bankman-Fried, is a mop-headed, Toyota Corolla-driving, slug genius whose Robin Hood aphorisms and membership of a movement called Effective Altruism has made him a darling of the Web3, blockchain, and even political realms.

Global names like Andrew Yang, Tony Blair, Gisele Bundchen, Tom Brady, everybody's favorite DJ Steve Aoki, and even former US President Bill Clinton are present at Crypto Bahamas. Trying to make sense of stable and shit coins same as everybody else, but not clueless enough to issue anything other than shining adulations of the tech, the country, understandably, and Bankman Freed, who most folks now know by his initials, SBF.

I'm convinced that we've got a lot of money, energy and talent behind crypto. And when you have something that's obviously serious, you want to do right by it in the regulatory space, says the sax playing cigar inserting our cans and Clinton lending this strange new world a whole other level of respectability.

That's despite fleets of crypto scammers, Asian slave armies and the increasing use of Bitcoin and other ledgers to wash and fund the activities of some of the world's scariest organized criminal groups. Money talks, especially in the case of Pampadex Politico's fiat currency.

Cracks will appear in FTX's organization within weeks of the mega show. By the following January, this January, Bahamas police arrest SBF after U.S. prosecutors filed criminal charges, including wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering. That's another way of saying FTX is a giant steaming pile of crap.

And one writer has been there throughout the whole thing, ready to track its and crypto's fall from grace. Welcome to the Underworld Podcast.

ZF

An investigative reporter for Bloomberg Businessweek named Zeke Fox, an author of the recently released Number Go Up, which is a wild ride into the heart of the crypto wave, including the Wizards, Wise Guys and Puka Shell necklace wearing bros who've made it into a multi-trillion dollar sector in just over a decade. And of course, Crypto Bahamas. What a guy will do to see C.R.I.O.K.A.

First off, we've got a great new bonus from Auckland this week, a drug trafficking tale winding from LA to Sydney to Tahiti. And I've got some cool stuff coming up for the show from Papua New Guinea, where I'm heading this week on assignment for Harper's Magazine. Danny's also working a couple of audio docos to release soon, and we are actually journalists, guys. And as ever, if you can't support the Patreon, please do get stuck right into the IG, the YouTube, the Twitter. It all helps us out a hell of an amount. It really does help.

I spent a large part of this week listening to the audio book of Number Go Up, so cheers to Zeke for doubling my weekly gym time. But it's a crazy, crazy good read. Wines from Miami to the Bahamas, El Salvador, Southeast Asia, where some of the worst crypto-related crimes are still going strong today. And you might remember our show on the scam compounds from a year or so back now.

At the centre of all of this, of course, sits SBF, who's currently awaiting sentencing for fraud and conspiracy convictions, and who Zeke actually met for a Businessweek feature around 18 months ago, just before the whole house of cards came tumbling down.

Less well-known, perhaps, is something called Tether, a so-called stable coin, which is kind of like the foundation for a huge amount of crypto transactions. We're going to get into the whole grubby thing today. So I know it's late there, Zeke. Thanks so much for joining us. This book is pretty insane. Thank you so much for having me on. I guess because you tee up the book with Sam Bankman-Fried...

You mentioned meeting him in the Bahamas at these kind of like slubby headquarters of FTX, which is his exchange. Um,

I mean, if you could draw a kind of cosmology of the crypto Milky Way, say, like, where is SBF and FTX? And then where is Tether as well? So at that time, it's February 2022, and FTX had just aired its big Super Bowl ad with Larry David, where...

Basically, they made the case that crypto was an invention as good as the wheel, the Walkman, the fork, and that if you doubted crypto, you were pretty much a loser who's going to miss out on the next big thing. And

Bankman Freed, at this point, he's 29. He's worth $20 billion. He's basically the biggest star in crypto. Now, he's not like the richest guy in crypto. That would be Binance's CZ, whose exchange was way, way bigger. But...

Bankman Freed was like a great hope for somebody in crypto who could go legit. He was testifying before Congress. He had just, like a week before the Super Bowl, he had testified before a Senate committee and they were just fawning all over him. I mean, Cory Booker was complimenting him on his fro. They're asking his advice about how to regulate crypto. And nobody's really talking about...

Hey, like, why is this guy in the Bahamas? I mean, in the answer, what she would tell you is that the stuff we do here would not be legal in the United States. Yeah. There's moments where you meet him where you say that it kind of... It's not really a mask slipping, is it? He just kind of comes out and pretty much blurts out the whole thing in sort of not-so-cryptic language. So...

I went to go meet him because I wanted to solve this mystery of Tether. And if SPF was like the most legit guy in crypto, Tether was like the least legit. And it's also massive. It's a stable coin. It's a coin that's always worth a dollar. And it's supposed to be backed by real dollars in the bank. And at that time, it had gotten to be bigger than $50 billion. So they're supposed to have $50 billion in the bank somewhere and

And I'm basically on a mission to figure out where that is and if it really exists. And Bankman Freed, as one of the biggest players in crypto, is one of the biggest users of Tether. Because you can kind of think of Tether as like casino chips and...

