In The FTX Collapse, The Democrats Inherit Their Own Watergate Sized Scandal
The Greed And Corruption That Fueled The 2008 Banking Collapse Rears Its Head In Yet Another Ponzi Scheme, As Billions In Investments Disappear
Photo by Mariia Shalabaieva on Unsplash
The smoke had barely cleared from the vacuous, laughable political battles of the November 2022 midterm elections, when, in what will possibly become the biggest political scandal and conflict of interest since Watergate, and certainly, the biggest financial scandal since Bernie Madoff, broke into news headlines.
Technically, it’s a scandal that could only be created in the Frankenstein laboratory of modern financial capitalism, yet one that follows historical precedents set by traditional Ponzi schemes, speculation, greed, corruption, and overreach.
What makes this particular fraud so unique is its large, hulking footprint: huge donations to both political parties, record-breaking donations to the Democratic party, alleged funding connections to the proxy war in Ukraine, (which corporate media have rushed to deny as a “conspiracy theory”) and its basis exclusively in the cryptocurrency markets.
The story gets weirder, involving celebrities and well-known figures from professional Sports like the writer and comedian Larry David, and NFL quarterback Tom Brady. The class action lawsuit against these people has already been filed as I write this. The million-dollar advertising campaign, starring David, is immensely entertaining, while at the same time selling soon-to-be-duped investors on the idea that the entire history of human progress was populated by close-minded naysayers who were always wrong.
Except in this case.
The idea that you could “miss out” on another great leap in man-made capitalist fortune and human progress leaves the practical concerns of legitimate risk tossed aside like garbage. Basic common sense screams out a perpetual warning: don’t ever invest in any assets you’re not prepared to lose entirely. The advertising said otherwise: be bold, and don’t be a whining, naysaying loser. Opportunity knocks and FTX cryptocurrency will propel human progress as surely as the electric light bulb, the wheel, indoor plumbing, and the Walkman did.
If you’re like me, you can barely comprehend the machinations of traditional investing and trade on the stock market. My eyes glaze over and I rapidly tune out just hearing mere seconds of the blathering financial analysts on the various business channels on cable television.
The shows on these corporate-owned network outlets always seemed to me to be less about solid financial advice, and more like a 24-hour-a-day advertisement for an unlicensed carnival sideshow and gambling casino with the bare pretense of regulation. When things go badly, as was the case with Madoff, people serve prison time, but in most cases, the punishment rarely, if ever, fits the crime.
What crimes, specifically are we talking about?
How about senior bankers on Wall Street blowing up the domestic economy in 2008 with barely a rap on the knuckles? Like made men in the Mafia, all ultimately untouchable, and under the protection of powerful politicians :
“The report profiled the records of Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo. Detailing the staggering $8.2 trillion that was committed to bail out these banks when their excesses blew up the economy in 2008, the report laid out what it called their RAP sheets—the record of illegal activity for which they have been fined a cumulative total of $181 billion in over 350 major legal actions.
The report concludes that these big banks “have engaged in—and continue to engage in—a crime spree that spans the violation of almost every law and rule imaginable. … That was the case not just before the 2008 crash, but also during and after the crash and their lifesaving bailouts. … In fact, the number of cases against the banks has actually increased relative to the pre-crash era.”
The scope of the illegal activity is breathtaking—overcharging soldiers on their mortgages, conspiring to fix the price of credit card fees, massive improper foreclosure practices, billing customers for services never provided, rigging interest rates, and more. The large fines are, for these mega-banks, merely a cost of doing business. And so the crime wave continues.”
It’s interesting that the report cited above was based on the findings of the House Financial Services committee under the chairmanship of Rep. Maxine Waters, D-Calif. As it happens, Waters has been charged, again, with chairing a formal hearing looking into the collapse of FTX.
So, what exactly is FTX, and what happened in a few short days that caused them to lose billions in investments and ultimately declare bankruptcy?
FTX was a cryptocurrency exchange, a virtual venue where investors can buy, sell or trade cryptocurrencies for traditional assets like regular fiat currencies, or even other digital currencies. Unlike the fiat monetary system, cryptocurrencies are not issued by a centralized banking authority like the Fed.
In 2019, Samuel Bankman-Fried, a graduate of MIT, founded FTX at the relatively tender age of 27. FTX attracted a diverse portfolio of investors and became phenomenally successful, so much so that it bolstered the reputation of the medium of cryptocurrency itself. FTX logos were soon branded onto college and professional athletic arenas, and after all, nothing says success in America more than having your brand splashed prominently in gigantic letters on the walls of a huge Sports complex. Even Bankman-Fried was soon gifted with his own moniker, referred to as simply “SBF”.
Since the collapse of FTX, the same individuals and organizations who were beating down the doors for the privilege of being affiliated with another American financial capitalist success story are now retreating as fast as they can unless their reputations become tarnished as well.
