Thursday, December 15, 2022

Part I

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‘Old Fashioned Embezzlement With New Blockchain Jargon’: Sam Bankman-Fried Arrested for Fraud

You go to a museum of ancient history and you are likely to find exhibitions of coins. Those coins, even from very early civilizations, are intended to function as a currency. And as you look at the history of humanity, somewhere where you find civilization, you will find some mechanism of financial and economic exchange. It might be a series of rocks or it might be, well, in most recent days in the United States and elsewhere what has been called cryptocurrency. The big question is not whether it’s crypto but whether it’s actually currency, and that is the issue that exploded in the headlines with the arrest on Monday in The Bahamas of Sam Bankman-Fried, a 30 year old who was considered to be one of the kings of cryptocurrency having built a multi-billion dollar cryptocurrency empire.

But the issues that have exploded into the headlines have to do, for example, with the bankruptcy declared by FTX, which had been one of the biggest cryptocurrency exchanges, and frankly, having been established by Sam Bankman-Fried, considered to be the 30 year old wunderkind or the wonder child of cryptocurrency, and by the way, it was a multi-billion dollar operation but it’s about $8 billion short right now. About $8 billion of supposed value has simply disappeared. That’s why you had the arrest of Sam Bankman-Fried there in The Bahamas on Monday night. That’s why federal agencies and federal law enforcement entities, including the US attorney for the Southern District of New York, they are lining up to bring charges against this 30 year old. And as we shall see, at least a part of what is going on here is not a news story about cryptocurrency, it’s a very old story about what law enforcement officials now refer to simply as fraud.

It was just last month that FDX as a company, as an exchange declared bankruptcy, and it did so for the old reason. Its debts, its obligations vastly outstripped its resources, its revenue, and as you’re looking at this now, the handwriting was on the wall for a very long time. Sam Bankman-Fried, and we’ll think more about this in just a moment, was one of the, well, typically Silicon Valley high technology entrepreneurs that seem to live off a credibility by his own strange personality, even his mode of dress, and he presented FTX and Alameda, which was his other company, as oases of safety in a world of financial risk. It turns out that FTX was anything but safe, and now we know, at least according to the Feds, that was true not at some point but from the very beginning.

A front page article in yesterday’s edition of the New York Times opened this way, “Sam Bankman-Fried’s lies, prosecutors say, stretched back to the very beginning from the founding of his cryptocurrency exchange, FTX, in 2019. Mr. Bankman-Fried engaged in widespread fraud, the federal authorities charged on Tuesday, and used his customer’s deposits to finance his political activities, buy lavish real estate and invest in other companies.” Now, there are likely to be thousands of people bringing some cause against Sam Bankman-Fried and there are likely to be thousands of individuals who lost money, some of them a vast amount of money. Estimates are that at least some investors have lost nine figure sums. That’s in the hundreds of millions of dollars, and at least according to the company’s current leadership, $8 billion is missing. Now, that’s a lot of money, $8 billion now missing.

Just one of the criminal indictments was 13 pages long, and by the way, in the context of federal law enforcement, this kind of indictment came very, very fast. Lawyers are trying to explain how an indictment like this could have come together with such specificity so fast. There’s only one answer to that question, and that is that someone inside the operation has been giving lots of testimony and lots of documentation to federal authorities. And as you think about human nature, that’s the way it works. There were a lot of people involved in this particular fraud, at least as the federal prosecutors are presenting it, and it was a fraud, they now say, from the very beginning, and thus, there were a lot of people who were taken in by this fraud. And we’re going to be thinking more about the worldview implications of cryptocurrency itself, but the point is that it’s important to recognize right now that the main story here is as old as humanity, and that is a form of fraud, a form of fraud for gain.

It involved, in this case, high technology and complex financial and digital arrangements that the average American can’t even understand. It is also entering into one of the main economic debates of our time about the value of cryptocurrency, but we do understand fraud. Fraud’s an old story, and in this case, it’s not just the federal authorities declaring this operation to have been fraud but also the new management of FTX, brought in order to try to bring some order out of the chaos.