You can think of FTX and Binance and these other crypto exchanges like casinos. So instead of each having their own cashier, they send their gambler like, gamblers, you want to play here? Head over to the old Tether cashier, buy some Tethers, then you can bring them to whatever casino you want, move them around to different casinos, whatever. So I'm thinking Bankman Freed has got to know what's going on with Tether. But also...

I'm fascinated by this guy because when he actually seemed to be maybe living out something that I'd always kind of imagined, because I specialize in writing about people who made a lot of money in sketchy ways on wall street. And I've been doing it at Bloomberg for like more than a decade. I've met all sorts of guys who had made money,

fortunes on payday loans penny stock schemes online ad scams and i'd sometimes thought a lot of these guys you know they get their 10 million their 100 million and they seem kind of bored and unhappy and i'd even propose to some of them i'd said maybe you would get some more fulfillment for your life if you gave that money to charity like that could be kind of cool

And nobody likes this idea. Nobody took me up on it. And then I meet this guy, Sam Bankman Freed, and he's like, hey, listen, when I was a teenager, I was a vegan, was an animal rights activist. Then I met this philosopher who said, that's not the best use of your time. You should just get rich and then give the money to charity. We'll hire thousands of activists to hand out pamphlets with the money that you'll make.

And teenage Sam was like, that sounds cool. And then here he was in front of me, less than a decade later, running what appeared to me to be like a giant crypto casino where people are going to probably lose money. And he's doing it for charity, he says. He seems sort of like he's following this Robin Hood plan that I had imagined. So...

I was really fascinated by him. I wanted to pump him for info about Tether, but I also was curious, will he actually follow through with this plan, or will the pursuit of ever more wealth corrupt him along the way? So I was down in the Bahamas with these two, trying to investigate these two things, and sadly, not really trying to investigate the thing that I should have been trying to investigate, which was...

Is this curly haired guy sitting right next to me running the biggest financial scam of all time? This is the, this is the sort of effective altruism, isn't it? They're kind of like get mega rich and make more of a difference in the world that somehow hasn't saved the world from any of its major ill so far, which you would expect it to have done if people were following it, I guess.

Well, I find the idea kind of appealing. If you start sort of small, they'll say, hey, you could probably give some more to charity, right? Your life's pretty good. Let's say you gave away 10% of your income. I mean, you'd make some sacrifices, but you could handle that, right? And that could make a big difference for someone where...

that money would go further. Somebody who might be hungry right now. And it's like, it's hard to argue with that. And then, but these effective altruists take that argument to crazy extremes. And Sam became like the face of this movement. And he took it to the absolute, he pushed this to the limit. And it actually gave him a, a,

crazy tolerance for risk. Because, and we talked about this, he would say, I don't think that my life matters more than someone else's. If my life is a little worse, but that could make several other people's lives better, I should make that choice. And if you asked him, hey, I...

So he would say, like, I don't really care if I end up broke. Most CEOs really want to hold on to that, like, last 10 million so they can have their yacht and their fancy house. He's like, I'm going to double down every single time because all I care about is maximizing the expected value of my earnings and earning the most to give away. And I don't really care if there's a risk that I end up destitute.

If you had asked him, hey, we're going to flip a coin. Heads, you're going to become a trillionaire and you can give it all to charity and save the world from the evil robots. That was one of his goals. Tails, you're broke and you're going to be in prison for the rest of your life.

he would have said, like, let's flip that coin. We got to flip it because the heads is so good for the world and tails is kind of bad for me, but negligible impact on the world. It's funny because you mentioned one of the kind of next things that you get into in the book is you go to this like huge conference and

in Miami, like the biggest sort of collection of crypto. I'm going to say diplomatically, maybe dickheads. They sound like the most awful collection of people. I don't know. But like you get like mayors of these cities and like heads of government and people just like desperate to get on board with the crypto riches that are flooding in. And it's a similar kind of message, right? It's like,

I'm sure they don't understand what the hell this thing is, but it's like we can divert money to build bridges and solve gang crime or what have you. It's a similar message to that. I mean...

Bankman Freed and his people, it's now come out at his trial, some of their internal communications, they were at least contemplating paying off the entire national debt of the Bahamas. Just as a thank you to the government for passing friendly crypto regulations so that they could move there. I think for a couple years, it was as if

A spell had been cast and the normal rules of the financial world totally didn't apply. And these people I met at this conference in Miami, I heard some of the dumbest business plans that I've ever heard. And I met some of the sketchiest people that I've met in a career specializing in finding... But...

