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Column: In Michael Lewis, Sam Bankman-Fried found his last and most willing victim

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Column: In Michael Lewis, Sam Bankman-Fried found his last and most willing victim

The main hazard in telling a big story through the eyes of its main participant is the need to rely on his version as the honest truth.

Journalism schools will be able to use “Going Infinite: The Rise and Fall of a New Tycoon,” Michael Lewis’ new book about the collapse of the FTX cryptocurrency exchange and the fall of its boss, Sam Bankman-Fried, as a textbook on the imperative need to approach a subject with a healthy helping of skepticism.

To make a long story short, in this book Lewis doesn’t exercise any.

This is … the greatest financial mania the world has ever seen.

— Zeke Faux

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The result is what amounts to a defense brief for Bankman-Fried for his fraud trial in New York federal court, which opens Tuesday — coinciding, as it happens, with the publication date of Lewis’ book.

Fortunately, readers interested in the story of the cryptocurrency scam and Bankman-Fried’s rise and fall can turn to a much more convincing (and more entertaining) book. That’s “Number Go Up: Inside Crypto’s Wild Rise and Staggering Fall,” by Zeke Faux, a financial investigative reporter for Bloomberg.

Faux demonstrates his incisive grasp of the story with the very first words of his prologue: “‘I’m not going to lie,’ Sam Bankman-Fried told me,” he writes. “That was a lie.”

Lewis, by contrast, opens his book with an anecdote about a long hike he took with Bankman-Fried in the hills above Berkeley in which he listened to his subject spin wild yarns about all the money he was making in crypto, “all of which, I should say here, turned out to be true.”

Well, no. Not really.

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The fortune of tens of billions of dollars that Bankman-Fried bragged about to Lewis was built on quicksand — assets in the form of cryptocurrency tokens the values of which were set by Bankman-Fried himself or by the tokens’ other promoters, based on no rational yardsticks.

The venture investors who poured millions into FTX were seduced by Bankman-Fried’s boyish torrent of gibberish so baroque they thought it must be meaningful on a level beyond anything they learned in business school. The politicians who accepted his millions in donations were seduced by his self-crafted image as an altruist of remarkable and unique benevolence and his (utterly false) claim to run a responsible crypto exchange.

The sports and entertainment stars — Tom Brady, Larry David, Anna Wintour — who swarmed around this shlub in cargo shorts were seduced by their need to be in on a new thing.

This torrent of nonsense didn’t snow many people who knew anything about finance and weren’t angling for a piece of his action, like Bloomberg’s Matt Levine.

But it sure seems to have snowed the hell out of Michael Lewis, who wrote about financial schemes in “Liar’s Poker,” “Flash Boys” and “The Big Short.” In this book, he credulously quotes a venture capitalist speculating that Bankman-Fried “had a real shot at being the world’s first trillionaire.”

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Lewis doesn’t say who told him so, but the absurd conjecture appeared in a slavish profile written by a freelance author for Sequoia Capital, which invested in FTX; the profile has since been scrubbed from the firm’s website, presumably out of mortification.

When it all came crashing down, the investors lost their money, the politicians had to give some of theirs back, the stars stopped returning his phone calls.

Who else suffered? Of the collapse of FTX, the criminal charges against Bankman-Fried and the entire edifice of cryptocurrency, Faux accurately writes: “This is … the greatest financial mania the world has ever seen.”

Lewis, asked by a smirking, sycophantic interviewer named Jon Wertheim on “60 Minutes” Sunday if the FTX scam wasn’t just like Elizabeth Holmes’ hawking a fraudulent blood testing device under the Theranos name, rejected the thought.

Holmes was “supplying phony medical information to people that might kill them,” he said. “In this case, what you’re doing is possibly losing some money that belonged to crypto speculators in the Bahamas.” Then he caught himself, and added, “On the other hand, this is not to excuse.”

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Notwithstanding Lewis’ churlish dismissal, the truth is that millions of innocent people, many of them small investors gulled by narratives like Bankman-Fried’s, have lost their life savings in cryptocurrency scams.

