The Crypto Lotus Mystery feat. Sam Bankman-Fried

I'm kinda stumped on this one. It involves "superintelligent" AI, SBF, private equity, and a $100 million loan.

Usually when I write an investigative article, I try to be exhaustive. I try to make each of my articles as self-contained as possible and present my stories in a way that leaves my readers satisfied.

This is not the case with this article. After exhausting my avenues, I was left with more questions than answers and have effectively run into a wall in my research. Rather than trying to write a conclusive investigative article, I'm just going to narrate how I fell down this rabbit hole in the first place and what I learned from it.

Part 1: The Rationalist Group House Singularity Party

A lot of my writing is dedicated to covering AI and tech enthusiasts, specifically those in the Rationality community, a group centered around an internet forum called LessWrong. Describing this community succinctly is hard but in a broad sense, Rationalists try to view the world more objectively, often trying to apply Bayes' Theorem to utilitarian philosophy^[1]. The Rationality community is also broadly into futurism and the possible creation of an evil sentient "artificial general intelligence" (AGI) in particular - a concern shared by LessWrong's creator Eliezer Yudkowsky, who has become a cult-like thought leader for the community.

Before becoming a standalone website, LessWrong started off as a guest blog on Overcoming Bias, a blog written by George Mason University economist Robin Hanson^[2] who shares Yudkowsky's concern with the hypothetical technological singularity event that could lead to the creation superhuman AI and other theorized future technologies.

As I was reading through Wayback Machine archives of Hanson's blog, I learned that prominent rationalist blogger Katja Grace (most known for publishing a biased poll overstating attitudes about killer AI) also got her start making guest posts on Overcoming Bias. One of these posts from 2012 mentions the location of a planned house party in Berkeley happening in conjunction with that year's Singularity Summit^[3], a conference hosted by Yudkowsky's Machine Intelligence Research Institute (formerly known as the Singularity Institute). Out of curiosity, I decided to google the listed address to see if it had been publicly mentioned since that 2012 post.

It had!

Part 2: Crypto Lotus LLC & Nathana Sharma

As it turns out, the address listed for the 2012 Singularity Summit party was later used to register a hedge fund called Crypto Lotus LLC which, According to Forbes, officially started trading at the end of July 2017 with a strategy of investing in "philosophically sound currencies" like Bitcoin while also maintaining a "weighted basket" of smaller cryptocrurrencies.

The hedge fund's management has deep ties to both the crypto and AI-obsessed Rationalist communities. Crypto Lotus' managing director Joshua Goldbard was quoted by Forbes as describing himself as a "high school dropout that gets neurotically focused on things". Joining Goldbard at Crypto Lotus are Kevin Fischer and Apneet Jolly who served as the firm's chief investment officer and chief information security officer respectively.

Going by his LinkedIn, Kevin Fischer has deep ties to the Rationality community. He spent three months at Eliezer Yudkowsky's Singularity Institute before leaving to work for MetaMed, a failed medical startup^[4] run by several former employees of the Singularity Institute. He would later return to the think tank, describing his time there as such:

I was on the board of the Singularity Institute, but then we spun off the new organization, the Center for Applied Rationality and we changed our name to the Machine Intelligence Research Institute while selling the brand name and conference to Singularity University.

Fischer would go on to be Machine Intelligence Research Institute (MIRI)'s Director and treasurer from 2012 to 2015 before moving to Crypto Lotus. According to SEC filings, Fischer, Jolly, Goldbard, and a fourth employee named Aviad Haimi-Cohen all resided at the same address when Crypto Lotus was formed.

Beyond their founders, my research into Crypto Lotus led me to their lawyer, Nathana Sharma. There's little information about her online, but a lot can be learned about her from a Bitcoin explainer article published by SingularityHub (formerly known as Singularity University)^[5] back in 2017. Written by Sharma, it contains this disclosure section at the end regarding potential conflicts of interest:

The author^[6] is a principal at Crypto Lotus LLC, a cryptocurrency hedge fund based out of the San Francisco Bay Area, as well as a strategic advisor at Green Sands Equity, both of which have positions in various digital assets, including the ones named in this article.

According to her SXSW profile for a 2018 talk she gave, Sharma also worked at MetaMed and was a graduate of "Singularity University's Graduate Studies Program"^[7].

Part 3: Green Sands Equity enters the fray!

Nathana Sharma working for both Crypto Lotus and Green Sands is very interesting because Green Sands Equity would go on to sue Crypto Lotus LLC for breach of contract in 2022. Unlike Crypto Lotus' tiny outfit, Green Sands is a legitimate private equity firm with multiple international offices that has invested in successful companies like Lyft, Spotify, Airbnb, and SpaceX.