At that time, these people were amassing billions of real dollars with these plans because all these random cryptocurrencies were going up and up and up and up. And I remember around that time, I went out for drinks with Danny. And we were talking about... He was telling me about NBA Top Shot.

which is like a kind of a collectible trading card. It was like you could buy NBA highlight videos on the blockchain and

And people were making huge money flipping these. There was a guy in the Wall Street Journal, there was an article about the top, top shot trader, and he had made like $20 million. And Danny was telling me, the website barely works. It's always crashing. It's hard to even tell, it's hard to watch your highlight videos once you buy them. But yet, there was big money to be had in flipping these. And

You had really legit companies like the NBA just saying...

Who cares if it really works? This is hot. We don't want to miss out. There's FOMO everywhere. Danny's just bummed that he didn't get his Corey Leonard top shot video as well. I think he did pretty well on that. You've got to ask him. Damn, I will. The whole world has gone mad being put under a spell by this

Well, Ponzi scheme? I don't know. It's just crazy. Yeah, I mean, I couldn't believe it. I was skeptical of crypto going in. And I still, though, I sort of thought, kind of like today, if you're not paying that much attention to crypto, you just see some headlines like BlackRock's going to do an ETF or Visa is testing Solana payments. And you sort of think,

Okay, I think crypto is kind of silly, but it seems like legit things are happening. Maybe there's something there. Do I really want to miss out on the next big thing? And that's how I felt a couple of years ago. The headlines were different, but the story was kind of the same. But then I get to this conference, and instead of seeing people with plans that made sense, pitches about...

cutting out middlemen in finance or making payments easier around the world, you got these speeches from people who are just insane for Bitcoin, who just love Bitcoin with their whole heart and argued that it was going to save the world. And I mean, this is actually a chapter of the book that my mom's an English teacher and she was reading the book and she was like,

Listen, I know every paragraph of this conference in Miami is gold. You've got to cut, like, half of this. And it was very hard, but I did. And even now, I'm like, I want to tell you a story from the conference, and I'm just like, what do I choose? Just, like, everything that people said was so stupid and funny. But...

I think that the craziest part for me in the moment was at the end of the day, there was big problems with the conference, with the food. Couldn't get any food. It was very hot. I don't like the smell of cologne. The whole city reeks. Big problem with Miami. And so I'm in already sort of like a bad mood. And this Bitcoin bro takes the stage at the end. And he's...

Really, like, laying it on thick. He's sort of acting like a frat bro, um...

He's pacing the stage. He's got his hoodie up. He's got a trucker hat. He's cursing a lot. He's talking about going surfing in El Salvador. It's got something to do with Bitcoin, but I can't quite follow. He explains that Bitcoin is going to save El Salvador. Then he hits play on this video. It's the president of El Salvador. The president is like,

Bitcoin will now be our official money in our country. And it's real. It's not like some sort of trick. And then the kids comes back on stage and he's crying. And he's like, ah, this is like one small step for El Salvador, one giant leap for mankind. And then he starts yelling,

I will fucking die on this fucking hill. And he's like bawling. And then I look around, I'm just like, what is going on? And instead of laughing, like I see other people in the audience who are also crying because they're so moved by El Salvador adopting Bitcoin. Um, and yeah,

Spoiler alert for... I went back to the conference the next year and I had a meeting with the crying guy and I asked him... I wanted to ask him how things were going in El Salvador with the experiment. Natural, not a tough question. And I said...

So how's it going in El Salvador? That was a big announcement last year. He's like, oh, I don't like to I don't want to talk about that. And then I said, he's like, bro, I don't want to talk about that. Then I'm like, well, when was the last time you were in El Salvador? Did you notice anything? He's like, bro, I don't remember. And I'm like, you don't remember when you last traveled to El Salvador?

And he was just like, no. Can we move on? But that was because this experiment was a disaster. People in El Salvador hate Bitcoin. Yeah. That's our good friend Naib Bukele, right? He's like a stable. He's a store of this manner because of the anti-gang drives. It's all tied in, right? This like pivot to Bitcoin and the kind of like autocracy. And it's just like a crazy situation. Yeah.

I don't really... I'm still kind of confused what's in it for him with Bitcoin. It kind of made him popular with the crowd of dickheads that you mentioned. But it...

He spent quite a lot of money on this Bitcoin initiative, like hundreds of millions of dollars, and it totally backfired. He's actually... Bukele, his authoritarian policies are popular, according to real independent polls, but his Bitcoin policy, people hate it. And it hasn't... It's brought in some Western investors, but I don't think...

Clearly nothing commensurate with the size of his spending on Bitcoin. But he's still sticking with it. I follow him on social media, and it's seemingly like anyone who has anything to do with Bitcoin who visits the country can get an audience with the president. I saw recently a woman who sells...