Reading their pleas to a judge overseeing one such collapse is heartbreaking — lives, marriages, hopes obliterated. (“Now when I go to work, I drink water and eat any scraps I can find for lunch. … I am in deep depression and do not know if I can pull myself out of this,” wrote one.)

In telling this story, Faux has one major advantage over Lewis: Almost from the start, he had crypto’s number. “From the beginning,” he writes, “I thought that crypto was pretty dumb. And it turned out to be even dumber than I imagined.”

Faux puts meat on those bare bones by escorting his readers to many of the epicenters of the crypto scam — Miami, the Bahamas, the Philippines and more. He conducted interviews with hundreds of promoters, gamblers and victims.

He visits a vast metropolis of half-abandoned high-rises outside Phnom Penh, Cambodia, where human traffickers imprison thousands of people, injecting them with amphetamines or murdering resisters, forcing them to entice credulous victims around the world into fake romantic relationships via video chats, the goal being to steal their money via crypto investments.

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He stops by a Philippine town where virtually the entire populace was enticed into playing the online game Axie Infinity to earn crypto tokens, until the edifice crashed, leaving the destitute players holding worthless crypto. (The Silicon Valley venture firm Andreessen Horowitz led a $152-million investment round in the game’s distributor.)

From the day he started his inquiry into bitcoin and the entire crypto world, Faux writes, “I had seen nothing but red flags.” Even though 15 years had passed since a pseudonymously published white paper had laid out the principles of bitcoin and launched the entire cryptocurrency craze, “Hardly anyone knew what cryptocurrencies were for. … It was unclear why many of the coins would be worth anything at all.”

One answer he found was that the crypto world is populated by the same species of crook behind every boomtime swindle known to history: “hucksters, zealots, opportunists, and outright scammers,” many of whom became unimaginably rich, at least for a time — or at least seemed so.

Lewis makes a cameo appearance in Faux’s book, interviewing Bankman-Fried onstage at an April 2022 conference in the Bahamas sponsored by FTX.

“The author’s questions were so fawning,” Faux observes, “they seemed inappropriate for a journalist.” Lewis told Faux that he was already planning his book but denied that FTX had paid him for his appearance.

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Faux says Lewis also told him he thought U.S. regulators were hostile to crypto because they had been brainwashed or bought off by Wall Street. “You look at the existing financial system,” Faux quotes Lewis, “and the crypto version is better.”

One doesn’t need to validate the quotes, since their essence permeates Lewis’ book. Throughout “Going Infinite,” Lewis never really comes to grips with the fundamental fact of crypto: It isn’t worth anything.

Cryptocurrencies aren’t practical as currencies to buy things, they don’t have intrinsic value (their prices are based entirely on what an owner can persuade someone else to pay for them — the “greater fool” theory in action), their abundance or scarcity are entirely artificial, and the supposed interest yields bruited about by promoters are either imaginary or the product of Ponzi schemes.

Lewis doesn’t seem to believe this, or at any rate doesn’t offer his readers this necessary insight. In his only significant effort to explain how the crypto system works, he simply refers his readers to a 40,000-word Businessweek article by Levine, without making it too clear that Levine’s article, like his subsequent commentaries, explains why crypto is essentially worthless.

Lewis waves his hand at the vacuum at the heart of bitcoin: “Bitcoin often gets explained,” he writes, “but somehow never stays explained.”

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His failure to see crypto clearly for what it is (or isn’t) allows Lewis to offer readers the pretense that there was value in Bankman-Fried’s FTX, or would have been, had he not been brought low by an old-fashioned “run on the bank” in which investors tried to pull their money out so quickly that their claims couldn’t be honored. That might be true, if crypto weren’t so fundamentally crooked.

In “Going Infinite,” Lewis advances the conspiracy theory he offered Faux about the hostility of the financial establishment. He’s scornful about John Ray, the experienced financial cleanup artist brought into FTX as its post-bankruptcy CEO to untangle the mess and find whatever assets still exist to pay back customers and creditors.

