Not long ago, as I was speaking to a group of financial executives, one of the audience members said: “Does your generation understand what visionaries such as Sam Bankman-Fried are trying to accomplish?” Wow, that was a challenge unnecessary to accept!
For, as a business ethics motivational speaker, business ethics consultant and book author, my answer was all too simple: “Fraud?”
The path to success in the business world has been littered with unethical Pied Pipers whose smiles or good looks or confident attitude have led many to invest their life savings in companies that were little more than scams. Most recently, we witnessed such behavior with “visionaries” such as Ramesh “Sunny” Balwani and Elizabeth Holmes of Theranos fame, and today, Sam Bankman-Fried of now bankrupt FTX.
Darling of his parent’s eyes
Sam Bankman-Fried, the wild-haired darling of the crypto world, and former CEO of FTX, was arrested at his lavish Bahamian residence on December 13, 2022. His Stanford professor parents were by his side, wondering (possibly) how their son descended into the now world of financial scam. For his father, ironically, is an economics professor.
The SEC has charged the crypto genius with financial fraud by “diverting billions of dollars over a period of years for his personal benefit and to help grow his crypto empire.”
It is important that we italicize the words “personal benefit.” It is a criminal indictment and he is now scheduled to be extradited to the U.S. and he will be asked to defend his fraud in front of the House Financial Services Committee.
The FTX crypto trading platform once carried a valuation of $32 billion. Here is where the facetiousness must end. For many investors, naïve to say the least, believed in Bankman-Fried, the way people once believed in visionary Bernard Madoff. However, in some ways Bankman-Fried was more sinister.
He spent hundreds of millions of investor money trying to legitimize himself to celebrities, sports teams, and members of Congress. He peddled influence across social, political and influencer platforms. And, in the process, investors lost everything they had ever accumulated.
He admitted to making mistakes but did not characterize his song-and-dance as an effort to she The FTX founder, as the notorious fictional Wall Street character Gordon Gekko had done many years before, created a maze of investment situations intended to confuse and gain him advantage.
He first built a crypto organization called Alameda Research and then envisioned a trading platform, FTX. As the money rolled into FTX, Bankman-Fried siphoned the money into Alameda. He was, in his opinion, the best and brightest in the room (and how many times has this played itself out in the past few decades?).
According to the SEC the investments were used “to make undisclosed venture investments, lavish real estate purchases, and large political donations.” Several politicians of both parties took the money and ran.
By all indications (again, like Madoff), Bankman-Fried was the master puppeteer. He was the one who created a fictionalized accounting system and he spent the money much like any other fraudster. He lavished his family with gifts, he mingled with the elite, he tried to buy power.
Like any other fraud
Sam Bankman-Fried, and “his children” Alameda Research and FTX, is anything but visionary. He saw an opportunity to commit fraud in an atmosphere of no oversight, check and balances; his need was age old for power and money and perhaps he rationalized he was smarter than everyone else.
If he does jail time, he is free to reflect on his home in the Bahamas which will undoubtedly be liquidated along with his reputation and crypto legend.
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