Like Bitcoin stuffed animals was down there. Gave one to the president. Oh my God. That's so embarrassing. I mean, this is kind of one because I've done a bunch of reporting on crypto as well. And I think I share a lot of your opinions on the whole thing. But I mean, I guess one of the biggest red flags is that when I've been reporting on kind of blockchain web three related companies is that,

There's some talk of this kind of this sort of like restorative or like kind of democratizing stuff about, you know, saving the world, getting around fiat currency. You mentioned that that conference, I think there's like a stack of dumped Venezuelan currency. It's like God knows how many stories on this is going to save people in Iran. This is going to save people in Uganda or, you know, and it and it always ends up being.

selling pictures of apes or like NBA shots to get a few bucks. And, and it, and it, like you mentioned also going to the Bahamas where SBF is talking as well. He's actually getting interviewed by Michael Lewis of all people who wrote a book that came out recently. I think got, uh, well, there was a wide story that was just like brilliant saying that your, your book was way better account of everything. But, um,

You know, it's basically an elitist game, right? It seems like it's become a sort of play thing at the top end for kind of celebrities and sports stars and politicians and whatnot. A lot of the ideas that crypto people put forward, like to give them some credit, I know they sound good. And I know there's smart people who are in this space who...

may even have good intentions. But I think you have to judge crypto based on what it's accomplished so far. And yeah, like I think what you've seen is kind of a zero sum game where the way to get ahead is to get in, be friends, either create the coin yourself or be friends with the guy who created the coin and get in really early at a discount. And by the time you,

Danny and I are talking about NBA Topshop at a bar. I mean, look, there's some chance we're going to get lucky, but we are basically the suckers who are going to provide what they call the exit liquidity for the insiders who are going to dump their overpriced highlight videos on us just when we think we're going to get this big score. And when it comes to...

Bitcoin, I would have a lot of these conversations with Bitcoiners. Some of them, I think these guys are very sincere about how much they love Bitcoin and how great they think it is. But I would say, let's say your vision of the world comes true. Um,

won't we just have like a new because they're all very anti-bank anti-billionaire anti-establishment but i would say won't we just have a new set of oligarchs maybe like like the the winklevoss twins are they gonna be like our kings we'll all just have to you know beg them for uh sats that's what bitcoin people call like a fraction of a bitcoin um

There's no way it can make us all rich. That was sort of one of the pitch at the Bitcoin conference would be like, just get in now. We're all going to be rich. That's like the crypto people like to say, we're all going to make it. Like Wagme, that was a big meme. And it's like, we can't all make it. It's actually not possible. It's quite prosperity gospel kind of stuff, right? It's like similar. Yeah.

Yeah. Yeah. It's, it's kind of crazy. I mean, let's, let's turn to turn to tether then, because this is, you know, this is kind of the, well, it tethers a lot of the story together in your book and it plays a kind of pivotal role in holding the crypto world together, I guess, in some ways. And, and you mentioned, you mentioned before that it's kind of this $50 billion thing and it's tied to a U S dollar thing.

And its founders were saying that it was kind of tied to secure investments, right? But you were not really finding any evidence of that. How did you start to report that and kind of tell me about some of the key characters involved in that out there as well? So if you, in the regular financial world,

If you write about a company, like I was just reading an expose that somebody else wrote of a

startup that claimed to be doing big business in Nigeria. And they basically found, hey, the CEO, he's got this sketchy past, and it doesn't look like their factory is actually just a rendering, that image is fake. Basically, they point out these red flags. And that is often enough to...

change investors' minds about the company. Because investing is based on confidence. With Tether, just in a few minutes of Googling, I turned up enough red flags that I certainly would have had some doubts about this company. Meaning crypto, it's like the central bank of crypto. It's clearly really important in crypto. But the CEO...

is so rarely seen that people online speculated that he was not a real person and did not exist. Like, it's just a stock photo. Not true, but it was not a fringe view. And I'm told quickly that by people like Sam Bankman-Fried, they say, oh, well, if you want to do business at Tether, the real guy in charge is a CFO. His name is Giancarlo De Vicini, and

He's Italian from Milan and early in his career, he was a plastic surgeon and you Google him. You find this photo of him with half his face shaved, where he's looking in a mirror and he's talking about how he quit plastic surgery. And he says, he just realized his whole work was just a scam. And then, uh, from there, uh, he got into the import export or the import, uh,

business. He was importing electronics from China and appeared to be operating on the fringes there because he got sued for counterfeiting Microsoft products. Um...

So then his business burned in a, in a fire, his factory burned in a fire. Oh, I mean on the web, it didn't take that much research to find that like on its website, he was portrayed as like this really, really successful entrepreneur. But in fact, like Italian corporate records showed that many of his companies were reporting losses and like his factory had burned in a, in a big fire. So like,

This is the guy that's behind one of the biggest companies in crypto. They won't say where the company is exactly. They had implied it was regulated by the British Virgin Islands, but I shot an email to the regulator and he said, no, what are you talking about? So, and I

When I started looking into it, Tether had already been sued for fraud by the New York Attorney General. And in that lawsuit, they had revealed serious misconduct where Tether had misrepresented the nature of its reserves. So you've got this company that's saying, oh yeah, we've definitely got $50 billion in the bank, but...