Lewis paints Ray as an old fogey who simply doesn’t get it and has tried to impose old-school financial standards on new-school operations such as FTX. He implies that Ray came onto the scene with a preconception of FTX as a criminal enterprise, missing the truth that it was a new thing, comparing him to “an amateur archaeologist [who] had stumbled upon a previously unknown civilization” and can’t decode its customs or language.

Lewis quite plainly started this book project thinking he could write the definitive foundation story of cryptocurrency as “the new new thing,” to quote the title of one of his earlier books. When the thing collapsed, he was unable to shed his initial enchantment.

Some authors who discover in the midst of a project that their preconceptions are dead wrong have been able to reverse course — one thinks of Joe McGinniss’ “Fatal Vision,” which he started convinced of the innocence of murderer Jeffrey MacDonald, only to become conviced of MacDonald’s guilt and to report on his own journey toward the truth.

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Lewis hasn’t traced that route, even though the truth about Bankman-Fried’s activities — that he never honored his own promises about the integrity of his accounting — stared him in the face. To the end, he treats Bankman-Fried as sort of an endearing scamp who got in over his head, essentially by an adorable habit of inattention.

He accepts the self-image of Bankman-Fried and his parents, Stanford law professors Joe Bankman and Barbara Fried, as people with “basically zero interest in money” — never mind allegations in a lawsuit filed by Ray that they profited by tens of millions of dollars from their son’s enterprise, including the purchase of luxury property in the Bahamas, or that Bankman, according to a lawsuit by FTX’s new management, complained that his salary with the company was only $200,000 rather than $1 million.

Amazingly, there are still efforts in Congress to find ways to legalize and regulate cryptocurrency, which serves no significant financial purpose known to humankind. Those efforts can only be helped by doting narratives like Lewis’.

But lawmakers — and investors and aficionados of good true-crime stories — will benefit more from Faux’s judgment that while Bankman-Fried was being lionized in public as a “benevolent prodigy,” he was in fact “secretly embezzling billions of dollars of his customers’ money and blowing it on bad trades, celebrity endorsements, and an island real-estate shopping spree to rival any drug kingpin’s.”

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How Poshmark Is Trying to Make Resale Work Again

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How Poshmark Is Trying to Make Resale Work Again

Lauren Eager got into thrifting in high school. It was a way to find cheap, interesting clothes while not contributing to the wastefulness of fast fashion.

In 2015, in her first year of college, she downloaded the app for Poshmark, a kind of Instagram-meets-eBay resale platform. Soon, she was selling as well as buying clothes.

This was the golden age of online reselling. In addition to Poshmark, companies like ThredUp and Depop had sprung up, giving a second life to old clothes. In 2016, Facebook debuted Marketplace. Even Goodwill got into the action, starting a snazzy website.

The platforms tapped into two consumer trends: buying stuff online and the never-gets-old delight of snagging a gently used item for a fraction of the original cost. During the Covid-19 pandemic, as people cleaned out their closets, enthusiasm for reselling intensified. It was so strong that Poshmark decided to go public. On the day of its initial public offering in January 2021, the company’s market value peaked at $7.4 billion, roughly the same as PVH’s, the company that owns Calvin Klein and Tommy Hilfiger, at the time.

Then, the business of old clothes started to fray.

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Using the Poshmark app, Ms. Eager and others said, started to feel like trying to find something in a messy closet. The app was cluttered with features that did not work or that she did not use, and it felt “spammy,” she said, sending too many push notifications.

Many platforms found selling used items hard to scale. Now, online resellers are trying to recalibrate. Last year, ThredUp decided to exit Europe and focus on selling in the United States. Trove, a company that helps brands like Canada Goose and Steve Madden resell their goods, purchased a competitor, Recurate. The RealReal, a luxury consignor, appointed a new chief executive as the company tried to improve profitability.

