Jan 18, 2023

Skybridge Capital Founder Anthony Scaramucci, joining "First Mover" live from the World Economic Forum in Davos, Switzerland, discusses the collapse of crypto exchange FTX, its impact on Skybridge Capital, and its continuing domino effects, including crypto conglomerate Digital Currency Group's (DCG) decision to suspend dividends amid distress at DCG's lending unit, Genesis.

Video transcript

Our next guest is among of the most well known business leaders here talking about the future of crypto and lessons from 2022 especially those involving FTX. Nothing is off limits with Anthony Scaramucci, founder and managing partner of Skybridge Capital. He joins me now, Anthony, always a pleasure to have you. Good to be. All right. So actually let's address some breaking news we had at the top, which was that DC G Digital Currency Group, which is a crypto conglomerate which also have its own coin desk. They're suspending its dividends until further notice. Are there still more dominoes to fall in this crypto contagion we've been having. So I can only guess at that because I honestly don't know the answer, but I want to provide some parallel and context in 2008 when Lehman brothers failed, people thought, ok, this has to be the bottom of the market, but the market frankly didn't bottom until March of 2009. So to me, I sort of see three or four more months of negative activity from some of the industry leaders. Now, I hope and pray that DC G does not have to go bankrupt. I hope this dividend suspension is temporary and I hope they'll be able to restore to better fund. And I think you and I both know if price activity continues to improve in the crypto currency world, Bitcoin and Ethereum specifically, I think that will benefit these companies. So time and price will tell whether we're going to have more fallout. But it feels like we are. Unfortunately, if there was another domino to fall, which one would it be? I don't know, I don't want to speculate on it, you know, because I'm, I am a big fan of DC G. I'm a big fan of CC and B I don't want any of any of the speculative rumors or the fear and uncertainty and doubt. I want them to be overwhelmed by the good management and the good people that work at those organizations. So, but I'm just saying this because of what's happened in my life. In, in the past, you know, 98 we had the long term capital Russian ruble crisis. It took three or four months to sort that out. We had Sam's collapse in November took three or four months, I believe, to sort this out. It's only, we're only in month, 2.5 or three. So we'll see. So I want to get into that. Obviously, 2020 was not the greatest year for you with your partnership with FTX. Do you have any idea? Well, I didn't have any health scares. Thank God. I mean, everything else was like a disaster. Yes. Do you have an idea of how much you lost? How much I lost? Personally. Skybridge Sky was down. Our core funds were down 30 our coin fund was down 60. We're having a very steep rebound right now. In January, I think there are, you know, some of our assets are up as much as 50% Frankly. In the first couple of weeks here, our core fund is probably up 5.5 6%. The one that was down 30 so time will tell. But like I tell people, listen, if you're a long term investor, you really shouldn't look at it day to day. Um When you say, how much have I lost? I haven't lost any Bitcoin, meaning I have no leverage on any Bitcoin position. So if I have 1650 Bitcoin, well, I still have that Bitcoin now. It's priced and being denominated differently in us dollars today than it was. But I still own that asset. I think it's important for people to understand from Skybridge perspective. We're completely un levered, we own our inventory. And if you're looking at this over 3 to 5 year periods of time, I think we're going to be very fine. And I think I'm encouraging people to invest now, we're closer to a bottom than we are to another time. And personally with your investment in FX. What? Well, I mean, listen, I mean, remember he gave us the money, we gave him money very early on at FX on one of the 30% of, yes, he bought 30% of Skybridge. Remember he gave us the money, right? So we took in $45 million. We bought $10 million of his token. Um, we, we, we sold that at a loss, uh F TT. So we sold that at a, sold that at a probably a 9.5 $9.6 million loss. Uh We still have the other cash that he uh put into the company, we gave him 30% or now it's owned by the bankruptcy estate and, you know, we're patient people, we'll wait to see what the bankruptcy people think in terms of us buying back the shares. And so I'm confident that hopefully by the middle of this year we'll be able to do that. But time will tell it's sort of like building a house. You know, you think the house is going to be complete at a certain time, but your contractor has other ideas. So we, we were friends with Sam. Were you not? I considered him a friend? Yes. How did, how did you develop your relationship? How did that begin? Well, you know, it really came through the salt uh conferences that are owned