Happy Wednesday, and welcome back to Dry Powder.

It’s said that the real treasure of any adventure is the friends you make along the way, but in the case of Anthony Scaramucci, aka The Mooch, and his recent adventure-cruise to the Bahamas, that treasure included not only a new friend—the 30-year-old FTX crypto kingpin Sam Bankman-Fried, aka S.B.F.—but also very real treasure, in the form of a $45 million-dollar investment from FTX’s venture arm into the general partner of Scaramucci’s hedge fund of funds, SkyBridge.

So I called up The Mooch to ask him how the partnership came about. Our discussion about the deal, the future of crypto, and, of course, Donald Trump, is below.

When The Mooch got to Nassau, he called up S.B.F., whom he had gotten to know over the years from his participation in The Mooch’s respected SALT conference, where I have served as a paid interviewer, and as The Mooch pivoted more heavily into crypto. “You’re the only one standing between me and eight hours at the waterpark,” The Mooch told S.B.F. “You’ve got to come over and have lunch with me.”

S.B.F. obliged. He drove to the harbor in his Toyota Corolla and met The Mooch. Over lunch, they started talking about The Mooch’s plans for SkyBridge, his hedge fund of funds that has been under pressure lately because of its struggling investments in crypto: SkyBridge has gated one fund, and another has been a little overwhelmed by investors wanting out. But the overall business, while small, is still profitable, Scaramucci told me during our conversation last week. “We can raise and lower salaries very easily,” he said. “If assets are going up, I raise my pay. If assets are going down, I cut my pay.”

As the two men got to talking, the older Mooch, 58, figured he might be able to help the younger and wealthier S.B.F., 30, and vice-versa. FTX had just started trading equities, for instance, which The Mooch has been buying and selling for years; he also had 34 years of Wall Street experience, and cut his teeth at Goldman Sachs. “He’s a DeFi guy who is probably going to move into some TradFi,” The Mooch told me. “I’m a TradFi guy that’s moving into DeFi… almost like a chocolate and peanut butter, Reese’s Peanut Butter Cups sort of thing.” Maybe The Mooch could share his Wall Street connections with S.B.F. and maybe S.B.F. could help The Mooch and SkyBridge get deeper into crypto. “We sort of walked out of the lunch with the idea that, ‘Hey, maybe there’s something more we can do strategically together,’” Scaramucci recalled.

The Mooch did not sell any of his roughly 31 percent stake in SkyBridge to S.B.F. as part of the first leg of the deal. Rather, S.B.F. bought primary stock from SkyBridge. It was SkyBridge’s idea to put $5 million of the $45 million into its checking account for working capital and to invest the remaining $40 million into an unidentified basket of beaten-down cryptocurrencies. “We’re trying to make a statement to people that we’ve pivoted,” The Mooch explained to me. “We’ve made an adaptation and a pivot in our business. And since we believe in the future of DeFi, we selected a group of currencies that we all mutually agreed upon, and bought those. We didn’t disclose those because we don’t want people predatorily shorting them and we don’t want people pumping them.”

The overall deal with S.B.F., including the option to buy a majority of the business, values SkyBridge at roughly the same $200 million as HNA Group, the big Chinese insurer, did back in 2017 when The Mooch was working himself into a job with the Trump White House and out of Wall Street. In the end, CFIUS—the Committee on Foreign Investment in the United States—blocked the sale of SkyBridge to HNA and The Mooch wrangled the unexpected job of the White House Director of Communications, starting on July 21, 2017. He lasted 11 days in the job, as he found himself at odds with his mercurial boss, and then returned back to New York City and SkyBridge, more famous than ever. The Mooch, who grew up in a blue collar town in Long Island before eventually earning a Harvard Law degree and starting his long march in finance at Goldman, dusted himself off and rededicated himself to SkyBridge and to the SALT Conference. “I try to tell my kids, ‘You have a setback in life, something traumatic or bad, turns out it could be one of the best things that ever happened to you,’” he explained.

The Mooch is the first to admit that SkyBridge has had a rough 2022. His overall fund is down some 22 percent so far this year. He’s put the gates up on its $230 million Legion Strategies fund and he’s had redemption requests of some $900 million from its flagship fund, which remains open. (He’s filling the redemption requests twice a year.) “When we’re getting our ass kicked at least I’m man enough to admit it,” he said. But he does not view FTX’s investment as a rescue financing. “We’ve had a bad year,” Scaramucci said. “I’m not mincing that. But you know when that happens to you on Wall Street, people start to swarm and start rumor mongering.” In the wake of the S.B.F. investment, “They really can’t do that at this point,” The Mooch said, adding that some of his investors are now reconsidering their decision to redeem. He said he’s got about $60 million worth of cryptocurrencies and other assets on SkyBridge’s balance sheet. “The likelihood of us going out of business at this point is probably zero,” he said.

