Much ink has already been spilled about this story, so I do not want to bore the reader with another long retelling. The most likely scenario of what happened seems to be the following. Sam Bankman-Fried (SBF) used (read, stole) user funds to bail out his failing hedge fund Alameda Research. In addition, FTX extended large lines of credit to Alameda, taking illiquid shitcoins like FTT and SERUM, which FTX had created, as collateral. Crypto prices crashed, people wanted to withdraw their money, and now FTX and Alameda are bankrupt. If you are by any chance unfamiliar with the matter, this piece gives a good overview of what happened.

Many of the details are irrelevant to us here, but one thing is important to point out: the NYT piece (PDF) on the topic is incredibly dishonest. Reading it, one gets the impression that SBF did nothing wrong – the word “fraud” is never mentioned. The subtitle reads, “Mr. Bankman-Fried said in an interview that he had expanded too fast and failed to see warning signs.” On Twitter, everyone immediately pointed out how disgraceful the article was (1, 2)

If you are not convinced about how dishonest the New York Times has portrayed the issue, please read the piece linked above or this Twitter thread and then the NYT piece.

Citizen Journalists

Like everyone else, I am impressed with those who contributed to this story by doing independent research on Twitter. More than that, I am grateful to those who rang the alarm bells before everything collapsed, allowing some to withdraw their assets.

Nevertheless, I would caution people not to jump to conclusions about the trend of citizen journalism. I would love this to be the “tipping point,” but let me explain why I am skeptical – apart from the fact that victory is never that cheap.

For many people in the crypto industry, the NYT’s dishonesty came as a great shock. However, this is not because it was the first time the NYT was so untruthful, but because it was the first time most people in the crypto industry noticed. When you catch someone lying, it is not the first time they have lied; it is the first time you have caught them. In this case, it was the first time people on crypto-Twitter knew the true story because they saw it unfold in real-time on Twitter. In many other cases, they did not know the real story and therefore trusted the NYT and other mainstream media institutions.

Don’t Forget

As I wrote on Twitter the other day, it is crucial to avoid Gell-Mann Amnesia, as described by Michael Crichton:

Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray's case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward-reversing cause and effect. I call these the "wet streets cause rain" stories. Paper's full of them.
In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.

However, we need to question not only everything we read in the future, but also everything we have read in the past. This will give us a sense of how unusual – or, as I claim, ordinary – this kind of disingenuous reporting is. Two examples from the 20th century immediately come to mind.

First, the New York Times published Nazi propaganda claiming that Poland had invaded Germany, and even won a Pulitzer Prize for it. Here is a long quote from Ashley Rindsberg’s book The Gray Lady Winked detailing what happened:

On August 31, 1939, Hitler put into action one of the most flagrant scams in the history of the modern world. In order to give Germany a reason and a right to begin its war of European conquest, he and a number of Gestapo propagandists and henchmen (including Heinrich Müller, who would be made head of the Gestapo a month later) concocted a scheme to make it seem as if neighboring Poland had attacked Germany. With a bit of crude but bold propaganda, the Second World War began.

The New York Times bought the Nazi dupe without flinching. Underneath its famous banner, "All the News That's Fit to Print," the paper reported that, according to "Chancellor Hitler," Germany had been attacked. Already in the second paragraph of the Times's front-page article, the reporter, Otto Tolischus, went on to reprint verbatim Hitler's infamous war speech to the Reichstag, which the Führer used to justify to the world, as much as to the German people, his invasion of Poland.3 Between the pages, the Times went into detail, reporting that Polish attacks had been carried out against Germany at a German radio station in Gleiwitz-and other points along the border. The report was written in the Times's characteristically deliberating and objective tone and presented the "facts" of the events that would lead to humanity's most horrifying war.

"At 8 P.M., according to the semi-official news agency," the Times report stated, "a group of Polish insurrectionists forced an entrance into the Gleiwitz radio station [in Germany], overpowering the watchmen and beating and generally mishandling the attendants. The Gleiwitz station was relaying a Breslau station's program, which was broken off by the Poles." The problem, however, was that the times, places, names, and the events themselves, as they were reported by the Times, were all Nazi fabrications. With the publication of Nazi propaganda on the pages of the most trusted newspaper of the world's greatest democracy, the Führer and his top propagandists got more than they could have hoped for from "Operation Himmler."

Under the headline, "Hitler Gives Word," Otto Tolischus presented only the point of view of Hitler and the Nazis concerning the events along the German-Polish border. Tolischus wrote, "Charging that Germany had been attacked, Chancellor Hitler at 5:11 o'clock this morning issued a proclamation to the army declaring that from now on force will be met with force and calling on the armed forces 'to fulfill their duty to the end.?»

In the very next paragraph, Tolischus reprinted Hitler's proclamation, which the dictator calculated as a way to fire up the German public for war. The proclamation and its reprint in the Times represented the next and possibly most damaging stage of Operation Himmler since the very first words of Hitler's widely published speech were coldly designed to deceive as much of Europe and America as possible: "To the defense forces: The Polish nation has refused my efforts for a peaceful regulation of neighborly relations; instead it has appealed to weapons," Hitler said.

Tolischus printed the entirety of the proclamation in his front-page article and then went on to report German military restrictions and warnings.