by Skybridge. Um We did a conference at the Javits Center actually that you were there. Actually, it was September of 2021. Sam, as well as New York Digital Investment Group were principal sponsors of the conference. I took Sam to a very small dinner that I hosted for some very high profile hedge fund managers and public officials. I, you know, I don't, I don't want to over exaggerate my relationship because Sam was such a high profile person. He had other relationships in New York. And so I'm sure there were other people introducing him to New York. But from a salt perspective, I gave him like the head seat at the VIP table and I think he very much so enjoyed that experience. We entered into a longer term relationship on the salt contracts. Um I think we signed like a three year deal in that, you know, it's funny, I, I didn't have any inkling and my, my friends don't like me mentioning their names on the air. So I won't mention their names on the air, but you can Google my friends' names. Ok. We had some of the highest respect, the most highly respected venture capitalists, hedge fund managers, sovereign wealth funds that gave Sam money before I got on the air. Just now, we just announced that we're doing salt in May at the glasshouse in New York. Hopefully, you guys will be able to make it. No salt. Crypto Bahamas, we'll eventually go back. Will it be at the Bahamas. I'm not exactly sure. Um, I sort of feel like it's a radioactive blast zone at this moment. I thought one of our best events, you know, we've been doing salt conferences since 2009. I thought our crypto Bahamas event with FDX was among the best events that we've produced. Uh, it's just, unfortunately that Sam has turned out to be a fraud. But listen, I couldn't have predicted that you asked me a question. Do you feel betrayed? Yeah. Well, I've said that certainly, I think, I think what happens is when you have a friend and you're extending yourself to that friend and you're providing that friend with something that's of value to yourself. In my case, it's my 35 years on Wall Street and some relationships that I have on Wall Street that are older than Sam's life on planet Earth. I was extending those to him and the notion that he was running his operation the way he was and then using backdoor accounting mechanisms to hide that from people like venture capitalists or people like some of the due diligence. People at Skybridge is a betrayal and there's no question about that. But, but here's the thing, I'm not playing victim about it. I'm not doing anything that moving forward. What good entrepreneurs do is they accept the blows in life and accept their losses, whether it's a fraudulent loss like Sam, or maybe I've made investments in my life that have gone to zero. I've also made investments in my life that I've made 30 to 1 on. So it happens. I'm not going to sit here and blame Sam for any of the woes of Skybridge or any of the woes of the Cryptocurrency market history in our lives. It may not repeat itself exactly. But you and I both know that it rhymes. There are no new stories. They're just remixes of past stories. You still talking to Sam, I'm not. But I just want to finish this point if you were around for the Russian ruble crisis that John Meriweather helped to contribute to or the Bernard Madoff crisis in 2008 where he was running a Ponzi scheme. One was over leveraged. John Merryweather. Madoff was a Ponzi scheme and fraud. It's almost like John Merryweather and Bernie Madoff got together and had a biological baby that was Sam Baman free because he was fraudulent and he was over levered. And so we're going to live with the aftermath of that. Uh But I'm not gonna sit here with any mill son of regret on my neck. I don't kick myself in the pants that I had made a decision to be in business with Sam. I'm going forward. I'm very optimistic about the Cryptocurrency space. Super optimistic about the Skybridge portfolio and we have some new products that we're gonna be launching. You know, Sam has created his own substack. He's trying to get his word out there. He insists that FTX US is solvent always has been. He didn't siphon off billions of dollars and what not? Do you believe them? Well, I think in the FDX US case, I actually do believe him because I was one of the early angel round founders, seed investors and Ledgers. And so I actually introduced Zach Dexter to Sam. I think Zach was super happy about that and grateful to me, I've now subsequently apologize to Zach for making that introduction. So Ledger itself was completely solvent. It was following the letter of the law. I believe that FTXU si know the senior executives. There was also following the law. Uh I made a statement here in Davos earlier in the week that uh American based companies or specifically New York based companies that had oversight regulation, tight regulation, they more or less have stayed, solve, they more or less have stayed in existence. And so I think it was the laxity of some standards elsewhere around the world that helped to contribute to the malfeasance. But I think Sam is right