We're not going to say where. And there's pretty good evidence we've lied about this stuff in the past. And our resumes are really weird. Trust me, bro. Yeah. And they're not even going to get on the phone to say, trust me, bro. They're just like, you know, these sort of mysterious figures. And this is enough that like in the traditional financial world,

It's hard to imagine that people would trust them with billions of dollars. It's kind of a pump and dump. It sounds like a pump and dump, right? This whole thing is just a storefront. Yeah, I mean, they're not even investing the money to create the appearance of legitimacy that one would expect. And I start looking into it, and I don't really find anything reassuring. For example, at this Miami conference...

One of the shadiest guys I met with, Alex Mashinsky of Celsius, now facing serious criminal charges for running a big fraud. At the time, one of the most legit guys in crypto, but also really unsurprising that happened based on my first impression. But anyway, he told me pretty early on, he's like, oh yeah, Tether, great guys, great

I give them Bitcoins and they loan me tethers. And I've borrowed more than a billion tethers from them.

And I pay 6% interest. So I'm thinking, wait, I thought Tether was just backed by dollars in the bank. Now you're making loans to one of these weirdos in Miami at 6% interest, backed by Bitcoin, which is really volatile. That seems riskier than a bank loan. Promised. Yeah. And...

I also find evidence that Tether, as I start investigating, I find records that show that Tether has invested billions of dollars in short-term loans to Chinese companies. And basically, the situation at that point was that interest rates were zero. So even though Tether had amassed $50 billion, which sounds great as a business model, they...

Didn't have an easy way to earn money with that pile. And so they, in order to earn profits, it's tempting to put their reserves at risk and to invest in weird stuff, which they're apparently doing like this loan to Celsius or the Chinese commercial paper. So as I'm learning about their investments, I can't quite get to the bottom of like, do they have the whole 50 billion?

Where are they keeping it? But I find signs that it's maybe a bit riskier than I had imagined. And plus, as I get to know the people behind Tether more, they only seem more mysterious. But yet, Tether, as I'm looking into it, Tether just grows and grows.

Yeah, the number go up. Yeah, it's just crazy. And I mean, people should definitely buy your book because there's so much more than we're going to talk about in the book as well. There's so many crazy stories and individuals that are involved in this. I want to kind of move on to possibly one of the darkest stories.

if not the darkest side of the kind of crypto world, which is something called pig butchering, which some people listening might know what that is. I think we last spoke, what was it at the start of the year? I think you were just heading out to Southeast Asia to report some of this stuff.

and you went on a pretty wild ride around some of the seedier corners of Cambodia looking for scam compounds that are run by various shady organizations. I mean, they're running human trafficking things. But you kind of dive into the story when you're out at a bar and somebody called Vicky Ho gets in touch with you

Um, and I'm, I'm just going to read what her opening, well, one of our opening gambits is cause it's, I don't know if people would be, uh, snagged by this, but she says, I like to pursue romantic things like a healthy body and the surprise and preciousness of love, which I mean, that's nicer than most people's opening gambits on Tinder. So it seems, it seems pretty legit, but you kind of string her along, um, and find out that she is, um,

maybe a Shia or a He, but they're working at one of these scam compounds. Tell me sort of what you went to the region thinking you'd see and kind of what you saw, because it sounds like you basically landed and it all just went off. Yes. So we've talked mostly about like silliness. And I, but as I learned more about crypto, I realized that,

It is having a big impact in the real world. It's not the one that the crypto guys are promoting to me. And the scam compounds are definitely the most evil part of that. And I had been reading up about these scam compounds, like huge office towers filled with thousands of people forced to...

send spam text messages around the clock and to run, hopefully lure people in richer countries into kind of fake friendships and then lure them to, uh,

So Vicky, like all of them, eventually starts dropping hints like, oh, I have a lot of leisure time. Look at my Ferrari. My uncle gives me trading tips. Oh, look, he just gave me another good one. And after a few days, she finally let me in on her secret and had me download a trading app. And I had been... Because the part of this that I wanted to investigate was that

I had heard that a lot of these scams involve Tether. And that, I mean, you could imagine them using any cryptocurrency, but what I'd heard is that they overwhelmingly preferred to use Tether, which I was, and I was trying to investigate Tether's continued appeal. And one of the theories I'd heard was like,

It's great for criminals. Criminals love it. And they... So this is why I'm playing along with Vicky to try and see, will she ask me to use Tether? And sure enough, she did. She asked me to zap her over 100 Tethers to her fake trading app. And though I had hoped to figure out exactly where she was, once I sent her the money and told her, I was an investigative reporter, asked her...

where she was working, and if she was being held under bad conditions, she disappeared. But yeah, I went to Cambodia and linked up with two reporters, star reporters who had been really early on working on exposing this problem for a local news organization called Voice of Democracy. Mekdara and Danielle Keaton Olson. And legitimately, these two were...

were on it from the start and had written big exposés of different scam compounds around the country. And if they were in the U.S., I think they would have won journalism prizes, but their reward in Cambodia was literally the president closed their newspaper. He didn't say it was because of the

The scam compounds, but it'd become like a national embarrassment by the time I got there. The scale of this problem is huge. The UN has recently put out a report estimating that 200,000 people are held in these scam compounds. It's crazy. To work on gambling and crypto scams. So I'm looking into...