John Jay Ray III, the new CEO of FTX, and by the way, he’s come in in order to try to salvage value out of other major economic disasters, he said, speaking of FTX, “This is really old-fashioned embezzlement. It’s taking money from customers and using it for your own purpose.” The editors of the Wall Street Journal yesterday simply said, “It’s old-fashioned embezzlement but with new blockchain jargon.” By the way, Mr. Ray revealed something else very interesting about FTX. This is incredibly telling. It’s also something that seems almost so strange that it can’t be true, but it was true. It turns out that this $30 billion company was using a bookkeeping program that is sold for local families and for small businesses, QuickBooks. So it turns out the software that you may be using to help you with your income taxes every year is also the software that was basically the accounting system for a $30 billion corporation. What could go wrong with that?

Now, at this point, I’m going to venture where I have not gone before, and I can tell you right now, I’m going to receive pushback. It happens every time I discuss cryptocurrency as thought through a Christian worldview. It is because I instantly hear from people, almost all of them young males, telling me that I just don’t get it. I don’t understand the blockchain, I don’t understand mining, I don’t understand cryptocurrency, and cryptocurrency is something entirely new in the financial, technological and moral universe and if you are thinking in terms of the old economy, you just don’t get it. Well, I just don’t get it when it comes to cryptocurrency because I believe that value has to be real.

This is something that Christians have had to think through for a long time. I’m not saying it’s wrong to invest in cryptocurrency but I’m saying it’s wrong to call it currency, and I think it’s also wrong to believe, and even more wrong to claim, that there is inherent value in it because apparently, there’s not. In the Old Testament in particular, but also in the New Testament, but extensively in the Old Testament, Israel is given a set of economic rules and principles and they are intended to try to aid human flourishing and to try to limit human evil, in particular, injustice, robbery, embezzlement, fraud. You have texts in the Old Testament that make very clear the sinfulness of such things as having illegal weights, wrongful weights, and doing business on the basis of fraud or misrepresentation. But there’s something even more basic in the biblical worldview and it comes down to this. One of the structures of creation is value, and value has to be eventually translated into something real. This is to say that for Christians, in the end, a value that isn’t based in something real isn’t a value.

Now, sometimes the link between value and that something real is indirect, and that’s true these days with almost any modern currency. If you have a US dollar bill in your hand, well, that is basically a piece of paper with some very sophisticated art on it that declares a value and it holds that value so long as two things happen. Number one, banks and other commercial business institutions recognize it, but ultimately, the United States government, and in particular, the US Treasury stands behind it saying, “Yes, that is a dollar and we stand behind that dollar.”

Someone may come back and say, “Well, if you’re talking about value, then what about investing in something like the stock market?” Well, I’ll just come back and say that the wise Wall Street investor or the wise stock investor is actually investing in something of value. There has to be inherent value in the proposition from the beginning. Now, that inherent value might not yet be, say, real estate or equipment. It might not yet be some kind of trademarked or patented product. It might be in the beginning, an idea, but that idea itself has value, and investors invest in the proposition that this value will grow. That’s the very idea of an expanding business. That’s the very idea of a growing investment. That’s the very idea of appreciation when it comes to investments. It has to be based in something real. The hope is that that something real will really grow.

Now, one of the things you need to recognize is that entire companies, entire countries, entire empires have fallen because the currency has been absolutely debased. The currency becomes meaningless, it becomes worthless, and the government, the entire government may fall. I have in my library a bill for 1 million German marks. 1 million German marks. I’m very proud to own that. That makes me of sorts a millionaire in Germany, but it was actually a millionaire in Germany in the late 1930s during the time of the Weimar Republic. And at that time in Germany, the inflation was rising so fast that it would actually take a fist full of million mark notes in order to buy anything in the equivalent of a grocery store.

It should tell you something that I paid something like the equivalent of 20 American dollars for a 1 million German mark note, and the fact is that I might have overpaid for it in terms of the antiquarian market but I just wanted it as a talking point, and I’m talking about it right now.

Part II

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Value Must Be Based in Something Real: The Issue of Crypto Currency

Now, I said I get pushback every time I even mention cryptocurrency but the fact is that it’s based upon a couple of ideas that ought to be suspicious from the beginning. One of them is that you can actually trust what is known as a blockchain or the people involved in a blockchain and the technology behind it to manage and to perpetuate value in what would be a cryptocurrency. Now, I’m not going to go into the details here. The point is this, there is nothing of inherent value behind these cryptocurrencies, or at least most of them. Instead, at least one of the reasons why cryptocurrency was developed was to create a form of currency independent of governments.