about that, but I think that there was a decision, strategic decision and he can be a naysayer about it. But I think if you were the bankruptcy trustee or the new CEO of FTX, if you looked at the whole umbrella of everything they owned, in order to maximize the return to creditors and potential account holders, I think they had to make the decision to bankrupt FTX US. It made sense to me that they did that. Well, you were in the room when that decision was being made in the Bahamas, you flew down to the Bahamas, you said he needs to get in front of a regulator and in the end he did step away. Do you? I don't know like, but now he's saying that he should have stayed and he could have raised money and saved the company. Not, not possible. Even his uh general counsel, his US general counsel, Ryan Miller said it wasn't possible. There was nothing, there was nothing there to save. Uh I think you're referencing lawyers. The silo Miller. Yes, I understand that. I mean, look, he's, you listen, sometimes when you're in a situation like that, you don't like taking accountability. You know, when I got fired from the White House in 20 I think that he probably believes what he's saying. I know the definition of a liar for me is somebody that doesn't believe what they're saying, but they're actually saying it. He probably believes that he's saying. So there's a little bit of misguidance to his personality. There's a little bit of self delusion in his personality, so I'm not going to call him a liar, but I do think he's somewhat delusional about what he's writing. I mean, listen, he would never take my advice. I'm sure he's not taking his parents or his outside counsel's advice, but I would stop saying it. All he's doing is digging himself a hole. I know people have said to me, well, why are they giving him access to the internet? Why are they allowing him to do this? Because it's almost like an open confessional and the more they allow him to do this, the bigger the case is going to be against him, he should go to jail. Well, that's not enough for me to decide. You know, I remember I went to law school. I passed the bar in New York. Uh I'm not on the jury. I don't like being in the social media system where everybody is a judge and a jury and a sentencer and they've already made these decisions because there are people sometimes as a result of that fury and that mob frenzy that are in fact innocent and they get mistreated and say, I'm not saying that that's going to be the case for Sam. I've been asked pointedly, do I think Sam committed fraud? And I think prima facia, the answer is yes, Sam did commit fraud. But and that's my opinion, but a 12 person jury needs to make that decision. And then once that is decided, assuming it is, then a judge that has a principled basis about how to sentence people like Sam should put him in jail if he's, if he's innocent, God bless him. But there's an old expression when the window is open and you hear clip clop, it's a horse, it's not a zebra. Ok. You can't have the four people around you plead out guilty and then you're the only innocent person inside the room. It doesn't, doesn't make sense to me. But let's let the facts unfold. Then let's see what happens. Meantime, you're moving on. It sounds like you're still very well. You're here. You were at CFC ST Maritz for a crypto conference. You're at the West still talking about crypto. You're still bullish. It sounds like a long term. I'm very bullish. I can't, I don't think you can predict these markets short term. Um but said something to me have the opportunity to have dinner with C in uh San Maritz, he says is very valid and it's worth repeating. These markets have been like clock work on four year cycles, perhaps tied to the having cycle of Bitcoin. And so you, you see a, a blast cycle of a super bear market where we hit a low and then you have a recovery year, then you have an all time high and then you have a new all time high. And then it looks like you end up in that zip code again of a bear market not to say that you are holding a Bitcoin E as well as and I mean they had clients. Those are your but you're still hopeful that again, remember they had declines uh based on the fiat currency the US dollar, but I still own the asset, both, both down from where I bought them. But remember if I'm right about the robust nature of those two particular pieces of technology, the entry points that we had in 2020 21 will look like great entry points again. And it's a big, if it's a new investment technology, it's an early adapting technical asset. And so it requires somebody to have strength of dealing with volatility and strength of thinking about it. From a long term perspective. I can remember friends of mine who watched their Amazon Stock go from 119 or 116 to $6 in the NASDAQ bubble of 2000, many people left and they said I'll never buy tech again. And that was a mistake. They missed a generation of incredible investment opportunity by leaving out tech. Are you hopeful of getting the 30% back? That FX venture? Extremely, extremely hopeful? But remember, I