In my work as a business ethics keynote speaker, business ethics consultant and book author, I once thought that Bernard “Bernie” Madoff was the epitome of a single-handed fraudster. It now appears as though Sam Bankman-Fried might make Bernie look like a saint in comparison.
Caroline Ellison
Caroline Ellison, COO of FTX and erstwhile girlfriend of the crypto guru, finally admitted to a judge that her “boss” provided investors with misleading financial information. According to Yahoo! business writer Ryan Ozawa (December 26, 2022):
‘Ellison told U.S. District Court judge Ronnie Abrams, “I am truly sorry for what I did—I knew that it was wrong.’
The court asked her to clarify. ‘Did you also know that it was illegal?’
‘Yes,’ Ellison replied.”
Ellison is cooperating with the federal government as is Gary Wang, Bankman-Fried’s former partner. At the center of its investigation, the government is exploring the association between FTX and its “arrangement” with its company Alameda Research, where there were billions in exchanged funds in the form of loans.
Indeed, billions in funds are now unaccounted for, including luxury items, homes and such, not to mention hundreds of millions in sponsorships and influence peddling.
Said Ellison, “In practical terms, this arrangement permitted Alameda access to an unlimited line of credit without being required to post collateral, without having to pay interest on negative balances and without being subject to margin calls or FTX.com’s liquidation protocols.”
She admitted that customer funds had to be used to cover its loans to Alameda.
In the end, Ellison issued this tepid apology to all of the investors who have gotten royally fleeced:
“I want to apologize for my actions to the affected customers of FTX, lenders to Alameda, and investors in FTX. Since FTX and Alameda collapsed in November 2022, I have worked hard to assist with the recovery of assets for the benefit of customers and to cooperate with the government’s investigation. I am here today to accept responsibility for my actions by pleading guilty.”
A week ago
It was only about a week ago when Sam Bankman-Fried was hauled into a Bahamian court. There were two things about the proceedings that particularly stand out in my mind as someone who is a business ethics keynote speaker and consultant.
The first thing I noted was his glazed-over face, the same face as Madoff and a hundred other fraudsters I have written and spoken about before. It was a face devoid of emotion, except the obvious impression of “How could they have caught me? I am brighter than all of them.”
The second thing I noted was the face of his mother, laughing and mocking the Bahamian courtroom proceedings. She is a professor, you know, at an elite school. She was a study in someone who may have raised a child with few consequences for bad choices. I understand her laughter was due to nervousness and – possibly – the reality that she could be an old woman before her son is ever freed from jail.
For choices do have consequences.
Ellison and Bankman-Fried’s former partner, are emblematic of those who are attracted to fraudsters. The moment the house of cards collapses, the sycophants flee the situation. Ellison was caught up in the “headiness” of the money and power. In the end, the money and power will crush her. She had no choice but to turn against him as she was facing more than a century of jail time.
She claims she was exposed to a lot of economics before joining FTX and her former boyfriend’s scam, but she too, has an extremely weak ethical compass. She was not exposed to the simple mindset of right and wrong.
Sam Bankman-Fried is clearly worse than Bernie Madoff and Ellison knew it. She could have walked away at the start, but chose instead the life of no consequences. Now she will have many.
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