Poshmark is undergoing perhaps the biggest reinvention. In 2023, Naver, South Korea’s biggest search engine as well as an online marketplace, bought the company in a deal valued at $1.6 billion, less than half its IPO price.

Something of a mash-up of Google and Amazon, Naver is betting it can rebuild Poshmark, which has 130 million active users, with the same technology that made Naver dominant in its own country.

It may also help breathe new life into the resale market. Analysts think the resale fashion market still has room to grow in the United States, with revenue expected to increase 26 percent to $36.3 billion by 2028, according to the retail consultancy firm Coresight Research.

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New legislation in California could help. The law, passed last year, requires brands and retailers that operate in the state and generate at least $1 million to set up a “producer responsibility organization” to collect and then reuse, repair or recycle its products. Resale platforms like ThredUp and Poshmark could be in a position to help brands carry out that mandate.

At the moment, though, Naver’s focus for Poshmark is more basic: Make it a better place to sell and shop. The company has the “operating know-how” to do that, said Philip Lee, a founder of the media outlet The Pickool, which covers both South Korean and U.S. tech companies.

“They’re trying to renovate Poshmark and then expand the market share,” he said.

Poshmark, which is based in Redwood City, Calif., was founded in 2011 by Manish Chandra, an entrepreneur and former tech executive, and three others. In trying to expand, Poshmark faced a problem common to resellers: Capturing the excitement of the secondhand-shopping treasure hunt while not frustrating buyers with an endless scroll. The company knew it needed better search, as well as interactive elements that gave people more reasons to come beyond paying $19 for a J. Crew sweater.

For its part, Naver was looking for ways to push beyond South Korea, where its commerce and search businesses were already mature. The growing online resale market in the United States presented an opportunity, and also gave the company access to the largest consumer market in the world.

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Commerce is a big growth engine for us,” Namsun Kim, Naver’s chief financial officer, said. And the peer-to-peer sector, where users sell to one another, was still in its infancy, with room to expand. But, Mr. Kim added, “it’s a more challenging segment, and that’s why it’s harder for a lot of the larger players to enter.”

There are two common business models for resale: peer-to-peer and consignment. With consignment, a platform collects and redistributes physical goods. Poshmark uses the peer-to-peer model, which relies on scores of people — many of them novices — haggling over prices and then mailing items to one another. This decentralization can be a headache for brands, which like to maintain a certain level of control of their products. And platforms like Poshmark must make buyers comfortable with trusting the sellers on their site.

Before the Naver purchase, it was difficult to push through needed technological changes, said Vanessa Wong, the vice president of product at Poshmark.

“I would always talk to my engineers and ask, ‘What if we do this or do that?’ They’re like, ‘That’s hard. The effort’s really high,’” Ms. Wong said.

Naver’s purchase offered both the investment and the expertise to pull off the changes. Founded in 1999, the company is everywhere in South Korea.

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“We are not just a simple search technology or A.I. service,” said Soo-yeon Choi, the chief executive of Naver, whose headquarters are near Seoul. The company, she said, “alleviates the frustrations of people, which is what is needed to help growth.”

Search built Naver “into the massive power that they are in Korea,” said Mr. Chandra, who stayed on as chief executive after Naver’s purchase. It was the top priority when the company bought Poshmark.

Several new elements for users and sellers have been introduced. With a tool called Posh Lens, users can take a photo of an item and, using Naver’s machine-learning technology, the site populates listings that are the same or similar to the shoe or tank top that they’re searching for. A paid ad feature for sellers called “Promoted Closet,” pushes listings higher on customer feeds.

Poshmark also introduced live shows, some of which are themed, to draw in the TikTok generation and increase engagement. One party auctioned off clothing previously worn by South Korean celebrities, a connection that was made with the help of Naver.

Still, the resale market is going through growing pains and has not quite found its footing since the height of the pandemic. It’s not clear whether the changes taking place at Poshmark will be enough. In May, Mr. Kim, Naver’s finance chief, said in an earnings call that Poshmark’s profitability was improving, but by November, the company was cautioning that growth had slowed because of weakness in the peer-to-peer resale market in North America.

