The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

Sam Bankman-Fried: MIT-Educated Crypto Swindler Scammed Billions, Donated Millions to Democrats

Posted on | November 13, 2022 | No Comments

How could a Ponzi schemer hide in plain sight so long? That’s the real question at the heart of the story of how Sam Bankman-Fried, the son of two Stanford University law professor, became a celebrity in the financial world — rubbing shoulders with Bill Clinton and Tom Brady, among others — even while critics were pointing out that his crypto-currency empire appeared to be a swindle similar to multi-tier marketing schemes.

Universally known by his initials SBF, Bankman-Fried was nothing if not well-connected. His father, Joseph Bankman, is the Ralph M. Parsons Professor of Law and Business at Stanford Law School, while his mother, Barbara Fried, is the William W. and Gertrude H. Saunders Professor of Law at Stanford. SBF attended Massachusetts Institute of Technology (MIT) where “he graduated with a degree in physics and a minor in mathematics” in 2014. This is an important data point — whatever else you may say about Samuel Bankman-Fried, he is not stupid.

This is important, I say, because as you examine the rise and fall of SBF’s crypto empire, there are two possible explanations for what happened: (a) incompetence or (b) deliberate fraud. Given his academic pedigree, it’s difficult to believe it was (a) and therefore . . .

Say hello to SBF’s girlfriend/business partner, Caroline Ellison who, like Bankman-Fried, comes from an academic family. Her father, Glenn Ellison, is the Gregory K. Palm Professor of Economics at MIT. Caroline Ellison graduated from Stanford University in 2016 with a bachelor’s degree in mathematics. So the MIT/Stanford nexus is strong here and, if you’re old enough to remember the Vietnam War, you’re probably thinking about The Best and the Brightest — very smart people with degrees from elite schools who bring about catastrophic failure.

The details of what went wrong with SBF’s scheme are only partially known at this point. Until a couple of weeks ago, there was little awareness of any problem at the Alameda Research/FTX operation, and only in the past week has SBF’s world come crashing down. Basically, SBF created Alameda Research, “a quantitative trading firm specializing in cryptocurrencies,” in 2017. Then in 2019, he launched FTX, a cryptocurrency exchange that attracted over a million clients. He then started robbing Peter to pay Paul, making unauthorized use of funds belonging to FTX customers to prop up Alameda — allegedly, I hasten to add, as a responsible journalist. Predictably, there came a time when the money started running out, and SBF sought a new investor to rescue his enterprise; when that would-be investor did their “due diligence” research, they discovered that FTX’s bookkeeping was a toxic dumpster fire and — KABOOM! — the whole thing went bankrupt in a matter of days. The collapse was sudden, but it wasn’t as if people had no warning.

In April, FTX co-hosted the Crypto Bahamas conference at the Grand Hyatt Baha Mar in Nassau. The conference reportedly drew more than 2,000 people who paid $3,000 to attend. FTX’s cohost for the conference was “global thought leadership forum SALT” and the “alternative investments firm SkyBridge,” founded by Anthony Scaramucci. Among the headliners at the conference were NFL quarterback Tom Brady, former President Bill Clinton and former UK Prime Minister Tony Blair.

Literally every article written at the time about that conference referred to Sam Bankman-Fried as a “30-year-old billionaire,” and he appeared in a T-shirt, shorts and sneakers, which are apparently the only kind of clothes he owns. That was his chosen image — the billionaire slob.

Never trust people like that. Such behavior is disrespectful.

There was something else about SBF’s carefully crafted image, namely his oft-asserted claim to be an “effective altruist.” He wasn’t one of those greedy capitalists — no, Samuel Bankman-Fried was just making money so he could give it away as charity benefiting worthy causes. And, of course, by “worthy causes,” I mean woke liberal bullshit like “climate change” and massive campaign contributions to the Democratic Party.

“Sam Bankman-Fried . . . donated more than $40 million to Democrat candidates and super-PACs, including providing the initial funding for the Protect Our Future PAC. He was the second largest donor to the 2020 Biden campaign, pouring over $10 million into Biden-related campaign organizations.”
David Strom, HotAir.com, Nov. 10

Is anyone really surprised by this? Of course, there are shady people in the financial world who are Republicans, but the 30-year-old MIT-educated billionaire slob? The “effective altruist” who cares about climate change and has a girlfriend who’s a Harry Potter fan?

No, he’s a Democrat. It only makes sense. As the tangled web of SBF’s multi-billion-dollar swindle is unraveled, we should keep this in mind: Democrats collected tens of millions of dollars in campaign contributions from a scammer who defrauded investors around the world. The damage inflicted by Sam Bankman-Fried is only beginning to become apparent. It’s possible that SBF’s swindle may collapse the entire crypto-currency market and, I repeat, people were warned it was a Ponzi scheme.

 

Click and watch that video, which was posted to YouTube in April, just about the time SBF was hosting his Crypto Bahamas conference. Stephen Findeisen, a/k/a “Coffeezilla,” is a Texas A&M alumnus who got interested in exposing fraud because of his personal experiences with friends who got involved in a multi-tier marketing scam. As Findeisen points out, there were interviews in which Bankman-Fried more or less admitted he was running a Ponzi scheme. There were numerous clues that SBF’s business wasn’t legit but . . . “30-year-old billionaire”!

Some people want to believe that the economic “system” is rigged, and that successful people are beneficiaries of unearned “privilege.” In such a worldview, the most successful people are the worst people and all the truly good people are impoverished failures. This belief system functions as a balm to soothe the injured pride of people who secretly envy the ultra-wealthy. Such people like to think that the reason they’re not rich is because (a) capitalism is inherently corrupt and (b) they themselves are too ethical to do whatever it takes to get rich. Having no such illusions myself — I’m just too lazy and disorganized, so once my “Become a Famous Rock Star” plan didn’t work out, I basically had no choice but to become a journalist, a notoriously ill-paid occupation — I don’t hate or envy rich people, and would be very happy if my kids became rich, because then I could just sponge off them in my retirement years. Meanwhile, I’m just rattling the tip jar in hopes that readers get enough entertainment value out of this blog they’ll be willing to spare some cash to keep it going, a “business plan” (if you can call it that) which has worked out surprisingly well over the past decade-plus.

If you believe the “system” is rigged, however, the phenomenon of a 30-year-old billionaire tends to confirm your worldview, showing the economy to be a circus in which any sort of clown can win.

When this bushy-headed slob in sneakers was CEO of a company once valued at $32 billion, people could point to him and say, “See? Capitalism is just a gigantic crapshoot. All that ‘work hard and save your money’ stuff is just a lot of moralistic bullshit.” Now that Bankman-Fried is bankrupt (and quite likely to end up in prison), however, what lesson have we learned? We have learned what I’ve been saying for years: If something seems too good to be true, it’s probably neither good nor true.

 

Sticking the Big Yellow Button in here because this blog has always been in favor of shameless capitalism. There’s no “get rich quick” secret here, no something-for-nothing flimflam, just me writing stuff that I hope you’ll enjoy reading. A simple fee-for-service transaction that I’ve often summarized as The Five Most Important Words in the English Language:

HIT THE FREAKING TIP JAR!

So far, this arrangement has worked out OK. And unlike a certain 30-year-old crypto billionaire, I’m not heading to federal prison. Life is good.

UPDATE: As might be expected, while I was writing this, Ed Driscoll (who unlike me is neither disorganized nor lazy) published a succinct roundup of news about the FTX meltdown.




 

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