Now, you can understand a certain libertarian impulse to want that kind of currency that might not depend upon a government, except for one thing. At the end of the day, you’ve got to go to somebody if you feel like a wrong has been done. You have to go to somebody in order to say, “There has to be some value here.” Isn’t it interesting to know where the people who have a complaint against FTX are going to go? They’re going to go to the federal authorities, they’re going to go to the federal courts. In other words, they’re going to go to the very government they said they didn’t want to have anything to do with the establishment of their currency.

Now, I know exactly how the critiques are going to come. They’re going to come from people who say, “I just don’t get it.” Well, I’ll just tell you right up front, I just don’t get it. I don’t get why you would take something like a cryptocurrency and say, “You know, I’m going to put my wealth there.” And as you look at FTX, you just realize, that was a huge problem for the investors in that exchange, and it turns out that many of them were recruited particularly because the founder of that exchange, Sam Bateman-Fried, said that FTX was an oasis of safety in an otherwise fairly dangerous and volatile world of cryptocurrency. And yet, the authorities said on Tuesday, “It was a fraud from the very beginning.”

So let me move to what we do know surely as Christians, and that is that fraud is wrong. We know that, and we know also that value is a very important biblical concept, value of land, value of property, value of a crop. And that’s a very important point, because as you look at currencies as we know them, and frankly, even as you will find them in the main in a museum, what do they represent in terms of confidence? It is going to be a government. It is going to be a state. It’s going to have somebody’s image on it. In the main and throughout most of human history, that has been an emperor, a king, a Caesar, or a king or a queen. Why? Because ultimately, the assurance is that Caesar will make certain that this has value, that the king, the emperor or the queen will make certain that this has value. Someone is standing behind this currency and that someone’s profile is actually on this coin.

In some cases, those images are honorific as they are in the United States. They’re historical and honorific, not a current monarch. We don’t have one of those, but rather a significant person from the nation’s history, most importantly, George Washington, our very first president. Now, don’t go try to find George Washington if you have a complaint against the US Treasury. Someone else is in charge of that now. The point is, it is the moral authority of George Washington, and to an even greater degree, the moral authority of the treasury of the government of the United States of America that stands behind the value of that currency.

When it comes to something like cryptocurrency, who at the end of the day is standing behind that currency? There are a lot of people who have lost at least something like $8 billion who are asking that question now.

Part III

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An Ivy League Family, Big Donations to Progressive Causes, and a Silicon Valley Rejection of Power Attire: The Backstory of Sam Bankman-Fried

But as we see this story unfold, there are a couple of other issues of worldview importance. One of them has to do with family, and you say, how’s family involved here? Well, obviously, a lot of families have been harmed in this but let’s think about the family at the center of the story. Sam Bankman-Fried, that hyphenated name points to his mother and his father. Joseph Bankman is his father and Barbara Fried is his mother. What makes this most interesting? Both of them are very well known professors of law at Stanford University.

And so here you have a major figure, the major figure in one of the biggest financial scandals of all world history, and his parents who aided him, at least to some degree, in putting all this together turn out to be very respected professors of law at one of the most prestigious universities in the world. Now, it turns out that his father, professor Bankman, has been directly involved in the company. More of that of course will be disclosed in time to come.

It turns out that his mother, professor Barbara Fried, had been very much involved in a movement known as Elective Altruism. We’ll talk more about that in a subsequent edition of The Briefing, but let me tell you, it means that you had the son, in this case, the major figure at FTX, Sam Bankman-Fried, the son of Professor Bankman and Professor Fried, who was making a name for himself not only by creating this massive fortune and getting people to invest in his cryptocurrency, but also by exercising a form of altruism as he called it, that made him one of the major donors to philanthropic endeavors around the world, and many of those vast worldview implications more than we can consider today.

The other part of this is that in recent years, Sam Bankman-Fried has been the biggest donor to progressive democratic candidates and movements, coming in second only to investor, George Soros. That at least by the accounting of some in the major media. We’re talking about big money, we’re talking about big money into American politics. There will be more to that story, you can be sure, but that leads to another interesting aspect to all of this. The arrest of Sam Bankman-Fried came Monday night. The timing on that, very interesting. That timing may have been precipitated by an effort by federal prosecutors to prevent Sam Bankman-Fried from appearing by some sort of Zoom or similar technology in order to give testimony before the United States Congress. That testimony was scheduled for Tuesday morning. His arrest on Monday night meant that he could not give that testimony. It could be, in other words, that the arrest Monday night was part of an effort by federal investigators and law enforcement authorities led by prosecutors to try to get Sam Bankman-Fried before them and before a court rather than before Congress.

