The $32B Downfall of FTX & Can Paris Hilton Save 'X'?

0:00Does it ever feel like you're a marketing professional just speaking into the void? But with LinkedIn ads, you can know you're reaching the right decision makers, a network of 130 million of them, in fact. You can even target buyers by job title, industry, company, seniority, skills, and did I say job title? See how you can avoid the void and reach the right buyers with LinkedIn ads. Spend$250 on your first campaign and get a free$250 credit for the next one. Get started at linkedin.com slash campaign. Terms and conditions apply. Tonight on NBC, Jimmy Fallon and Bozema St. John host a highly anticipated new competition show.

0:37I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best I do win! On brand with Jimmy Fallon. Series premiere tonight on NBC. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. On today's pod, the Sam Bankman free trial begins over what could be one of the largest business frauds in history. We're definitely going to talk about that.

1:13Then Katy Perry is locked in a mansion dispute in California that has gotten so messy it could affect real estate laws across the country. It's Monday, October 3rd. Let's rise.

1:28Toby, what day is it? It's October 3rd. So for anyone who doesn't get why we keep saying that, it's a famous quote from Mean Girls. Lindsay Lohan's character is asked what day it is by her crush, and that day is today. But Neil, I just want to know, do you think Mean Girls is on the Mount Rushmore of most quotable movies? It is extremely quotable, but I was looking through my list of the most quotable movies. It is in the top 10, but it's not in the top three. Here are my top three. Number one, I got to go Step Brothers, our Bonita Fish Big. It's too good. Number two is Big Lebowski. And number three, I have from way back when, Shrek.

2:05Because I could not stop talking about that movie. I'm eating waffles. Dang, this makes me want to watch all those movies. Before we jump in the news, we do have a quick message from today's sponsor, Yahoo Finance. Neil, the Las Vegas sphere opened over the weekend, and I wanted to gauge what the public reaction was and see how its parent company fared in the markets so I could break it down for you guys, the listeners. And that's where Yahoo Finance comes in. I moseyed on over there to read some news and get high quality real-time market data all in one place. Yeah, and it's so simple to use and find what you're looking for.

2:38This is not a Bloomberg terminal. Instead, it allows you to get in, check that Sphere stock is up 11 % or keep tabs on what else is on your portfolio and get out without having to parse through the complex interfaces that finance is known for. To see what we're talking about, check out finance.yahoo.com. That's finance.yahoo.com for markets data you can actually use. Let's start our show in a New York City courtroom where jury selection will begin today on the business fraud trial of the decade. Yes, it is not easy to dethrone Elizabeth Holmes from the top spot on the modern fraudster list, but Sam Bankman-Fried may have done it.

3:14The former crypto wonder boy is accused of essentially stealing about$8 billion in customers' funds in his crypto exchange, FDX, by using it to take risky bets with his private hedge fund, make frivolous purchases like a$30 million penthouse in the Bahamas, and make political contributions to various candidates. Experts say the fraud that allegedly happened here is a combo of Elizabeth Holmes and Bernie Madoff. You had this larger-than-life character who supposedly ran this groundbreaking business. But once you got a peek inside the hood, you realize that it was all built on a house of cards. Toby, this trial is going to be spicy for so many reasons.

3:52You have SBF story arc of going from palling around with Tom Brady to a Brooklyn jail cell. You have his eccentric young business associates who all live together and maybe dated each other in a Bahamas penthouse. You have the political intrigue. You have the celebs in SBF's orbit who endorsed FTX. And you also have the money involved. So much money that SBF allegedly swindled from customers as he built up his net worth to at one point becoming the 60th richest person in the world. As far as the legal arguments go, prosecutors will try to prove that SBF knowingly used customer funds as his personal piggy bank.

4:27On defense, SBF will say that he makes business errors, but they were honest and he never intended for customers to lose money. Toby, what are you watching? First of all, we've been waiting for this trial to start so we could talk about it for a long time. So it's finally kicking off. And to me, this is not just an SBF or an FTX trial. It's almost crypto as a whole on the stand there. It's kind of a proxy case because even though it's him on the stand, FTX was meant to bring crypto to the masses. It hired every famous person under the sun, every famous athlete you can think of. And it was supposed to be the thing that legitimized crypto and made it mainstream.

