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Catching Up With Crypto And The Burgeoning FTX Scandal
Thanks to commenters like Surviving the Billionaire Wars and Ray So-cal, for pointing out links for the developing FTX scandal. This FTX story may have some legs, although the usual suspects are probably already busy covering the trail. The principle governing this is, again, a simple one. Crypto is a fraud, probably designed as such for special purposes. Therefore, expect fraud almost everywhere you look in that field, and especially when large amounts of money are involved.
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Alex Krainer points out that, in the case of FTX and its public face, we’ve been there before:
Our empire of lies seems to have perfected the template for fraud on an industrial scale
Last week brought us another mega-scandal as another celebrated, multi-billion dollar success story turned out to be a massive fraud. As more details emerge about FTX and its young founder, Sam Bankman-Fried, the outlines of the story increasingly resemble another mega-scandal, Theranos. It would appear that our financial-political-media complex has developed a template for industrial scale fraud.
The template includes a genius entrepreneur - a brilliant, magnanimous person who’d pull him/her/itself by the bootstraps to become an instant billionaire. It also includes murky family connections, protection in high places, dirty political dealings, overflowing praise for the venture and its founder, and a rapid ascent to success.
The FTX scandal will continue to feed the news cycle for years to come as further details emerge and the case goes through courts. But even without waiting for the dust to settle, we should take a few important lessons from all these cases: when Wall Street and the PR industry contrive another story about a genius young entrepreneur and their game-changing unicorn venture, at a very minimum we should remain on guard and look into into their bill of goods with due discernment.
Now, if you follow the link, you’ll find 3 links to articles that Krainer wrote about Theranos, as well as an embedded 43 minute Youtube (including promotional message) that presents “the real message” about Theranos. I haven’t watched the Youtube, but the real message appears plausible to me from the opening words:
Thus far the media narrative have focused on the company’s young founder and CEO, Elizabeth Holmes. Countless stories and reports are based on the unlikely assumption that Theranos was her own brainchild and that she alone drove the fraudulent venture.
Readers are free to correct me. I admit that I know little about the Theranos case. Nevertheless, like all fraudulent schemes involving “individuals”, there was too much money involved for an “individual” to do this alone. We know about Holmes’ influential backers. And we’re finding out right up front that Bankman-Fried had connections right to the top of the prog feeding chain. These frauds are too apparent for individuals to get away with—without protection. Protection comes at a price, and oftentimes the whole venture may be a front for others. That’s what Moon of Alabama suggests regarding the entire Crypto scam.
Moon has done yeoman work in assembling what is already known about the FTX scandal—so far. What I’ve done here is to quote Moon himself, for the general picture, while including his links. The ellipses (…) largely indicate Moon quoting from those linked articles, sometimes at considerable length—it’s all interesting.
Crypto 'currencies' have no real purpose. They ain't money. Their value solely depends on the trust people have in them. When the trust vanishes their values go to zero. That is what happened to FTX and the FTT 'currency' the company had issued:
There was a lot of criminality involved here. FTX lent its customers' 'money' to Bankman-Fried’s trading firm, Alameda Research, which had invested it in a number of other loss making crypto schemes. The likewise shady crypto 'exchange' Binance had owned a big share of FTX's 'currency'. …
Some of the money that FTX allegedly gave to Alameda Research had vanished on its way:
At least $1 billion of customer funds have vanished from collapsed crypto exchange FTX, according to two people familiar with the matter.
The exchange's founder Sam Bankman-Fried secretly transferred $10 billion of customer funds from FTX to Bankman-Fried's trading company Alameda Research, the people told Reuters.
A large portion of that total has since disappeared, they said. One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion.
The whole thing was, like about anything crypto, one huge fraud:
In a subsequent examination, FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a "backdoor" in FTX's book-keeping system, which was built using bespoke software.
They said the "backdoor" allowed Bankman-Fried to execute commands that could alter the company's financial records without alerting other people, including external auditors. This set-up meant that the movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX, they said.
There’s a history here, and it looks like political connections and political fundraising were part of the mix from the get go. Major red flag, when coupled with unregulated money and Zhou.
There is a different aspect of the story that deserves a lot more scrutiny:
Sam Bankman-Fried's mother is a "co-founder of the political fundraising organization Mind the Gap, which advocates for progressive political candidates and funds get-out-the-vote groups."
What good son would deny a doting mother’s request for a share of the skim? After it was first thoroughly laundered, of course.
Sam Bankman-Fried put a lot of the money he had 'owned' into Democratic politics:
The 30-year-old Bankman-Fried has been a major force in Democratic politics, ranking as the party’s second-biggest individual donor in the 2021–2022 election cycle, ... What’s more, he had promised to spend far more on Democrats moving forward, predicting in May that he’d fund “north of $100 million” and had a “soft ceiling” of $1 billion for the 2024 elections.
Bankman-Fried was a major donor to President Joe Biden in the 2020 election and is the primary donor to the Protect Our Future PAC, …
That was either protection money or a well played scheme by the Democrats to finance their elections. Then again- it may have been both.
I’ll opt for “both.” Betting both ways seems safer in this situation.
