There are numerous parallels between Sam Bankman-Fried and Bernie Madoff. On the plus side, both men emphasised that Bitcoin maximalists are immune to Ponzi schemes.
Bernie Madoff sat atop the longest-running, largest swindle in history long before Bitcoin. In comparison, the rise and fall of Sam “SBF” Bankman-Fried, former CEO of crypto exchange FTX, were accelerated. While the parallels are striking, the plot is not: form organisations under false pretences, form relationships with persons in positions of authority, cheat clients, live as long as possible, and avoid detection.
In 2008, Madoff advisers encountered a “liquidity” problem when the fund was unable to meet client redemption demands. On the surface, the timing of the Madoff collapse more than a decade ago appears to be strikingly similar to FTX’s implosion in 2022. Bitcoiners who keep their keys will never have a “liquidity crisis,” because their Bitcoin isn’t being leveraged for anything else. It is the toughest money in the world as long as it is in the possession of its lawful owner.
Even as the scheme was unravelling, Madoff planned to pay out $173 million in early incentives to family and friends. On December 9, 2008, when confronted by his sons, Madoff admitted to the vast fraud. In many cases, the figures represent fractions of the fraud that FTX is accused of. Bitcoin maximalists keep reminding their communities that yield, third-party custodians, and humans are untrustworthy. Satoshi Nakamoto’s white paper has stood the test of time.
Madoff’s sons quickly contacted a solicitor, who urged them to approach federal authorities. On December 11, one day after federal agents were made aware of the fraud, Madoff was arrested.
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