I want to look into the crypto angle. I'm not really sure what I'm going to find out because I'm not thinking that I'm going to interview the owners of the scam compounds or I don't speak the language or the languages in the region. I do meet up with some people who escape from the compounds by paying ransoms and hear a little bit about how they work that way. But

I'm taking the bus from Ho Chi Minh City to Phnom Penh in Cambodia. And I cross the border and I get out in this dusty casino town. And I'd seen videos of workers escaping from one of these casinos, chased by...

the security guards beaten with batons. And I'd seen investigative reports that, that show pretty convincingly that right here was a site of like some of the biggest, uh, scam compounds and right in the parking lot, like next to where I, the sites that the workers had escaped in the video, there was like this little booth advertising. We will trade, uh,

tether for dollars and i have the tether logo on it and i'm pretty sure that's the first place in the whole world outside of crypto conferences that i had seen the tether logo and i just think to myself like this doesn't prove anything but this is kind of maybe this is a sign that that uh that this is what tether is used for and then with um

Danielle and Dara take me to Chinatown in Sihanoukville. And this is the most notorious compound. It's this huge complex that was built around a casino that hasn't been completed. So Sihanoukville was like this casino town on the west coast of Cambodia. And it sprung up in like the last...

five, 10 years with all this Chinese investment. And the investment was based around, um, this kind of loophole, um, that they could offer online gambling to people in China over live stream. And this town was trans. It was kind of like a sleepy, uh, beach town that was transformed by this huge amount of investment. There were like hundreds of casinos were built, uh,

And then there was a crackdown on the loophole and COVID hit and the rug was pulled out from all this development. So you go there now and there's literally hundreds of, of unfinished skyscrapers, um, wherever you look. And so Chinatown is sort of one of these unfinished complexes. And there's about, I'm going to say like 30 office towers down this Boulevard, um,

on the outskirts of town, and each of them had held these scam outfits. And some people had estimated there may be like 6,000 people had been held in Chinatown, and workers would try and escape. They'd jump to try and escape.

The Raw was very good at finding social media of people who'd been trapped inside, showing videos of people getting tortured, forced to scam, trying to escape. And just the stuff you could see on the outside was incredibly spooky. Like, stores. So, from the street, you could see... All the stores on the ground floor...

had signs in Chinese rather than local language, Kumai, because the people in this area who had the liberty to go buy stuff were the bosses who were Chinese. And the stores were divided inside by bars. So if you came in from the street...

to buy food you could not pass through to the courtyard where on the inside where the workers would come so there was like people who were trapped in the compound could only go into the stores from the back and they could not pass through and get out to the street and I could see that a lot of these towers had were built with balconies

But then these balconies had had bars welded onto them, turning them into cages. And by the time I got there with Danielle and Dara, it was a few months after a big raid. This was like the most prominent of the compounds. It attracted a lot of attention. So they made a big show of cracking down on it. And we had thought...

We're curious to see what had happened. What we saw was that actually it appeared like activity had restarted. And judging by the laundry hanging on the balconies, there were workers, they're filling back up with workers. And most surprisingly, the

There was like a hotel in... I'd spoken to this one guy who had escaped from here, who'd been one of my best informants about what went on at Chinatown. There was this hotel with kind of a gilded front, like a very nice looking hotel, weirdly surrounded by all these semi-abandoned dingy scam towers. My source had said this was a place where the bosses would go and...

sleep with prostitutes. Um, but it's this hotel that's like totally deserted in the middle of this really sketchy area, but it's on booking.com and you can get a room there for a hundred dollars. Like it's, it's, um, and so, um, I decided to check it out and I do that. I probably wouldn't see that much because, um,

Most people don't speak English. I went in and in the lobby, like an eight foot tall golden pineapple, which was odd. Yeah, a little bit. I go up these marble stairs to the restaurant and it's like a giant banquet hall that could have a wedding there. But there's very few people there.

eating there and one of the they appear kind of confused that i'm even there and don't seem to know what to charge me i'm just i'm sort of just waved in and it's kind of like a buffet and it seems like there's like a bunch of uh

A couple buff dudes are eating there and watching really loud TikTok videos while these other guys who are their minions come up and talk to them. They're being handed cash. There's a fridge with beer. You can just go take the beer. There's also a buffet with traditional Chinese food. There's a chef who'll make you whatever you want. I'm just sitting there. I'm like, I really wish I knew what was going on. This seems like...