He never once mentioned the possibility that the Nazis, so well versed in propaganda and so ready to use that weapon, as they had proven many times by 1939, might be lying. For his error-ridden, propaganda-friendly reporting, Tolischus was awarded the Pulitzer Prize in 1940 "for his dispatches from Berlin. "4

But the reality of the Times's reporting was much more serious than Tolischus's blind reprint of Hitler's infamous speech or his failure to provide a smidgen of counterbalance in his report about the attack at Gleiwitz.

When, on page three of that day's issue, the Times reported on the details of the supposed Polish attack that "according to the semi-official news agency, a group of Polish insurrectionists forced its way into the Gleiwitz radio station," the reporter and editors at the Times left out one critical fact that would have been known to them all: the "semi-official news agency" cited as the article's main source was one of the Nazis' central propaganda organs. In reality, by 1939 there was no such thing as a "semi-official news agency" in Germany. Propaganda minister Joseph Goebbels had brought the entirety of the media under his control when Hitler became Chancellor of Germany in 1933. There was no scrap or snippet of information published in any part of the news media that wasn't completely in line with his media guidelines.

Second, the New York Times covered up Holodomor, the starvation of about four million Ukrainians by Stalin. They again printed regime propaganda without checking it and received the Pulitzer Prize for it, as they admitted in a statement titled New York Times Statement About 1932 Pulitzer Prize Awarded to Walter Duranty:

Describing the Communist plan to “liquidate” the five million kulaks, relatively well-off farmers opposed to the Soviet collectivization of agriculture, Duranty wrote in 1931, for example: “Must all of them and their families be physically abolished? Of course not – they must be ‘liquidated’ or melted in the hot fire of exile and labor into the proletarian mass.”

Taking Soviet propaganda at face value this way was completely misleading, as talking with ordinary Russians might have revealed even at the time.

Note that a conversation with ordinary folks in the crypto industry would also have immediately revealed the misrepresentation of the FTX story. In other words, their ignorance is (and was) deliberate.

I hope these two examples suffice to show that when you read anything in the NYT (or in any other newspaper), your default should be distrust. That is a big, but necessary, shift away from believing stories until you find evidence to disprove them. That said, be aware of a common trap that conservatives in particular fall into: do not assume that because the NYT is often wrong, the opposite must be true. Often, the dichotomy is false. Simply put, distrusting CNN does not mean you should trust FOX News.

It will be the same, just a bit worse

I mention the two historical examples not just to further destroy any semblance of trust in our media institutions, although I think that is an important task. I mention them to show that the New York Times has not only published worse articles, but even got away with it.

My readers can be forgiven for not knowing about these two incidents since they happened before you (or I) were born and no one reads history anymore. But there are examples of the same type of dishonest reporting in our lifetimes. I usually refrain from mentioning them because our proximity means that many people still have a strong emotional attachment to them. They have not moved from the realm of controversial politics to the realm of boring history. Still, I think it is worth briefly touching on some of them here.

First, the Covid-19 lab leak theory: similar to the FTX case, the reporting on it has been incredibly dishonest, one-sided, and corrupt. The theory had long been portrayed as a conspiracy not even worth investigating. Even though citizen journalists did some great research on the subject, showing that a leak from the lab was possible (even likely), no one in the mainstream cared. Their ignorance was, once again, deliberate. The Covid-19 lab leak story could have been the “turning point for citizen journalism” - and was hailed as such in some political circles – especially since it has now become a credible theory, proving the pseudonymous Twitter accounts and independent journalists right. Unfortunately, not much has changed. Trust in institutions has continued to decline and citizen journalism on Twitter has gained in importance, but there was no tipping point.

To take another recent example: most Republicans believed that things would change radically after the infamous “peaceful BLM protests.” Surely now, everyone would see how biased the mainstream media coverage is – “just look at this picture, no one will trust them anymore!”

It would be the tipping point for independent on-the-ground journalism – or so they believed. But it turns out they were wrong.

Continued Entropy

Every time I read that it is going to be different this time, I think of Houellebecq, who remarkably accurately predicted the following in May 2020:

I do not believe for a half-second the declarations that 'nothing will be like it was before' […]

We will not wake up after the lockdown in a new world. It will be the same, just a bit worse […]

(I predict that this will also apply to the period after the Ukraine war.)

Consequently, when the CEO of a crypto exchange tweets that a scandal in his industry represents the tipping point of a larger trend, I am skeptical. Everyone wants to believe they live in a special time in history; it turns out, they rarely do. In other words, continued entropy is more likely than a phase and state change.

To me, the reporting on Sam Bankman-Fried and FTX represents simply another entry in the long list of dishonest reporting by the New York Times – and compared to others, it is not even particularly bad. Some people will lose their faith in these institutions, but most will not. Citizen journalism and the internet will grow in importance, but we have not reached the tipping point (yet).

No Alternative

The main reason for my skepticism in addition to what I have outlined above is simple: trust is not lost, it is transferred. Trust, like energy and sovereignty, is always conserved. And there are simply no institutions people can transfer their trust to.

For most people, it is neither practical nor a good idea to get their news – their entire worldview – from independent, often pseudonymous sources on the Internet. It is too difficult and time-consuming to assess the veracity of many conflicting sources, especially since you have to do it anew for each issue.

The current chaos of independent citizen journalists on Twitter and Substack presents therefore not a credible alternative to the system of the New York Times, CNN, and Co. In other words, a turning point will not occur until we bring it about by building a better alternative. I worry that if we are convinced that we have already reached such an important tipping point, we will not put in the necessary work. And I want to caution the reader against this naive optimism. Building an institution that people can trust to tell the truth is difficult and takes time, but I think it is one of the most important challenges facing us today.