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sam bankman fried
How Concentrated Wealth and Corporate Power Nurtures the Greed of Thieves
Larceny from our corporate world’s most “respected” chief execs supplies the con artists among us with rationalizations for their own scamming behaviors.
Jan 28, 2023
What makes for a thieving culture? An overabundance of pickpockets? Tsunamis of burglary and shoplifting?
Most definitely not. To truly gauge a society’s larcenous leanings, many of us would posit, we need to look beyond the nimble-fingered and focus more on the smooth-talkers, the power-suited flimflammers who thrive in any society where significant numbers of people feel a driving need to get rich quick.
The most recent example? Federal prosecutors last month charged the crypto currency CEO phenom Sam Bankman-Fried with committing “one of the biggest financial frauds in American history.” The 30-year-old billionaire, the Securities and Exchange Commission charges in a separate filing, built an immense financial empire on a “house of cards.”
The executive now trying to pick up those cards — the new CEO of Bankman-Fried’s FTX cryptocurrency exchange — says his predecessor simply engaged in “old-fashioned embezzlement,” not even stopping to bother with the “highly sophisticated” thieving of Enron’s fabled executive crooks a generation ago.
Right before Bankman-Fried’s brief appearance on America’s economic stage, the nation’s face of fraud belonged to Elizabeth Holmes, the founding CEO of the health-tech company Theranos.
Holmes raised some $900 million from a “star-studded” list of investors who ranged from media mogul Rupert Murdock to Henry Kissinger. Early in 2021, a federal jury convicted her of various frauds in what the Washington Postcalled “the most high-profile test of whether Silicon Valley’s “fake it until you make it” ethos could withstand legal scrutiny.”
The hustles of our Bankman-Frieds and Elizabeth Holmeses can certainly make for entertaining reading. But Freya Berry, a veteran corporate fraud investigator, sees their scams “as not as unusual as you might think” — and not as entertaining either. With “rewards high” and “penalties higher,” she notes, corporate miscreants “go to great pains to conceal” their nefarious ways, even “making death threats to whistleblowers.”
We need these whistleblowers. We also need to understand that our thieving culture rests on more than the outright larceny of our indicted corporate crooks. Our most accomplished corporate thieves, in fact, never fear indictment. They steal in broad daylight. They regularly steal livelihoods — from the thousands upon thousands of men and women who’ve worked ever so diligently, sometimes for many years, to make them fabulously rich.
We’re now living through an intense stretch of this theft. Tech’s top execs are now laying off workers at a fearsome rate. Earlier this month, Microsoft announced plans to pink-slip some 10,000 workers. Amazon is cutting 18,000, Google parent Alphabet 12,000, IBM nearly 4,000. Overall, estimatesForbes, tech firms have so far this month alone given the heave-ho to 56,000 employees.
What makes these layoffs “thefts”? Simple avarice. Investors on Wall Street “expected more growth,” explainsGrid economics analyst Matthew Zeitlin, than Big Tech companies “are currently showing.” That has Big Tech share prices sinking, “and any time share prices fall, investors and executives get antsy — and workers often pay the price.”
Meanwhile, the antsy CEOs slashing all these jobs are continuing to stuff dollars into their own personal pockets, at overall pay rates that rarely dare drop below a quarter-million dollars a week.
This past October, Microsoft disclosed that chief exec Satya Nadella’s annual compensation had jumped 10.2 percent to just under $55 million. Nadella now makes more in one year than the typical Microsoft employee can make in 289 years. Back in 2018, the typical Microsoft worker only had to labor 154 years to earn what the company’s CEO made in just one.
This past December brought news that Alphabet’s Sundar Pichai has a new three-year “performance” package that stands to award him $210 million.
Execs like these set a thieving tone for our entire society. Their grand fortunes don’t just make the rest of us feel ever poorer. They leave us ever more vulnerable to the con artists who promise shortcuts to jackpots.
And this larceny from our corporate world’s most “respected” chief execs supplies the con artists among us with rationalizations for their own scamming behaviors. The corporate big boys play their games, they tell themselves, we play ours.
Societies that let enormous wealth concentrate in the pockets of a few make all this inevitable. They nurture greed and grasping. They always have. They always will.
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Trump, Bankman-Fried, Musk: Monsters of American Capitalism
Absent any moral code, greed is a public danger. Its poison cannot be contained by laws or accepted norms.