Who knows what these guys are up to? One of the servers does speak English and starts talking to me. And I said to her, what's with this hotel in the middle of... What's with these weird towers around here? So I'd seen workers passing through this gate. It seemed heavily guarded. It was very odd. And I'm asking the server about this, and I'm like...

why is nobody at this hotel? Why is it so heavily guarded? And she's like, well, don't you know, this is, this is Chinatown. And I'm like, no, I don't know. Please inform me about Chinatown. And she says, um, well, like the, the people that work here, they can't leave. And wow. Okay. I make like a very, um, bad face, I think, because then she says, oh, don't worry. Um,

The staff of the hotel, we have our freedom. I'm just like, oh no, this is... Look, I've talked to people who've suffered horrible things in this compound, so I knew about... I already knew that terrible things went on here, but then just being there and seeing that, like, no, this isn't some sort of

conspiracy theory this is real um it was truly it's truly shocking and right at the entrance to chinatown there was a shuttered currency exchange just like that other one i'd seen the advertised on its wall we'll trade u.s dollars for your tethers uh right here um

It's just all out in the open. No one really cares about hiding it. I think you mentioned that

You mentioned that a lot of the kind of like political grandees are either in on it or profiting from it in some way. So there's very little kind of political movement against it. And you also mentioned about Hun Sen, the leader of Cambodia. He's had a pretty crazy crackdown on the freedom of press in the last couple of years as well. I think he handed over the reins of power to his son. So kind of like a Juche thing going on there.

Yeah, I mean, because obviously my question for Daraa and Danielle was, like, shouldn't we do something about this? Like, is there someone that we can tell? And they said, like, the police don't care, and that when they do raid these places, they...

will often arrest the workers on immigration violations and that the true bosses do not get in trouble. But it seems like the situation, it's hard to know from afar, it seems like the situation has been changing a bit lately. There's been a number of arrests of Chinese criminals who run these places. It appears like China no longer tolerates this. The government even allowed the release of a

movie called No More Bets that dramatized this idea of people being tricked into going to take jobs as scam compounds. And it was like the number one movie in China. There's actually, there've been a few movies about this. So it's,

clear that they're trying to spread the word about that scam compounds are bad and that this won't be tolerated anymore. But the biggest compounds now are in Myanmar where they're beyond the reach of law enforcement. Right. Something I know a bit better about that country than down in Cambodia and how...

Yeah, like massive drug cartels and illegal gambling operations. Just able to go completely under the radar, guarded by one of the billion different rebel groups that's fighting for land in that country. Or just sheltered by the government, right? Recent military coup and all kinds of corruption going on there.

Yes, and I haven't been able to make sense of these reports yet, but there's reports now that some of the scam compounds that have been sheltered by the government are now under attack by rebel groups. And some of the scam compounds are dispersing to other locations in Myanmar or other places around the region. And now...

If you are someone who's into crypto and you're listening to this, you are probably thinking, what does this really have to do with crypto? Like, why are we talking about this? This is like clearly terrible, but it's not crypto's fault. And this is something I thought about a lot. And what I found was that, look, these kinds of scams...

They certainly did exist before. We can remember the Nigerian Prince email scam, which is kind of similar. But in the past, in order to receive the money from the victim, the bad guys needed to have money mules in the U.S. who could open bank accounts in their name. And that opened them up to...

risk. Even if you get some sort of patsy to accept the money, that person might know who you are. They could get arrested and that's a clue to go off of. If you're making people send international wire transfers, that's going to raise all kinds of red flags at the bank too. With Tether, I was able to go on a crypto exchange, easily acquire...

the tether I wanted to send to my scammer, Vicky Ho, without raising any red flags. And once I send them to her, she just has to give me her 32 random character address. I zap them over. I've instantly sent money from the U.S. to likely like a Chinese gangster in Cambodia. There's no refunds. And were I to give the police...

Vicky's address, they would not be able to glean any information from that. Even Tether, the company, does not collect Vicky's name or address. And I spoke to a Taiwanese human trafficking investigator, a police officer from Taiwan, and he said what you would expect. He was like,

yes, this is making my job a lot harder. When the criminals used banks, we would get different clues. Now they're using Tether, and it's much harder to track. That's, in fact, why they're using it. He said that some of the gangs, the Taiwanese gangs, would even buy and sell the workers, the trafficked workers for Tether. And so there's no...

allegation that tether the company has any relationship with these criminals but they've created this system that makes crime easier and is making it possible for this to be happen on like a huge scale people are sending billions of dollars and there are people are losing billions of dollars to these big butchering scams and that's why these huge compounds are set up to run them and

I think that crypto has supercharged this. These types of scams are kind of age-old, but they wouldn't be possible on this scale without this semi-anonymous way to instantly move money around the world. And I found that... I think if you create a startup, it's sort of on you to know how your company is impacting the world. And if that means that...

If your product is really popular with gangsters who are doing human trafficking and running scams, then maybe you should consider whether there's something you can do about that. But I found it again and again in crypto that the people who created the products were not putting any thought into what the real impact was. Another one that I looked into was

Axie Infinity, this really popular game that became a national craze in the Philippines. People were quitting their jobs just to play this game all day. Naturally collapsed like NBA Top Shot. Real Filipino people lost their livelihood and they did not get any sorry from the creators of this unsustainable bubble. Yeah.