It’s going to be really interesting to see the involvement of his parents in all of this. You’re not just talking about somebody who decided to start this kind of project out of a high school idea. You’re talking about someone whose parents were law professors at one of the most prestigious universities in the world, and in retrospect, that gave him geographic proximity to Silicon Valley and it also gave him relational proximity to a lot of people with a lot of money, and he started out with the advantage of a lot of credibility, starting up, particularly with his powerful parents. Oh, and by the way, just given human nature, wouldn’t you tend to trust someone starting a major business rather than perhaps trusting someone else if the person you are inclined to trust seems trustworthy, because after all, his parents are two very well known law professors in an extremely respected university? That’s also the way the world works, sometimes rather disastrously we note.

One final note on Sam Bankman-Fried, there’s going to be a lot more to say in the future, but he was well known for creating a persona in which he had wild, wild hair, a dark form, some sort of Albert Einstein, and he tended to wear very loose t-shirts and shorts in order to present himself as something of a very, very unkempt person, because it has become a part of Silicon Valley tradition that these tech entrepreneurs appear to be absolutely unconcerned about showing up in what had previously been described as power attire, a dark suit, a light shirt, a respectable tie.

All of this, whether it was Steve Jobs or Mark Zuckerberg or whoever, it was probably intended to imply, “Look, this is a new generation. This is the wave for the future. We don’t follow the old rules. And for that matter, our expertise is our credibility, not our ability to look like professionals playing the business game.” But here’s the point I want to make – clothes sometimes mean a lot more than clothes. When Sam Bankman-Fried showed up in court in The Bahamas having been arrested, guess how he dressed himself for court? Dark suit, dress shirt, no tie yet, but by the time he gets in an American court, I’ll be betting on the tie joining the ensemble as well.

So again, bottom line for the Christian worldview, we believe in value. We believe in value marked with righteousness and justice, and we believe in an economy that is based upon open rules and the same rules for everyone. Now, the fact that that doesn’t happen doesn’t mean that we’re not concerned about the fact that it should happen.

But I’ll simply end this part of the discussion by underlining the fact that in the history of Christian moral thought, many of the greatest and gravest moral and theological issues have come down to something precipitated by money. And maybe it’s because, and Jesus seemed to be speaking of this in more than one of his parables, the way we think about money really does reveal the condition of our heart.

Part IV

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Famous and Infamous, Controversial and Political: Anthony Fauci Retires as 5th Director of NIAID

But finally for today, I want to reflect about the meaning of the retirement of Anthony Fauci, certainly at this point, the most famous or infamous medical doctor in the United States. That came because of two reasons. Number one, the Coronavirus pandemic, the COVID-19 pandemic that so reshaped American society became so central to our discussion, for good reason, over the course of the last several years. And then secondly, the rise of the constant age of media in which you had all these issues being talked about all the time, social media, streaming media, cable, you name it. And so Anthony Fauci basically found his way or worked his way into just about every single kitchen, living room and television set in the United States.

As a young man, he had been drawn to infectious diseases and that’s why he joined the US Public Health Service in 1969 after graduating from medical school at Cornell University, and he rose eventually to become the fifth director of the National Institute of Allergy and Infectious Diseases, generally remembered as part of the National Institutes of Health. Now, I mentioned both the terms famous and infamous about Anthony Fauci, and that’s because he really is both. Particularly on the left, he’s famous. On the right, he’s increasingly infamous, and a lot of that has to do with all the controversies about COVID-19, but it also has to do with his personality and with his claims about himself.

He had valedictory rounds on the Sunday talk shows, Face the Nation, Meet the Press, This Week for ABC News, and as he was speaking on Face the Nation for CBS, responding to a statement by Margaret Brennan, the host that he was seen as a political figure, he said, “You know they say that I’m not political at all, period. I’ve never been, and anybody who knows anything about me knows that that’s the case end.” In other words, he says anyone who knows anything about him knows he’s not political. Well, I want to tell you right now, if there is any flat, wrong, dishonest statement in all of American medicine or politics, it is that. Anthony Fauci has been deeply involved in politics.