5:03And yet here it is on the stand now for legal issues. So that to me is kind of, it's a proxy case in a certain way. A lot of people in the crypto industry, I think, want to see SPF behind bars because they want to show that there are bad actors that have gamed the system and scammed a lot of people. And then there are the above board people who say that crypto actually still has a lot of applications and SPF is not a part of what we want to do to bring Web3 to the masses. For sure. And then there's so many weird details about this case, too, that I just want to run through. I mean, SPF, particularly on the people in the case, SPF says he only drinks a half a glass of alcohol a year, which is just such a random detail to ever have as a human being that you can quantify it in terms of glasses.

5:48And then also Caroline Ellison, who is SPF's romantic situationship, who also ran the Alameda hedge fund. And she ran a Tumblr blog that talked about everything from Harry Potter to eugenics. So that was like a weird angle to all of this. And then also there's this effective altruism angle as well. So SBF was known for this philanthropic kind of philosophy that attempts to maximize an individual's positive impact on the world by using logic and reasoning. So that was one of the big things when he was on the rise. Everyone said, we finally have this altruistic billionaire. He wants to give all his money away, make the world a better place.

6:26And yet here he is now on trial for potential fraud. So there's all these different angles to it from a personal perspective as well. Caroline Ellison will definitely be the witness that everyone will want to watch her testimony because she ran the Alameda hedge fund that is kind of at the center of this entire case. Basically, what Sam Bankman-Fried is accused of is taking in customer funds to FTX and then using those that billions of dollars to fund risky bets with his private hedge fund called Alameda. Those were like beyond the pale in terms of the kinds of things he was investing in. There was a bank run in 2021 on or 2022 on FTX, and all of that money was in Alameda.

7:13Its balance sheet was completely underwater. and then there was no money for the customers to take out. And that's how we got here. Right, yeah. There was not a lot of separation of church and state. And just to put a bow on this, John Ray III, who was hired as a CEO to kind of clean up SBF's mess, said once he got under the hood of FTX, it was worse than Enron, and he calls it a good old-fashioned embezzlement case. Well, he has justification to say it's worse than Enron because he oversaw the Enron bankruptcy. I know. So whenever you're getting mentioned in the same sentence as Enron, That's not going to be good.

7:45Let's move on to our next story where it's time for Science Hat Toby to reemerge. That's because the Nobel Prize in Physiology or Medicine has been awarded to two of the scientists behind the development of the mRNA COVID vaccine. Professors Caitlin Carrico and Drew Wiseman will share the prize for their unprecedented rate of vaccine development during one of the greatest threats to human health in modern times. Really quickly, mRNA vaccines differ from old vaccines because instead of relying on a dead or weakened version of the original virus to provoke an immune response, mRNA vaccines inject part of the virus's genetic code into a patient to provoke that antibody response.

8:26The key difference is it's a lot easier to play around with the genetic instructions for a virus versus growing large amounts of infectious cells, then inactivating them for use in a vaccine. And while these vaccines are mostly known for the role in the pandemic, this technology makes it way faster and way more flexible to teach our bodies to respond to a variety of different diseases and even cancer. So, Neil, I remember the hype around mRNA technology when the vaccines first dropped, but it's not quite top of mind anymore for a lot of people. So I'm glad these two are getting the award because it's such a cool piece of technology.

9:02It is, but it had been shunned for many years in the past few decades. And when you read into Kariko's story, it is absolutely crazy. She was an immigrant from Hungary, worked at the University of Pennsylvania, completely sent to the outskirts of science for researching mRNA because when you did early experiments with mRNA, it would get destroyed by the body really quickly. So it was this cool technology that people knew about. It wasn't this mysterious thing, but it would get destroyed by the body really quickly. So it couldn't be used for any treatment. But Kariko was just telling herself, I have to persevere.