Green Sands alleges that Crypto Lotus failed to provide legally mandated statements on how it used their $585,000 investment, claiming that "the Fund completely stopped all reporting of any kind in or about the first quarter of 2019". Green Sands further alleges that Crypto Lotus was cited by the SEC for internal accounting inconsistencies, mismanagement, and failing to provide disclosures to investors and claims that Crypto Lotus dodged their requests to withdraw their funds for over a year.

Besides the fund's cofounders, Green Sands' lawsuit names a Crypto Lotus employee called Jonas Lauren Norr^[8] as a defendant. Communications between the two firms presented to the court show Green Sands' lawyer getting increasingly upset with Jonas Lauren Norr's repeated dodging of his emails:

It’s this simple: Green Sands tried to withdraw in March. You actively induced them to wait pending April NAV. Which you then refused/failed to provide - I now believe intentionally - to frustrate Green Sands’ withdrawal.

And if I’m wrong, based on your track record you won’t have [our July 31 withdrawal request] until sometime in 2022, making it impossible to calculate Green Sands' withdrawal.

The fact that you would say “we cannot violate the express terms of our agreement” is outright insulting given your complete and abject failure in honoring your end of the agreement

We know what’s going on here - the value tanked, and you don’t have the capital to pay Green Sands what you owe. Instead of hiding behind a letter agreement you repeatedly breached, just be honest and perhaps we can work something out But your constant shifting grounding, delay , and failure to communicate are unacceptable and will absolutely not lead to a resolution.

You have 12 days. Please use them wisely. We are happy to work with you - but your current approach is untenable

In response to the complaint, Crypto Lotus moved to force Green Sands into arbitration rather than have the matter decided in court. This request was granted by the court, but further drama ensued when "Defendants failed to present a settlement offer despite being asked to do so several times".

Part 4: Sam Bankman-Fried enters the fray!

Fast forward to 2023. Sam Bankman-Fried is arrested, tried, and convicted of the biggest fraud scheme in US history involving his FTX cryptocurrency exchange. One of the misdeeds he was convicted for was the misuse of customer funds to finance companies run by his friends.

One of the ways Bankman-Fried misused funds was by allowing Crypto Lotus to use their crypto investments as collateral for withdrawing $100 million from FTX. This was questioned by prosecutors in SBF's trial:

Prosecutor: Can you name any customers that were allowed to pledge outside investments as collateral for withdrawing money on ETX apart from Alameda?
SBF: I can name a couple of instances where we considered or in fact did do that.
Prosecutor: When did you in fact do that?
SBF: I believe that we did that with a firm called Crypto Lotus, and I believe that we considered that with Three Arrows.
Prosecutor: Crypto Lotus, you said, is one customer that was allowed to pledge an outside investment. What was the size of that
investment?
SBF: I don't recall the exact amount. I think it may have been a hundred million.
Prosecutor: A hundred million?
SBF: My guess.
Prosecutor: Can you recall any other instance where a customer other than Alameda and Crypto Lotus with this 100 million was permitted to post as collateral an outside investment?
SBF: Not off the top of my head.
Prosecutor: Sitting here today, the answer is no?
SBF: Correct.
Prosecutor: When Crypto Lotus was allowed to pledge this outside 100 million, was that disclosed to the public?
SBF: Not specifically, no.
Prosecutor: And you were friends with the head of Crypto Lotus, weren't you?
SBF: I don't think so.
Prosecutor: You had a personal relationship with the head of Crypto Lotus?
SBF: Who are you referring to?
Prosecutor: Yes or no.
SBF: There was someone from Crypto Lotus who I had talked to.
Prosecutor: Was that person your friend?
SBF: We didn't have nonwork discussions.
Prosecutor: So it's your testimony that you have no personal relationship with anybody at Crypto Lotus?
SBF: There was a more junior employee who I had been friends with.

Conclusion: IDK 🤷‍♀️

I'm not sure what's going on here. It certainly seems like SBF was closer to Crypto Lotus than he let on and FTX clearly had a reason to give the hedge fund a special deal in order to obtain a loan from them.

Joshua Goldbard tweeted in 2022 that he would be at that year's SALT crypto conference in the Bahamas (where Crypto Lotus is registered) alongside SBF. Given that he was just an advisor to Crypto Lotus and isn't named in their SEC filings, it seems possible that he was the "junior employee" Bankman-Fried is referencing here. Golbard was also the founder of the cryptocurrency MobileCoin which was traded on FTX's platform. The coin was eventually subject to price manipulation on FTX, leading to a financial debacle that was eventually a factor in the company's demise.

Regardless, Crypto Lotus provides another direct link between Sam Bankman-Fried and the Rationality community. While it's still unclear how deep these ties are what Crypto Lotus spent their $100 million loan on, or how it relates to MobileCoin, there definitely seems to be more to this story than what can be gleaned from court documents.