Now, as he speaks for himself, he doesn’t endorse candidates, but he does speak about political issues and he does share platforms with political leaders, including a succession of Presidents of the United States going all the way back to Ronald Reagan. And he has been deeply involved in and deeply opinionated about just about every major medical controversy of recent times, most importantly, having to do with infectious diseases. When it comes to COVID-19, Anthony Fauci is found in controversy even over how the virus emerged and whether or not China as a government was directly involved, either with the creation or with a coverup of the existence of the virus in its early stages.

Fauci also became famous, or infamous, because early in the COVID-19 pandemic, he made public statements coming out directly and saying that there is no real medical purpose to wearing a mask. He shortly pivoted to say, “No, you should wear a mask.” In some of the reports, he said that he did so because of a concern of a shortage of masks if every American was trying to get them when you had medical people who needed them first of all, but he also said that the science changed so his advice changed, and given the context of an interview, his answers change. When it comes to government’s responsibility to its people, the arrival of something like the COVID-19 pandemic presents an enormous challenge, and frankly, Christians understanding the purpose of government may disagree about exactly what a government agency should do under, say, condition A or B or C.

Now, when it comes to Anthony Fauci, there is more at stake there, and I must speak out of a long history here. Back in the 1980s, the issue was the AIDS crisis, and back in the 1980s, Anthony Fauci was known as a man of controversy, even as he was head of the very same government department. He was known as a man of controversy for tracking the emergence and the spread of the AIDS epidemic to gay bathhouses. I’m not going to describe them in greater detail. Let’s just say they were centers of gay male activity in San Francisco, although the virus early emerged in cities like New York and San Francisco, also some on the East Coast, all identified as centers of gay male activity. Early on in the AIDS epidemic, Fauci was openly fought by representatives of the gay rights movement who declared him guilty of all kinds of evil including something like the attempted elimination of homosexuals from the American society.

You look at all this, you recognize that there was a great deal of panic, but you also need to recognize that Anthony Fauci did a very interesting pivot politically and morally in the midst of the AIDS crisis, and he made his point by basically meeting extensively with homosexual leaders and then coming out and saying, “There’s nothing really wrong with this lifestyle. There’s nothing inherently immoral about what’s going on here. We just need to address this as a public health issue.” Now, that’s one thing, but he also publicly sought to shame conservative Christians for thinking that there just might be a tie behind the behavior, the immorality of the behavior, and the resulting spread of the infectious disease. But again, he said to CBS, “I’m not political at all, period. I’ve never been, and anyone who knows anything about me knows that that’s the case.”

I’m not saying that Anthony Fauci is the only figure involved in the federal government who has been politicized. I’ll simply say, when it comes to Anthony Fauci, there is a lot more there than meets the eye ideologically. And in order to make that case, I just want to point to the fact that in the midst of all of this, Anthony Fauci was celebrated as the 2021 Humanist of the Year. The American Humanist Association announcing the award said that he was being honored because of “his unwavering commitment to accessible evidence-based information and his robust communication to people about public health issues.” It was also stated in the announcement that Dr. Fauci has identified as a humanist and mentions that he aligns with humanist values. He has said in recent interviews, “I look upon myself as a humanist. I have faith in the goodness of mankind.” He also said, “I’m less enamored with organized religion than I am with the principles of humanity and goodness to mankind and doing the best you can.”

In receiving the award, and it’s important to say he went to receive the award, he gave a speech in which he spoke of his Catholic background, and this I quote, “My outlook has since evolved to align with the concept of making the world a better place rather than being involved in any organized religion.” In a 2015 interview on CSPAN, Dr. Fauci said, “I think that there are a lot of things about organized religion that are unfortunate, and I tend to like to stay away from that and think more in terms of the principles that I learned from the Jesuits and the Catholic religion, the principles that I run my life by. But the idea about the organization of religion is not something that I adhere to very much.” Now, I’m not saying that being a secular humanist meant that Anthony Fauci wasn’t a good doctor. I’m saying this, your worldview determines your outlook in all of life and it will come with consequences, and there is no doubt that the consequences of that kind of materialist humanism shows up very much in the moral evaluation of Anthony Fauci.

In the case of Anthony Fauci, it led to him basically celebrating LGBTQ identities and denying that in themselves, they represent any kind of vulnerability when it comes to health whatsoever. Back in the 1980s, the answer was supposedly safe sex. By the time it got to COVID-19, well, you pretty much know the drill.

And honestly, anyone sitting in that particular seat in our government was going to be at the center of controversy, but in the case of Anthony Fauci, it was not unfair that much of that controversy was about Anthony Fauci.