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The company has already done some backpedaling on unpopular decisions.

In October, Poshmark introduced a new fee structure, which increased costs for buyers. Sellers, fearing that higher costs would make consumers bolt, revolted. Within weeks, the company scrapped the new fee structure.

And there are still user headaches: tags and keywords that help users find what they’re looking for can be miscategorized. Sellers sometimes tag their products incorrectly to get more eyeballs on their less popular products. (Hard-to-offload Amazon leggings, for example, may be listed as Free People apparel.)

The company is beta testing changes with its frequent sellers — people like Alex Mahl, who sells thousands of dollars in apparel on the site each year. And within dedicated Facebook groups related to Poshmark, there’s a lot of chatter about the changes that sellers and buyers would still like to see.

“The only way for it to do well is there’s going to be constant changes,” Ms. Mahl said about the tweaks on Poshmark. “If you were just on an app that never changed — one, it would be boring, and two, the opportunity to just do better wouldn’t be there.”

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One recent morning, Ms. Eager, the seller who joined Poshmark back in college, was pleasantly surprised to find that the app had some new features she actually liked. She snapped a photo of her Aerie gray tank top with Posh Lens. Within seconds, the app populated listings of similar products. It was so much better than conjuring up the adjectives needed to describe it.

“Love it,” Ms. Eager exclaimed.

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When receipts of home renovations are lost, is the tax break gone too?

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When receipts of home renovations are lost, is the tax break gone too?

Dear Liz: I have sold my family home recently after almost 50 years. I had done lots of improvements throughout those years. Due to a fire 15 years ago, all the documentation for these improvements has been destroyed. How do I document the improvements for the capital gains tax calculation?

Answer: As you probably know, you can exclude $250,000 of capital gains from the sale of a principal residence as long as you own and live in the home at least two of the previous five years. The exclusion is $500,000 for a couple.

Once upon a time, that meant few homeowners had to worry about capital gains taxes on the sale of their home. But the exclusion amounts haven’t changed since they were created in 1997, even as home values have soared. Qualifying home improvements can be used to increase your tax basis in the home and thus decrease your tax bill, but the IRS probably will demand proof of those changes should you be audited.

You could ask any contractors you used who are still in business if they will provide written verification of the work they performed, suggests Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. You also could check your home’s history with your property tax assessor to see if its assessment was adjusted to reflect any of the improvements.

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At a minimum, prepare a list from memory of the improvements you made, including the year and the approximate cost. If you don’t have pictures of the house reflecting the changes, perhaps friends and relatives might. This won’t be the best evidence, Luscombe concedes, but it might get the IRS to accept at least some increase in your tax basis.

If you’re a widow or widower, there’s another tax break you should know about. At least part of your home would have gotten a step-up in tax basis if you were married and your co-owner spouse died. In most states, the half owned by the deceased spouse would get a new tax basis reflecting the home’s current market value. In community property states such as California, both halves of the house get this step-up. A tax pro can provide more details.

Other homeowners should take note of the importance of keeping good digital records. While documents may not be lost in a fire, they may be misplaced, accidentally discarded or (in the case of receipts) so faded they’re illegible. To make sure documents are available when you need them, consider scanning or taking photographs of your records and keeping multiple copies, such as one set in your computer and another in a secure cloud account.

When an employee is misclassified as contractor

Dear Liz: A parent recently wrote to you about a son who was being paid as a contractor. I know someone else who got a job that did not “take out taxes from his paycheck.” Such workers believe they are pocketing more money, but unfortunately, too many do not know about the nature of withholding. They only learn if they choose to file for their expected refund, but instead discover an exorbitant tax liability that a paycheck-to-paycheck worker cannot pay.

The sad fact is that many of these employers improperly classify their workers, who are truly employees, as independent contractors! And they do this to avoid paying their own portion of Social Security and unemployment taxes and also workers compensation insurance.