Another odd aspect of this story is the pedigree of the Bankman-Fried family, his parents are Stanford law professors. As noted from the article linked above, he comes, literally, from a background of ethics: “SBF was born into this world literally at the Stanford hospital to Stanford Law School professors. His father, Joe Bankman, wrote two leading casebooks on federal tax law. His mother, Barbara Fried, spent her days thinking about the intersection of law, economics, and moral philosophy; she specialized in risk and harm.”
So it’s quite extraordinary that a figure like Bankman-Fried, promoted by himself and others as part of a new generation of capitalists who believed that extraordinary amounts of wealth were meant to be used to better the conditions of society, immersed in a background of morality, ended up being just another con artist.
The short version of “what happened” is that Bankman-Fried, in the decentralized, unregulated Universe of cryptocurrency trading that afforded him an upscale, if completely unconventional lifestyle in the Bahamas, raided the investments of FTX and made speculative, risky trades and sales through the proprietary trading arm of FTX, Alameda Research. When a liquidity problem was called out by a rival cryptocurrency exchange, a run on withdrawals from FTX occurred. FTX wasn’t liquid enough with assets to cover the massive amounts of withdrawals, much like a traditional bank run.
This is an activity that is illegal, and strictly verboten in the traditional stock market transactions overseen by the SEC, but oddly, despite the tepid, barely in-the-headlines formal announcements of hearings made by Democrats like Waters, Bankman-Fried remains free. Strict regulation of the decentralized “free” market of crypto does not exist. So far, “SBF” has been questioned by, and is allegedly under the watch of Bahamian police. The SEC, DOJ, and other regulators, like Congressional Democrats, vaguely promise to investigate, with seemingly little speed or enthusiasm.
Apparently, international financial conspiracy, unlike traditional financial fraud committed on US soil, which resulted in the arrest of Bernie Madoff at his apartment by the FBI, merits questioning and a watchful eye.
There is no doubt that SBF donated extraordinary amounts of money almost exclusively to Democratic candidates. He was the second largest contributor to Democratic campaigns in 2022, spending 37 million dollars in the last election cycle. He was openly buying power, protection, and influence. “Regular citizens” do not get to testify and influence Congress through direct, in-person lobbying for hours on end.
Strangely, the very person now being charged with looking into the collapse of FTX, and the possible regulation of the cryptocurrency market, Democrat Chairwoman Waters, is so familiar with SBF from his previous lobbying and testimony, that images exist of Waters blowing SBF a kiss. SBF has been photographed on numerous occasions arm in arm with Waters and other powerful members of Congress, a sort of V.I.P. club meet and greet reserved for people who pay. The conflict of interest here couldn’t be more glaringly obvious, yet unashamed, Waters refuses to recuse herself from charing an investigative committee at this juncture. In recent interviews, Waters has directly avoided the ethical quandary of returning campaign cash.
There are few independent journalists, and certainly, no corporate media who have investigated the nebulous, and possibly illegal funding by cryptocurrency exchanges for NATOS proxy war against Russia, One of them is Grayzone’s Kit Klarenberg. Klarenberg urges caution and in a series of tweets spells out what we know, based on current evidence:
There is, at least according to a Ukrainian government official, an admission that FTX was used to convert crypto donations to Ukraine to fiat currency. Allegations of Ukraine directly investing in FTX, and by proxy in Democratic candidates are explicitly denied. Despite that, there is a connection.
If all this isn’t enough to raise questions about the dubious nature of SBF and FTX potential, possibly illegal involvement in financing the Ukrainian Ministry of Defense, this fact, the “backdoor” created by SBF with bespoke software, so SBF could literally move money in and out of FTX without being detected, should ring alarm bells immediately.
The FTX story is evolving, and if the current trends in obfuscation and distraction continue, it is unlikely we will get the full story. One thing is for certain: Something is certainly rotten in the state of Denmark.
Update: 11/21/2022: This morning’s latest news headlines reveal that Bankman-Fried is currently holed up in his Bahamas residence trying to “plug the billion dollar hole” s bankrupt company, This is almost unbelievable, that he is, at this late date allowed access to the internet to continue the grift.
NASSAU, Bahamas — Despite being pushed out of the cryptocurrency giant he founded, Sam Bankman-Fried told CNBC he is trying to lock down a multibillion-dollar deal to bail out FTX, which filed for Chapter 11 bankruptcy protection earlier this month.
In a brief interview with CNBC late Friday, the FTX founder declined to give details about the downfall of his crypto conglomerate, or what he knew beyond liabilities being “billions of dollars larger than I thought.” Bankman-Fried declined an on-camera interview or broader discussion on the record. He said he was focused on retrieving customer funds and is still on a quest to secure a deal.
“I think we should be trying to get as much value to users as possible. I hate what happened and deeply wish that I had been more careful,” Bankman-Fried told CNBC.
Another excellent supplemental article reveals how the corporate-friendly business media is as responsible for promoting the grift to an unsuspecting, potential pool of investors as the celebrity endorsers, and enabling politicians.
Watching for changes in this developing story.
Update: 11/23/2021 Another excellent summation of developments in the FTX scandal from the Cold Fusion Channel on YouTube.