don't need to get it back. It's frozen right now in the bankruptcy. But remember, I don't need to get it back as a minority stake. Uh and a result of which, uh you know, I buy it back rather than I would like to buy. I certainly like to buy it back. I don't, I don't love the optics of the creditors of FDX or the, the bankruptcy trustees having the stake. I would love to have it back let's move forward. Uh, but the flip side is, I don't need to have it back. Uh, it's never affected the way the business has been run. It's never affected our investment decisions. And so it's gonna be one way or the other and good entrepreneurs know they can't control everything in life and you got to just roll with the bunch in the meantime, you're also making some investments. I hear you're investing in FTX US. Uh former president, uh Brett Harrison's new company. Tell me a bit about that. Yeah. Yeah, I've made two reasonably significant investments for Sky. The first one I I want to mention if you don't mind, is vulgar forged. Uh The, the symbol is pyr uh that is a gaming token. We think that Vulcan forge, if you look at the dynamics relative to something like a sandbox or decent land, they have way more users. And from a value perspective, we really like that particular asset. The second investment that we made recently. And this is a personal investment for me. This is not from Skybridge money, this is from my personal money into Brett Harrison's new business. I made that investment as a friend, I made that as an investment as a long term supporter of Brett. I think he's a very ethical guy. I think he got blindsided by the FTX International situation. And unfortunately, the way the world works and the way the media works, I think he's getting a scarlet letter pinned to his chest known as FTX. And I think some people will shun him because of the optics and the association with Sam. I think it's very, very unfair for Brett. I think you'll learn about people like me. When your friends are getting hit with something particularly something that's unfair. You run towards your friends, you don't run away from them. So I'm very proud to be an investor in his new company. And again, that's a personal investment for me. Forges from the, from the firm. All right, on the flip side, are you surprised at how quickly people bounce back in crypto? I mean, also three years capital, the co founders there, they're raising $25 million apparently. Yeah. Well, I don't know them personally. I actually think they came to Crypto Bahamas. OK. And so here's the thing I know they were very well regarded. I don't, I Yeah, and I do so I don't know the whole fact situation uh behind their situation. So if you don't mind, I don't want to really comment on it because I'm not that well versed on it. But if you're making a general comment about resiliency and sustainability and durability, I have lived my life as a super bowl, not a piece of bone china. So, you know, when I hit the floor, I expect to bounce pretty hard and pretty hard to the upside, but you can't get to where I am in life without taking risk. And you can't have this very robust enriched life experience uh without taking risk. If you want to work in a corporation, there's a lot of establishment of corporations uh around us, they've rented out most of the space here on this promenade. You can do that, but it's not gonna be as fun as the stuff that we're doing. Finally. What do you hope to get out of the World Economic Forum when you hear and what are those conversations like? So I this is my 16th forum uh starting in 2007 or maybe it could be. Yeah, because we didn't have one in 2000 or this was my 16th forum. I would say to you that uh have a great time here. You know, did you come to my wine party last night? I, I don't, you missed it. Yes. So we had a, we had a great wine party last night. Uh We've been doing that for 12 years. I like coming here because I like understanding what the establishment is thinking and so the establishment hates crypto right now. So I think that's fantastic because in 2007, the establishment loved the economic landscape and we plunged into the global financial crisis. In 2009, the people here in Davos said that the Earth was going to open and we were all going to fall into it. They were extremely depressed. We started the largest or the biggest bull market in my lifetime. Uh, in 2016, I was told that Secretary Clinton Hillary Clinton was going to be the President United States in 2020. I was told here probably in this building actually that Donald Trump was going to get re elected president. It was a very strong consensus and bias towards that. And so this place hates crypto. Absolutely. It's like a radioactive blast zone for this place. There's a lot of shot and freude out here and there's a lot of I told you so. And that makes me extremely bullish. All right, Anthony, thank you. So, hey, it's good to be here. Always, always. Thank you. All right. That was Anthony Scaramucci is the founder and managing partner of Skybridge Capital.

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