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If workers believe that they have been misclassified (the IRS website provides all criteria), they can file IRS Form SS-8 and Form 8919, which will allow them to pay only their allocated half of their Social Security taxes. Hopefully the IRS will then contact these employers to correct their wrong classifications. And finally, it should be a law that, when hired, all true independent contractors should be given a clear form (not fine print on their employment agreements) that informs them of their status and the need to make estimated tax payments.

Answer: A big factor in determining whether a worker is an employee or contractor is control. Who controls what the worker does and how the worker does the job? The more control that’s in the employer’s hands, the more likely the worker is an employee.

However, the IRS notes that there are no hard and fast rules and that “factors which are relevant in one situation may not be relevant in another.”

The form you mentioned, IRS Form SS-8, also can be filed by any employer unsure if a worker is properly classified.

Liz Weston, Certified Financial Planner®, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.

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Inside Elon Musk’s Plan for DOGE to Slash Government Costs

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Inside Elon Musk’s Plan for DOGE to Slash Government Costs

An unpaid group of billionaires, tech executives and some disciples of Peter Thiel, a powerful Republican donor, are preparing to take up unofficial positions in the U.S. government in the name of cost-cutting.

As President-elect Donald J. Trump’s so-called Department of Government Efficiency girds for battle against “wasteful” spending, it is preparing to dispatch individuals with ties to its co-leaders, Elon Musk and Vivek Ramaswamy, to agencies across the federal government.

After Inauguration Day, the group of Silicon Valley-inflected, wide-eyed recruits will be deployed to Washington’s alphabet soup of agencies. The goal is for most major agencies to eventually have two DOGE representatives as they seek to cut costs like Mr. Musk did at X, his social media platform.

This story is based on interviews with roughly a dozen people who have insight into DOGE’s operations. They spoke to The Times on the condition of anonymity because they were not authorized to speak publicly.

On the eve of Mr. Trump’s presidency, the structure of DOGE is still amorphous and closely held. People involved in the operation say that secrecy and avoiding leaks is paramount, and much of its communication is conducted on Signal, the encrypted messaging app.

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Mr. Trump has said the effort would drive “drastic change,” and that the entity would provide outside advice on how to cut wasteful spending. DOGE itself will have no power to cut spending — that authority rests with Congress. Instead, it is expected to provide recommendations for programs and other areas to cut.

But parts of the operation are becoming clear: Many of the executives involved are expecting to do six-month voluntary stints inside the federal government before returning to their high-paying jobs. Mr. Musk has said they will not be paid — a nonstarter for some originally interested tech executives — and have been asked by him to work 80-hour weeks. Some, including possibly Mr. Musk, will be so-called special government employees, a specific category of temporary workers who can only work for the federal government for 130 days or less in a 365-day period.

The representatives will largely be stationed inside federal agencies. After some consideration by top officials, DOGE itself is now unlikely to incorporate as an organized outside entity or nonprofit. Instead, it is likely to exist as more of a brand for an interlinked group of aspirational leaders who are on joint group chats and share a loyalty to Mr. Musk or Mr. Ramaswamy.

“The cynics among us will say, ‘Oh, it’s naïve billionaires stepping into the fray.’ But the other side will say this is a service to the nation that we saw more typically around the founding of the nation,” said Trevor Traina, an entrepreneur who worked in the first Trump administration with associates who have considered joining DOGE.

“The friends I know have huge lives,” Mr. Traina said, “and they’re agreeing to work for free for six months, and leave their families and roll up their sleeves in an attempt to really turn things around. You can view it either way.”

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DOGE leaders have told others that the minority of people not detailed to agencies would be housed within the Executive Office of the President at the U.S. Digital Service, which was created in 2014 by former President Barack Obama to “change our government’s approach to technology.”

DOGE is also expected to have an office in the Office of Management and Budget, and officials have also considered forming a think tank outside the government in the future.