Dec 26, 2022
If this past week presents any single lesson, it’s the social costs of greed. Capitalism is premised on greed but also on guardrails—laws and norms—that prevent greed from becoming so excessive that it threatens the system as a whole.
Yet the guardrails can’t hold when avarice becomes the defining trait of an era, as it is now. Laws and norms are no match for the possibility of raking in billions if you’re sufficiently ruthless and unprincipled.
Donald Trump’s tax returns, just made public, reveal that he took bogus deductions to reduce his tax liability all the way to zero in 2020. All told, he reported $60 million in losses during his presidency while continuing to pull in big money.
Every other president since Nixon has released his tax returns. Trump told America he couldn’t because he was in the middle of an IRS audit. But we now learn that the IRS never got around to auditing Trump during his first two years in office, despite being required to do so by a law dating back to Watergate, stating that “individual tax returns for the president and the vice president are subject to mandatory review.”
Of course, Trump is already synonymous with greed and the aggressive violation of laws and norms in pursuit of money and power. Worse yet, when a president of the United States exemplifies—even celebrates—these traits, they leach out into society like underground poison.
Meanwhile, this past week the S.E.C. accused Sam Bankman-Fried of illicitly using customer money from FTX from the beginning to fund his crypto empire.
From the start, contrary to what FTX investors and trading customers were told, Bankman-Fried, actively supported by Defendants, continually diverted FTX customer funds … and then used those funds to continue to grow his empire, using billions of dollars to make undisclosed private venture investments, political contributions, and real estate purchases.
If the charge sticks, it represents one of the largest frauds in American history. Until recently, Bankman-Fried was considered a capitalist hero whose philanthropy was a model for aspiring billionaires (he and his business partner also donated generously to politicians).
But like the IRS and Trump, the S.E.C. can’t possibly remedy the social costs that Bankman-Fried has unleashed — not just losses to customers and investors but a deepening distrust and cynicism about the system as a whole, the implicit assumption that this is just what billionaires do, that the way to make a fortune is to blatantly disregard norms and laws, and that only chumps are mindful of the common good.
Which brings us to Elon Musk, whose slash-and-burn maneuvers at Twitter might cause even the most rabid capitalist to wince. They also raise questions about Musk’s other endeavor, Tesla. Shares in the electric vehicle maker dropped by almost 9 percent on Thursday as analysts grew increasingly concerned about its fate. Not only is Musk neglecting the carmaker but he’s appropriating executive talent from Tesla to help him at Twitter. (Tesla stock is down over 64% year-to-date.)
Musk has never been overly concerned about laws and norms (you’ll recall that he kept Tesla’s factory in Freemont, California, going during the pandemic even when public health authorities refused him permission to do so, resulting in a surge of COVID infections among workers). For him, it’s all about imposing his gargantuan will on others.
Trump, Bankman-Fried, and Musk are the monsters of American capitalism—as much products of this public-be-damned era as they are contributors to it. For them, and for everyone who still regards them as heroes, there is no morality in business or economics. The winnings go to the most ruthless. Principles are for sissies.
But absent any moral code, greed is a public danger. Its poison cannot be contained by laws or accepted norms. Everyone is forced to guard against the next con (or else pull an even bigger con). Laws are broken whenever the gains from breaking them exceed the penalties (multiplied by the odds of getting caught). Social trust erodes.
Adam Smith, the so-called father of modern capitalism, never called himself an economist. He called himself a “moral philosopher,” engaged in discovering the characteristics of a good society. He thought his best book was not The Wealth of Nations, the bible of modern capitalist apologists, but the Theory of Moral Sentiments, where he argued that the ethical basis of society lies in compassion for other human beings.
Presumably Adam Smith would have bemoaned the growing inequalities, corruption, and cynicism spawned by modern capitalism and three of its prime exemplars—Trump, Bankman-Fried, and Musk.
\u201cElon Musk took over @Twitter, but he's still the CEO of @Tesla. That raises legal concerns \u2014 is he creating conflicts of interest? Is he misappropriating company resources? Tesla is not Musk\u2019s private plaything. I\u2019ve got many questions for the Tesla Board. https://t.co/B028T1Yive\u201d— Elizabeth Warren (@Elizabeth Warren) 1671463697
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