That was a Vietnamese company as well, right? Axie Infancy? Yes. Sky Mavis, the company behind Axie, based in Vietnam, one of the founders of Vietnamese, and then there were a couple Westerners who were also founders. And amazingly, this was one of the... There's sometimes in crypto where I would just be like,

I can't believe this is real. And this was one of them. Axie Infinity got hacked for $600 million. That was not the cause of the collapse. It was just sort of like adding insult to injury. So it was like a Pokemon-ish game that got tons of people in the Philippines playing. And the hackers...

or North Korean, and the US government authorities have said that the stolen money from the Pokemon game is being used to fund Kim Jong-un's nuclear weapons program. I know that's kind of not funny when you think about it, but it is funny as well. Yes. Like Tether, I couldn't get over this when I started looking into it.

Similarly, the top, top officials in the US government, like the Treasury Secretary, they're having meetings about Tether. Is this a threat to the financial system? Meanwhile, the co-founder of Tether was a child actor from the Mighty Ducks who'd had a big business buying and selling swords and EverQuest and World of Warcraft. Oh my god.

I don't know. It was, um, it sometimes, even now, it's sort of, sometimes it feels like a dream. It's like, did this all like really happen? But I feel lucky that I was there for it. Um, for sure. Just to meet all these bizarre people.

Yeah. I mean, it is just some of the scenes and things that you rock up to in this book are pretty unbelievable. It's kind of like these people who are

Just stereotypes. I mean, just like hyper stereotypes of various people in the tech industry and in finance and various other places. Since you published a book, what kind of feedback have you had from people in crypto? I imagine you've got plenty of love slash hate mail in the intervening time. It's actually been very surprising. And

I was expecting more hate from the crypto people. And I even thought that this might help market the book, like if they were talking about it. But I've gotten almost no hate. And actually some really nice notes from crypto people. One person said,

told me that they hoped I stayed in crypto because crypto needed someone like me to make fun of them. And I actually just got a note from a blockchain developer in the Middle East and he said...

that my book is a nuanced description of what happened in the crypto space. And he asked for my crypto address so that he could send me money, which I cannot accept. I can't accept any donations or anything like that. So I did not give it to him, but I appreciated the note. And...

I think the thing is, a lot of people in crypto are smart. They can see that the last couple of years were a total disaster. And even if they are hopeful about the future of their industry, it's still kind of they can see that what happened recently was absolutely crazy, which is that all the coins pretty much crashed.

Most of the biggest companies in crypto were revealed to be frauds. If you're in crypto, it's like, wait, these are the guys who we were hanging out with at the conference a couple years ago. Now they're all facing criminal charges. It's extra surreal for them. I appreciate that they... I like that the crypto guys have enough of a sense of humor to enjoy the book

Enjoy the book too. Yeah. I mean, there's no, like this, there's no question in the fact that like, it comes out of the financial crash in 2008. And there's so many people become disillusioned with, you know, global finance, uh,

outright because one, the banks got bailed out and two, nothing seemed, no lessons seem to have been learned from it, um, in many ways so that, you know, the crypto movement comes out of a, I guess a lot of valid criticisms of financial systems. Uh, I guess, uh,

It's just like any innovation that it gets is prone to be hijacked by sort of very human elements of greed and sort of aggrandizement and other things that come along with any movement, I guess. Yeah. And like, I think my book, the stuff that I write about these last couple of years, it kind of is an argument for...

traditional financial regulations because like the crypto um

Crypto has been saying that these regulations are holding back innovation, and they've got a whole case that sounds pretty good about how the regulations have entrenched these middlemen who are earning trillions of dollars, picking our pocket every time we swipe our debit card. And it's true. That's why the argument sounds good, because it is true. But the problem is that if you don't have the regulations, then you have people like Sam Bankman-Fried saying,

And they sitting on a giant pot of money. Nobody's watching and he can just go gamble it all on Doge coin or, uh, buy a collection of rare board apes, um, or, you know, $300 million of real estate in the Bahamas. And, you know, no one's the wiser and tell it, uh, as long as number keeps going up, no one will ever know. Yeah. Um, yeah, it's, it's, it's crazy. Um,

Well, see, thanks so much for your time. It's, it's late in New York city, so I'll, I'll, I'll let you go. But, uh, yeah, thanks for joining us. Uh, we'll put up links in the, in the show description to the book. Everyone's got to buy. It's like, it's awesome. You've, you've managed to make, you've managed to make a financial story into a thriller. So that's, uh, that's, that's quite an achievement.

John, thanks for having me on. Great talking with you. And thanks for advising me on my...

amateurish reporting in Southeast Asia. Oh, God, no. I mean, if people read the book, they're going to see so much more that you kind of got wound up in. I mean, we could have talked about the Big Fatty Gang as well, but I'll let people read the book for that because that's another story altogether. Yeah, Zeke, thanks ever so much. And yeah, hopefully we'll speak again soon. See you later. ... ...

so