Quite often, meteoric rises end in falls equally swift. The latest to validate this is Sam Bankman-Fried, the man who founded the now-extinct FTX crypto exchange. As Mr Bankman-Fried goes down in the history of mega financial crimes as a star fraudster, he is turning into a memorable metaphor of crypto excesses. His not-so-shocking fall will not only asphyxiate the nascent crypto industry, but will also convulse the cash-thirsty American politics.
An Important Contemporary Lesson
Mr Bankman-Fried, 31, was convicted on November 2nd of seven charges of fraud and conspiracy. His mad adventurism and reckless risk-taking will now have a long-lasting impact on the crypto industry and American politics. As FTX collapsed like a castle of sand built on a stormy beach, he was found to be the kingpin of a massive loot that made Americans poorer by about $10bn. His shady practice of funding politics comes to an end now. https://www.cbsnews.com/news/sam-bankman-fried-trial- verdict/
Convicted of financial fraud, conspiracy and money laundering, Mr Bankman-Fried stands now on the threshold of a maximum sentence of 110 years. With an emotionless deadpan face, Mr Bankman-Fried looked resigned to his inevitable fate. Finally, the former crypto mogul’s fabulous rise and his equally fascinating fall have become an important lesson in the contemporary history of crypto exchanges.
Video Courtesy: YouTube/ABC News
Trapped Between Power and Wealth
To be sure, Mr Bankman-Fried is a convict today. His fabled FTX is now a deep crack in the portrait of digital coins, Bitcoin and Ether particularly. However, his conviction will purge of a major fraudster from the fledgling crypto industry. Optimistic analysts hope that such a purge will help the industry forge ahead, free from potential scandals. This may be just wishful thinking. The industry will take time to recover from the after-effects of FTX’s premature demise. https://www.reuters.com/technology/crypto-market-still-bears- scars-ftxs-collapse-2023-10-03/
Wishful thinking because for the crypto industry, entwined so dangerously with opportunistic American politicians, Mr Bankman-Fried’s conviction may not mean obituary for crypto scandals. American politics will probably ensure the crypto industry remains trapped between lust for power and greed for wealth. Viewed from this perspective, Mr Bankman-Fried’s conviction will endure his distasteful and devastating legacy in the notoriously-divisive American politics. https://poliphoon.com/politics-over-a-broke-exchange/
A Lofty Profile Licks the Muck
As his ace deputies confessed to Mr Bankman-Fried’s fraud during the superfast trial, the crypto mogul’s dalliance with fakery and lies stand exposed fully now. Not just America, the whole world is left numb with shock. His adventurism did extend to getting his officers route billions of customer dollars illegally from FTX to Alameda Research, a sister company in a major cover-up operation. These crimes are now turning into a lesson on how lust and greed are potential disasters for wannabe crypto scamsters. This is the life lesson that went unheeded in Mr Bankman-Fried’s world during an euphoric era. He will be paying for it anytime now. https://www.theguardian.com/business/2023/nov/02/sam- bankman-fried-trial-key-takeaways
The ace crypto convict’s ways of self-marketing too are becoming lessons in narcissistic financial selling. His projection of himself as a philanthropist stands hollowed out now. Since 2019, when Mr Bankman-Fried founded FTX, he has been quite successful in convincing his investors to cough up billions of dollars. However, as his lofty profile licks the mud now, crypto investors and cash-thirsty American politicians are sobbing silently with their faces buried in their trembling palms.
Diversionary Tactics Dive into the Dust
Foremost among the most impoverished today by Mr Bankman-Fried’s conviction are American politicians. Huge political donations from the FTX reservoir will stop. Republicans and Democrats alike are going to feel the pain. Their aches will now become acute as the election season approaches. How Mr Bankman-Fried influenced American politics is potentially a fertile subject for discussion for political commentators. To be sure, American politics is agonising. https://www.coindesk.com/policy/2023/02/05/ftx-asks- politicians-who-received-bankman-fried-donations-to-return- money/
As Mr Bankman-Fried’s defenses crumbled and his diversionary tactics dived into the dust in a packed courtroom, it was America’s politicians who felt the pain the most. As the crypto czar’s conviction seemed sure, the political beneficiaries of his financial munificence were shattered. Is the conviction turning into a monumental moment of catharsis for American politicians? Tragically, the answer is no. American politicians are as incorrigible as ever. https://poliphoon.com/politics-over-a-broke-exchange/
The Root Cause of the FTX Fraud
Mr Bankman-Fried’s legal battles may go on even after his conviction. A second trial on campaign funding, among similar charges, is set to begin some time next year. This trial is sure to drive the final nail on the carefree Mr Bankman-Fried’s crypto coffin. What began as a routine journalistic probe into FTX’s balance-sheet by CoinDesk, a crypto-news carrier, on November 2nd 2022, has now reached its logical end. The chickens have come home to roost. https://www.coindesk.com/business/2022/11/02/divisions-in- sam-bankman-frieds-crypto-empire-blur-on-his-trading-titan- alamedas-balance-sheet/
Blind ambition founded on belligerent fraud and financial skulduggery has never survived attacks from inquisitive and information-hungry media. Eventually, all crimes come to the courts and all criminals get their comeuppance. Shady fronts like Alameda, built with internal contradictions, collapse sooner or later. Utter disregard for investor protection and safety of their money gets its law-ordained punitive reward.
As Unholy as it Could Get
Alameda too has been found to be as guilty as FTX and its fraudulent founder. Alameda’s misadventures included, among others, misuse of its privileges. This shows how unholy was the nexus between FTX and Alameda. As unholy as it could get, Alameda was successful in withdrawing the cherished savings of FTX customers. Reckless borrowing and over-leveraging in the days that followed did take FTX and Alameda down the abyss of an inevitable collapse. https://www.investopedia.com/what-went-wrong-with-ftx- 6828447
The Poliphoon’s Last Word
The political lessons from the Bankman-Fried saga can be heard loud. Politicians who survive on mucky money are bound to be disappointed sooner or later. As their funding comes with the taint of corruption and fraud, the scamsters taint the politicians as well. This taint makes the latter a serious suspect in the eyes of the electorate. Financial fraud is a contagion. As discoveries of frauds bring down ethereal edifices built on greed and ambition, they shatter the dreams of politicians as well. On November 2nd, this lesson echoed louder than the FTX verdict.