The White House was directly involved:
A cryptocurrency billionaire facing federal investigation for mishandling customer funds had high-level White House meetings just months ago, as Congress was debating how to regulate his company—and just weeks before he pledged to donate up to $1 billion to Democrats ahead of the midterm campaign.
Sam Bankman-Fried, the owner of cryptocurrency exchange FTX, met on April 22 and May 12 with top Biden adviser Steve Ricchetti, according to White House visitor logs …
Ask yourself: Does that sound like the kind of situation in which a kickback scheme—perhaps through a dependent and corrupt foreign power, to cover tracks—would naturally arise? I think so, too.
This next part … talk about a rogues’ gallery!
[Bankman-Fried] gave more than $5 million to Biden’s 2020 presidential campaign, and has given millions more this cycle to the Democratic Party. ...
He said in June, weeks after his most recent White House meeting, that he might give up to $1 billion to support Democrats in the midterms, …
Amid the political spending, Bankman-Fried has led an aggressive lobbying campaign in Washington related to cryptocurrency regulation. …
Bankman-Fried was accompanied in some of the meetings by Mark Wetjen, the head of policy and regulatory strategy at FTX, who served as commissioner on the Commodity Futures Trading Commission under former president Barack Obama. Eliora Katz, FTX’s chief lobbyist, also attended the meetings but did not mention lobbying the White House in disclosures filed with Congress.
Bankman-Fried’s ... [brother] visited the White House on March 7 along with Jenna Narayanan, a Democratic strategist who once worked for Tom Steyer and the Democracy Alliance, a network of wealthy liberal donors who fund left-wing causes. ...
[long list of donation recipients—all Dems, governors, senators, all influential]
Its one big swamp. Its purpose here was to steal money from those little guys who are prone to fall for such schemes.
This whole crypto stuff was always bad.
I had read the founding bitcoin paper soon after it came out. It was written by an anonymous under the name of one Satoshi Nakamoto. That was the first red light. I suspected and still suspect that some 'western' secret services had come up with the scheme to have a way to secretly move money around.
Huh! Go figure!
As I had previously done a bit of banking IT I knew of the difficulties of mass transactions. I found that the blockchain, a public ledger mechanism that preserves a public record of every bitcoin transaction, was way too complicate for a substantial amount of global transactions. It would never reach the speed real money transaction systems, like those for the big credit card issuers, inherently have. I also thought it would be dangerous to have every private transaction recorded in a public ledger everyone could see and analyze. That would make true anonymity of such payments nearly impossible.
But if this was designed by intel services, might that not be a feature rather than a bug?
The whole system of exchanges and other companies build around it was unregulated, insecure and prone to fraud.
As I said, there’s lots, lots more. And more connections keep emerging:
But enough of the details. Let’s go global. How does this help us with the really big picture?
I believe that the real context for all this is simply the system of having a world reserve currency. Such a setup is virtually inevitable in a world trade system when it’s coupled with a dominant military/economic/political power. Remember? Ray Dalio explains all of that. What’s also virtually inevitable is that power brokers in the country (and closely associated allies) will leverage that position to make money through all sorts of scams. Money gravitates to power centers, and the Imperial City on the Potomac, being a center of world power, is a money magnet. It’s call the Rules-Based Order.
How plausible is it that consummate insiders—I’ll cite Bluto Barr and Turtle McConnell at random—are unaware that much of what goes on in DC is dictated by who gets what share of the swag? Who thinks these insiders are unaware that the whole budget process—and everything associated with it—is designed to distribute money to insiders and/or interest groups for political purposes or simply for fun and profit? It used to be a matter of divvying up the tax take, but with the rise of the US to global empire status and the attendant rise of King Dollar to reserve currency status, the monetization of more and more debt offered virtually (there’s that word again) unlimited possibilites to ingenious operators. And it keeps getting bigger.
Consider just two stories:
Mar 28, 2022 An academic paper released last year estimated at least $76 billion in potential fraud, and the authors said that was conservative. The SBA's inspector general has identified $78.1 billion in...
Three months later that amount—or, rather, estimate—had ballooned:
Jun 24, 2022 At least $163 billion of the $873 billion of unemployment insurance benefits was spent in error, according to the Labor Department. AP Raise your hand if you're surprised that the trillions of...
Right. I’m not raising my hand, and I doubt readers are, either. Coincidence? Hardly. It’s business as usual, a plan—just on an evergrowing, industrial, scale. Not an “error.” You can bet your bottom dollar politicians and the connected crowd all benefited.
So what happens when Mr. Trump—Mr. Clean, the most investigated human in history—goes to the Imperial City on the Potomac? Obviously Trump poses a threat to this whole system. Trump was talking about establishing decent working relations with Russia, which was openly planning to set up an alternative to the King Dollar reserve currency system. This presented an existential threat to the Rules Based Order centered on King Dollar as the world reserve currency, and so the entire ruling class unites to neutralize and then expel this threat from the body politic.
Trump was removed from office, but he has refused to simply go away. The struggle against Trump requires money, and so we should not be surprised to hear about money laundering. This is also the context for the war on Russia and the struggle to subjugate the entire world to the globalist order. US politics, within its federal system, is complex and thus money laundering becomes a necessary part of any election campaign, on a nationwide scale. I expect we’ll be hearing lots more about FTX.