Other positive developments for cryptocurrencies, he explained, include BlackRock’s decision to create a trust for their clients to invest in Bitcoin as well as BlackRock’s “Aladdin Project” with Coinbase to allow BlackRock clients to invest directly in Bitcoin. There’s also the next Bitcoin “halving,” coming in 2024, when the supply of available Bitcoins is cut in half. “That does improve prices,” The Mooch said, “or at least it has historically.” But he’s still waiting for more regulatory clarity from the Securities and Exchange Commission and the Commodities Futures Trading Commission before things really start to improve in the crypto market.

He admitted he’s been surprised by the 60 percent decline in the price of Bitcoin—to around $19,000—so far in 2022. He points to the collapse of Three Arrows Capital, a Singapore-based cryptocurrency hedge fund which was ordered to liquidate in June by a court in the British Virgin Islands, as being particularly damaging to the crypto market. “You and I know, because we’re been around the block a lot, there are no new mistakes, right?” he said. “So it’s like if Bernie Madoff had a baby with John Meriwether and they gave birth to Three Arrows. You didn’t just have a Ponzi scheme going, you had full on overleverage and fraud.” But he remains a crypto believer. He said he knows people who swore off tech stocks in 2000 after the dotcom bubble burst and said they wouldn’t buy Google when it went public in 2004 or buy any more of Amazon’s stock. “And yet, if you look back 22 years later, the sector of technology for the United States was probably the best investment thesis in the history of the United States,” he said. “I don’t want my clients to be missing what I think is this huge opportunity despite the current near-term weakness in prices.”

He doesn’t think Bitcoin is going to zero. “There are use cases for Bitcoin,” he said. “There are developers that are working on Bitcoin and Ethereum and Solana. Corporations are thinking about how they’re going to do transactions using cryptocurrencies, which may make those transactions more efficient and have fewer third parties involved in the transactions. There’s going to be a future for all this stuff.”

The Mooch said that SkyBridge’s “pivot” into crypto has been rewarding to him, despite the current chill. “I have learned a whole new industry, learned a whole new part of our economy,” he said. “I’ve teamed up with arguably the most influential person in that industry and in that genre. To me, I think this is a very exciting time ahead. And if you can stomach the volatility, which I’m obviously capable of stomaching, I think it could be a world class outcome. But again, I’m smart enough to know that I’ve been humbled by markets in life and that I don’t know [what the outcome will be], but I do feel very good about it.”

If and when S.B.F. executes his option to get 85 percent of SkyBridge or decides he wants to buy the whole enchilada from The Mooch and his other investors, Scaramucci would like to stay involved with the business in some way. “You know the cliché, ‘My wife married me, for better or worse, but not for lunch’,” he joked. He thinks she might actually be OK with him being home for lunch and stopping working. But he doesn’t want to. “I need to work,” he said. “I’m a product of a blue collar family and trained to work. I like working. My uncle died at 94. He was delivering motorcycles until his 92nd birthday. I want to work. Let’s say S.B.F. exercises his option, I hope I’m still running SkyBridge or the SALT Conference or overseeing something. Or helping with senior relationship management somewhere or something like that. I have no plans on hanging up my cleats at this point in my career.”

Before our time was up, I couldn’t resist having a conversation with The Mooch about Trump, and his prospects for both a criminal indictment and the Republican nomination for president in 2024. We had our conversation a few days before Letitia James, the New York State Attorney General, sued Trump, civilly, for years of alleged financial fraud in New York State court. The Mooch conceded he has no special insights into Trump these days. (They don’t speak anymore since The Mooch came to his senses about the former president.) Like others, including me, he’s heard Trump is poised to be indicted. “But I’ve been hearing that for three years and nothing ever comes of it,” he said. (Trump has, of course, constantly proclaimed his innocence and noted that he is the victim of various witch hunts and legal conspiracies.)

He has noticed, though, that as a student of Trump’s “mannerisms” over “a long period of time,” that the former president seems “remarkably subdued” these days “since they raided his house, or his club or whatever you want to call it.” He said Trump appears “worried” to him because he’s not in a “super offensive mode right now.” The “weird thing,” to him, remains the number of people in the country who still buy into the Trump shtick. “That tells you something about our society,” Scaramucci said. “We’ve disconnected a large group of people from our society and they feel left out and they’ve decided that they're going to turn to him to be their avatar, to express their anger and their displeasure with the establishment. Is he a good messenger for whatever that movement is? Is that the right messenger? The answer is no, but if he’s a bad guy, he happens to be, quote-unquote, their bad guy. They’ll accept weird behavior from him and treat it like it’s a non-entity. That tells you there’s something wrong that we have to try to figure out how to fix.”