Mr. Musk’s friends have been intimately involved in choosing people who are set to be deployed to various agencies. Those who have conducted interviews for DOGE include the Silicon Valley investors Marc Andreessen, Shaun Maguire, Baris Akis and others who have a personal connection to Mr. Musk. Some who have received the Thiel Fellowship, a prestigious grant funded by Mr. Thiel given to those who promise to skip or drop out of college to become entrepreneurs, are involved with programming and operations for DOGE. Brokering an introduction to Mr. Musk or Mr. Ramaswamy, or their inner circles, has been a key way for leaders to be picked for deployment.

That is how the co-founder of Loom, Vinay Hiremath, said he became involved in DOGE in a rare public statement from someone who worked with the entity. In a post this month on his personal blog, Mr. Hiremath described the work that DOGE employees have been doing before he decided against moving to Washington to join the entity.

“After 8 calls with people who all talked fast and sounded very smart, I was added to a number of Signal groups and immediately put to work,” he wrote. “The next 4 weeks of my life consisted of 100s of calls recruiting the smartest people I’ve ever talked to, working on various projects I’m definitely not able to talk about, and learning how completely dysfunctional the government was. It was a blast.”

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These recruits are assigned to specific agencies where they are thought to have expertise. Some other DOGE enrollees have come to the attention of Mr. Musk and Mr. Ramaswamy through X. In recent weeks, DOGE’s account on X has posted requests to recruit a “very small number” of full-time salaried positions for engineers and back-office functions like human resources.

The DOGE team, including those paid engineers, is largely working out of a glass building in SpaceX’s downtown office located a few blocks from the White House. Some people close to Mr. Ramaswamy and Mr. Musk hope that these DOGE engineers can use artificial intelligence to find cost-cutting opportunities.

The broader effort is being run by two people with starkly different backgrounds: One is Brad Smith, a health care entrepreneur and former top health official in Mr. Trump’s first White House who is close with Jared Kushner, Mr. Trump’s son-in-law. Mr. Smith has effectively been running DOGE during the transition period, with a particular focus on recruiting, especially for the workers who will be embedded at the agencies.

Mr. Smith has been working closely with Steve Davis, a collaborator of Mr. Musk’s for two decades who is widely seen as working as Mr. Musk’s proxy on all things. Mr. Davis has joined Mr. Musk as he calls experts with questions about the federal budget, for instance.

Other people involved include Matt Luby, Mr. Ramaswamy’s chief of staff and childhood friend; Joanna Wischer, a Trump campaign official; and Rachel Riley, a McKinsey partner who works closely with Mr. Smith.

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Mr. Musk’s personal counsel — Chris Gober — and Mr. Ramaswamy’s personal lawyer — Steve Roberts — have been exploring various legal issues regarding the structure of DOGE. James Burnham, a former Justice Department official, is also helping DOGE with legal matters. Bill McGinley, Mr. Trump’s initial pick for White House counsel who was instead named as legal counsel for DOGE, has played a more minimal role.

“DOGE will be a cornerstone of the new administration, helping President Trump deliver his vision of a new golden era,” said James Fishback, the founder of Azoria, an investment firm, and confidant of Mr. Ramaswamy who will be providing outside advice for DOGE.

Despite all this firepower, many budget experts have been deeply skeptical about the effort and its cost-cutting ambitions. Mr. Musk initially said the effort could result in “at least $2 trillion” in cuts from the $6.75 trillion federal budget. But budget experts say that goal would be difficult to achieve without slashing popular programs like Social Security and Medicare, which Mr. Trump has promised not to cut.

Both Mr. Musk and Mr. Ramaswamy have also recast what success might mean. Mr. Ramaswamy emphasized DOGE-led deregulation on X last month, saying that removing regulations could stimulate the economy and that “the success of DOGE can’t be measured through deficit reduction alone.”

And in an interview last week with Mark Penn, the chairman and chief executive of Stagwell, a marketing company, Mr. Musk downplayed the total potential savings.

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“We’ll try for $2 trillion — I think that’s like the best-case outcome,” Mr. Musk said. “You kind of have to have some overage. I think if we try for two trillion, we’ve got a good shot at getting one.”

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