Sam Bankman-Fried will grow old in jail. But don’t forget those who basked in his orbit
If the high-rollers surrounding the disgraced FTX founder had any qualms about taking his money, they didn’t show it
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This is the final disgrace of Sam Bankman-Fried. The judge, politicians and the world’s press will declare him one of the biggest swindlers in American history. They will note how within three years he built a marketplace for digital currencies, or crypto, that was worth around $32bn – and made himself the world’s richest person under 30. Still it wasn’t enough. He spent perhaps $8bn of his customers’ savings on luxury homes, risky investments and whatever else took his fancy.
But remember this. Those same groups who today come to bury the boy billionaire yesterday praised him without qualification – and took as much of his cash as they could. While battling Donald Trump in 2020, Joe Biden received about $5m from Bankman-Fried. He wasn’t alone. Mitt Romney, Cory Booker, Paul Ryan, Nancy Pelosi: they and so many other Democrats and Republicans accepted collectively tens of millions.
Up until then, the billionaire dined with Jeff Bezos and Leonardo DiCaprio. He hobnobbed with pop stars. Upon meeting, Katy Perry posted on Instagram: “im quitting music and becoming an intern for @ftx_official ok.” He was hosannaed on the covers of business magazines and a regular on American TV. The profiles depicted him as an idiot savant who slept next to his desk on a beanbag and worked amid day-old containers of chickpea korma.
Less space was devoted to the $40m penthouse in which he actually lived, looking out on to a yacht-filled marina, or to his upbringing as the son of two Stanford Law professors, who’d sent him to private school before the Massachusetts Institute of Technology. Who wanted dreary old facts when you could have the American dream?
After he was arrested and his bail was set at an almost-impossible $250m, they managed to raise the funds. Far too much was made of how he was amassing this fortune only to give it away, following a philosophy dubbed effective altruism. One journalist was savvy enough to do the maths and point out: “So far he’s donated less to charity than he’s spent on naming rights for the Miami Heat’s arena.”
More than hypocrisy by people who just wanted their next pay cheque, it helped to create his fortune. Among those who plunged millions into FTX were some of the biggest names in finance. One, a Silicon Valley firm called Sequoia Capital, not only gave its money: it ran a near-14,000 word hagiography of Bankman-Fried. When things went south a few weeks later, the piece was taken down. But with typical generosity, the web has archived it. Among the highlights is how Sequoia’s partners met Bankman-Fried over Zoom. They asked how he saw the future of FTX.
Rather than focus on the interview, Bankman-Fried is playing a video game, notes the piece. He says laconically: “I want FTX to be a place where you can do anything you want with your next dollar. You can buy bitcoin. You can send money in whatever currency to any friend anywhere in the world. You can buy a banana.”
Then, the piece records: “Suddenly, the chat window on Sequoia’s side of the Zoom lights up with partners freaking out.”
“I LOVE THIS FOUNDER,” typed one partner … “YES!!!” exclaimed a second.
Another responded excitedly: “I am a 10 out of 10.”
A pudding-faced boy in baggy shorts says he wants to buy a banana with internet money and some of the greatest minds in finance go wild. Just remember: it is this same class of geniuses in bodywarmers who Keir Starmer and Rachel Reeves believe will finance our new green industries.
If in these stories you can hear echoes of Jay Gatsby, that is no accident. The Great Gatsby was published in 1925, amid one of the great financial bubbles in world history. Wall Street went bust in 1929, and when the economist John Kenneth Galbraith wrote his masterful history The Great Crash, 1929, he diagnosed how economically exuberant societies indulged the same financial crimes they would later drag into court. He called this “the bezzle”.
In many ways, his story is of how an entire decade of cheap money and high hopes for a new economic paradigm was squandered. His crimes are his own to atone for. But his disgrace is the disgrace of a much larger financial and political establishment. The old guard spent years waiting for a new saviour to come along and rescue them from the doldrums of the banking crash. When a boy pulled up in a battered Corolla, they got in without asking too many questions.
Aditya Chakrabortty is a Guardian columnist
https://www.theguardian.com/commentisfree/2024/mar/28/sam-bankman-fried-jail-ftx-money
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