9:39I have to keep doing this. I see potential in this. And she met Weissman at the photocopier in 1998. And that literally altered the course of human history, that meeting at a photocopier, because they ended up in this partnership that produced this breakthrough. But just to read about how the University of Pennsylvania kind of sidelined her and didn't allow her to get any grants. And she had to retire from the university a decade ago because what she was doing was just seen as an outlier, not super effective to any any sort of breakthrough in medical treatment. And here we are now. She's a VP at BioNTech, which is partnered with Pfizer on making the one of the lifesaving vaccines.

10:22Yeah, I mean, she started work in 1970, and it took her till 2020 for the mRNA vaccine to really become a thing. So that's 50 years of perseverance. Pretty crazy. Also, I looked into, just because I was curious, how much do you think a Nobel Prize winner earns? I know, I looked it up. A million dollars. Yeah, it's 11 million kroner, which translates to right around a million dollars. Not too bad, actually. No, so what's next for Kariko is her daughter is an Olympian. She's a gold medalist, and she's going to try to start a business with her. So that's an overachieving family right there. I love these stories of scientists getting the call after working so hard in the lab for decades.

11:04They get the call from the Nobel Prize Committee. It is just a very cool thing, and obviously they're doing really important work. Moving right along, we don't often say win and X, the platform formerly known as Twitter, in the same sentence. But X did take one step forward in its turnaround plan yesterday by signing an exclusive content deal with none other than Paris Hilton. As part of the revenue sharing agreement, Hilton and X will work together to make four original video programs per year. That includes live shopping and the content will focus on topics such as Halloween, music, motherhood and cooking.

11:37Hilton will even get her own hashtag sliving, a term she's been trying to make happen since 2019. that's a combo of slang and living. Yeah. Anyway, this deal is a milestone in CEO Linda Yaccarino's plan to find new areas of growth for X after it lost more than half of its sales following Elon Musk's takeover and a subsequent advertising exodus due to rising hate speech on the platform. There's a lot more I want to talk about with X, but let's start with the Paris Hilton deal. Do you think it's the start of something real or a flash in the pan? I'm kind of in on the idea because, first of all, the live streaming market is just so big, especially internationally.

12:17In China, it's just this massive, massive market. And a lot of people have been trying to figure it out in the U.S. because whoever does win the live streaming shopping battle is going to reap a very large piece of the pie. And so, I mean, X is clearly trying to become the everything app. We've talked about that a lot. And so it is definitely throwing stuff at the wall. So who knows if this is really going to take off. But if there's even a 5 % chance that this could become a hundred billion dollar business, then why not take a shot at it? Is Paraself the person to start with? I don't know. Sliving is ridiculous.

12:50We talked about Mean Girls. Stop trying to make Fetch happen. Stop trying to make Sliving a thing. But I mean, she's still a big name and I mean, she moves the needle a little bit. We're talking about it. So I don't think it's the worst idea. Yeah. But you talked about live shopping, live stream shopping being huge internationally, especially in Asia. But so many social media platforms have tried in the u.s to make it happen here uh make make live stream happen here to quote me girls again but uh it has not worked out something about the american consumer just doesn't sort of dive with it yet but maybe someone will crack it i just don't know if i go on twitter x to shop so it's kind of a change in uh mentality that one would have but i do want to talk about you know last week there was this interview that linda yaccarino gave at the code conference that was the talk of all tech circles because it highlighted the disconnect between her and and owner Elon Musk.

13:43There were so many kind of cringy moments where she held up her phone and showed that X was not even on her home screen. She botched a lot of the user numbers saying various figures at different points in their interview and just she couldn't respond to a lot of things that Elon Musk had said. It seemed like she had never heard them before. So she's trying to work her way out of that PR hole that she dug herself last year right I mean there is a lot of different angles because actually the former head of Twitter trust and safety went on right before her and kind of skewered a lot of things that the new regime had done and so people said that she was set up to fail and yet yeah there's always been these rumors that she's kind of a lame duck CEO and that Elon still pulls the strings and that did nothing to dispel it so but it is interesting I mean they do ship stuff we talked about live stream shopping they also Elon did a 45 or 50 minute live stream of him playing Diablo, which is a video game.

14:39So they're trying to get into Twitch streaming as well, type vibes. So again, X is a everything app. I'm on board with the everything app idea concept, if they can monetize users in the most intelligent way possible. So they already are paying users based on the impressions they get from writing. If then they also pull in, uh, if you can monetize video views as well, and then also get live streaming as well. So suddenly you're a creator and say, wait a second, I can monetize every single part of kind of the creative sphere all under one hood. It becomes a compelling proposition. So even though all these setbacks, like this interview was awful, it didn't go well, all this, like the rise of hate speech on the platform, if they can figure out the creator side, I do think that there is a path forward for X.

15:22All right, Neil, before we jump into our next half of the show, we're going to take a quick break.

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16:24Neil, we are back with another edition of Toby's Trends where I, a screen-addicted Gen Zer, educate you, a millennial with lower back pain, about a recent trend I've had my eye on. And that trend is influencer-owned brands making it mainstream. So I'd venture to guess that most of our listeners know who Mr. Beast is. He's the biggest individual YouTuber in the world and has recently dipped his toe into other business ventures as well. One of those ventures is a chocolate bar brand called Feastables. Now, Feastables is a juggernaut already. Soon after its launch, it was already pulling in over$10 million a month.

17:00But the reason we're talking about Mr. Beast and Feastables is that they just became the jersey sponsor for the NBA's Charlotte Hornets. Neil, this is a pretty big deal. The sponsorship is worth a reported$5 million a year. So Feastables has to be making some cash to be able to afford it. And in fact, when the Morning Brew Twitter account tweeted about the deal, We included that 10 million a month stat and Mr. Beast responded to us and said we needed to add a zero to that number. So you do the math. But what is also interesting to me is that we are increasingly seeing the lines blur between creator-led brands and more traditional media properties like the NBA.

17:38This is an example of a YouTuber going extremely mainstream. I think it's really cool. I mean, this guy, Mr. Beast, his name is Jimmy Donaldson. He's literally just a dude from North Carolina who loves basketball. and he's built himself a big enough of a brand and made enough money to sponsor his favorite basketball team and get his brand up on the jersey. So I don't really have anything more to, I don't have anything to complain about. I think this is so cool. I wish I was in a position to do this. I would do it for the Sixers. I do, that is. Morning for Daily on the Sixers. That would be so cool.

18:10I do think it is more of a passion project because the whole idea of a creator-led brand with someone with a scale of Mr. Beast is that you don't have to pay for advertising. Because you control the means of distribution, you have a YouTube channel that pulls in 100 million views every single video you post. And so everyone was kind of scratching their heads saying, like, you don't actually need the NBA, Mr. Beast. But I do think he does love basketball. He is a North Carolina boy. So it does seem like maybe this is just something that you— Maybe you reach new audiences, too. I mean, the people who watch the NBA and the people who watch Mr.

18:41Beast YouTube maybe are different audiences. So you can't always rely on your own YouTube channel to get your message across or get your brand out there. So, yeah, maybe you always have to spend money on advertising, as we'll talk about in this next story. Even Tesla, after decades of not advertising, they have started to. So you reach a limit with organic reach. Neil, that was a great transition. So I'll let you ride the ride. I'll ride that transition. For our next story, we have a food fight in the freezer aisle. Cooler Screens, a company that sells digital cooler doors, is suing Walgreens for$200 million in damages, saying that the chain didn't fulfill its contract of using its digital displays across all the stores that said it would.

19:25Okay, what the heck is a digital cooler door? Well, imagine going into Walgreens for an Arizona iced tea. But when you get to the beverage aisle, instead of seeing a transparent glass door, you see a digital display that shows you advertisements and also shows a digital rendering of the contents of the refrigerator. Cooler Screen says the goal is to give consumers more relevant information about what's inside the fridge or freezer. Its CEO says this is the future of retail and shopping, but it doesn't seem like a future Walgreens wants to be a part of anymore. Customers noticed these Internet connected doors in 2022 and posted viral TikToks complaining about them, saying that they made shopping way more complicated than it needed to be.

20:05Walgreens, for its part, said cooler screens did not meet its contractual obligations by providing bad technology that often glitched. Cooler screens has shot back that Walgreens has poorly maintained refrigerator infrastructure. So here we are in a legal dispute over digital doors in convenience stores. Yeah, it is so interesting to read some of the complaints from it, too. Sometimes these cooler screens were even sparking and catching fire. So not only were they not effective, but they're also dangerous in some cases. Again, this is a very tit-for-tat thing where, yeah, cooler screens was saying, listen, Walgreens, you have such bad electrical connectivity.

20:39Of course, our screens can't stay on. And then Walgreens was like, your screens just don't work. So that we're definitely going to see a protracted kind of legal battle going forward. But also, I do think it is interesting that some of these companies are realizing that, hey, wait a second, we have a ton of foot traffic. We get a lot of website traffic. We could be media buyers and media partners of sorts for a lot of brands. So Walmart, Uber, Marriott have ramped up the development of their own kind of media networks, which allow a brand to place an ad in their website or their app or on their literal screen.

21:12So it is an interesting advertising trend to see these consumer-facing brands say, wait a second, we can be an advertising platform as well. Right. But about this Walgreens thing, can you make an argument that this isn't the stupidest thing in the world? It's so dumb. Because you're basically just putting a barrier between the consumer and getting what they want. What is wrong with just looking into a transparent refrigerator and extracting exactly the drink you want or the DiGiorno pizza? because you're just putting a barrier and it's obviously going to make consumers angry. From a consumer perspective, it's not a better experience.

21:47But from a brand perspective, I can see the pitch because you can then, there's sensors in the doors that can gauge whether someone has seen an ad. They can also gauge whether they opened and closed the door. So you start to get a little insight into consumer behavior. Like, oh, if I see an ad for body armor, will I open the door and actually grab a body armor or not? So I can see how, of course, everything goes back to data. but I'm totally on your side. Worst consumer experience by far. Yeah, I mean, there's nothing broken with the current way of opening, seeing what's in the content of the refrigerator, opening it and then grabbing it.

22:21So creating a barrier in between that just seems like you're going to piss off a lot of people. Maybe if there's a way to get, I don't know. I'm trying to think of what, maybe there definitely is a place for digital screens somewhere. They've been experimenting with voice recognition, which could work. So maybe there's a way that you can infuse this technology without it being so annoying, but I don't see any current way. Yeah, just don't cover the entire case. A glass pane works just fine. Just fine. Neil, we have a crazy story to end the show today. So Katy Perry is currently involved in a lawsuit against Carl Westcott, who's the founder of 1-800-Flowers, over the sale of his eight-bedroom mansion in Santa Barbara.

23:03Westcott is also crucially 84 years old. Now that's important because even though he agreed to sell the mansion to Perry for$15 million, he later contended that he could not actually consent to the sale given he was suffering from mental decline and had been on prescription opiates for an upcoming surgery when he agreed to sell the home. Now, Westcott and his family are working to establish the Protecting Elder Realty for Retirement Years, aka the Perry Act, in order to address the risk of elder financial abuse. The act establishes a 72-hour cool-down period where either party involved can rescind the agreement without penalty.

23:42Neil, Katy Perry is literally getting California real estate laws proposed against her, and the wildest part is this is a pattern for her. This is not the first time. So back in 2015, I believe it was, Perry wanted to buy a former convent from a bunch of nuns, and they didn't want to sell it to her. They wanted to sell it to someone else. So there's this legal battle, and Katy Perry eventually won out. But the most famous thing that happened during that trial was that a nun collapsed and died during the legal proceedings. So people are saying, Katy Perry, why are you just taking, what do you have against older people here?