Sam Bankman-Fried and the Crypto Scandal: Lessons for Average Americans

Sam Bankman-Fried, founder of FTX, a cryptocurrency exchange, was once worth billions of dollars. Today he is sitting in a Bahamian jail, abiding with rats and maggots. Worse--the prison doesn't offer a vegan menu.

Sam was to have testified before a Congressional hearing about his financial dealings. However, a federal prosecutor filed criminal charges against him, and the Bahamian authorities obligingly locked him up before he spilled the beans.

And so many beans to spill. Commentators estimate Sam has one million creditors, primarily investors. 

Federal prosecutors are accusing him of securities fraud, wire fraud, money laundering, and numerous violations of campaign finance laws.

The mainstream media has portrayed Bankman-Fried as a naive and inexperienced investor who got over his skis. I think that's bullshit.

SBF is no country bumkin. He graduated from the Massachusetts Institute of Technology with a degree in physics.

He certainly grew up in sophisticated surroundings. His Wikipedia bio says he was born "on the campus of Stanford University." (Evidently, Stanford has a maternity ward).

Sam's dad, a professor at Stanford School of Law,  is a tax specialist who got his law degree from Yale. Sam's mom, a recently retired Stanford law professor, has three degrees from Harvard, including a law degree.

So what's next for Sam Bankman-Friedman and his crypto empire, which some people describe as a giant Ponzi scheme?

There are two possibilities. If Sam's shenanigans are fully exposed, the public may discover that many influential politicians profited from Sam's activities, which could trigger a political earthquake and multiple indictments.

On the other hand, the full extent of this scandal may never come to light. Sam is in a Bahamian jail awaiting extradition to the United States. Sam might be prosecuted vigorously, but he will likely take a plea deal without ever publicly testifying.

Regardless of how this saga plays out, Americans can learn a lot from Sam Bankman-Fried and the FTX fiasco.

First, people should only invest in financial vehicles they understand. Who really knows what cryptocurrency is or why it has value? And yet, millions of people invested their savings in crypto.

Second, financially insecure people should not invest their meagrer savings in desperate schemes to reverse their fortunes.  Many Americans are approaching their retirement years with inadequate savings and are panicking.

Nevertheless, impecunious people who think they can get rich by investing in cryptocurrency are like the guy who loses heavily at the roulette wheel and places his entire dwindling stake on black. Desperate gambling often leads to disaster.

Finally, FTX's collapse is a reminder that people who have degrees from elite universities aren't necessarily smart.  Sam Bankman-Fried and almost everyone associated with FTX holds a degree from an exclusive school. Yet look what happened?

Sam Bankman-Fried has a degree in physics from M.I.T.

America's Journey into the "Heart of Darkness": MIT Professor Jonathan Gruber, Elite Universities and Obamacare

 Heart of Darkness, Joseph Conrad's tale of one man's journey up a mysterious river into the heart of Africa, is one of those books that has embedded itself in America's postmodern psyche. How many high school students have written theme papers on Conrad's book? How many professors have crammed  Heart of Darkness down the yawning throats of indifferent sophomores imprisoned in mandatory English courses?  How many scholars have quoted the book's most famous line--"The Horror! The Horror!"--and opined on the book's rich commentary on colonialism, racism, and existential doubt?

At its core, however, Heart of Darkness is about greed. The people who ravished Africa in the late 19th  century and who people Conrad's book had nothing more in mind than making money.  Conrad described a group of European adventurers encamped on the bank of an African river as "sordid buccaneers" whose talk was "reckless without hardihood, greedy without audacity, and cruel without courage . . ." When the character Marlow asks an accountant why he took a job that landed him in an African jungle, he scornfully replies, "To make money, of course. What do you think?"

I  thought about Heart of Darkness recently as I read the news about Jonathan Gruber, the MIT professor who was one of Obamacare's chief designers.  Videos came to light in which Gruber basically admitted that Obama's healthcare law was based on deception and the contemptuous belief that Americans are too stupid to understand what the law would cost them.

Prior to passage of the healthcare law, Obama's people bragged about how smart Gruber is.  He was going to craft the most perfect and lovely healthcare system that had ever been designed, we were assured. And now we find out that Gruber was just a cynical academic who made millions of dollars packaging a swindle.

Indeed, Gruber is very much like Kurtz in Conrad's Heart of Darkness, the mysterious man in the heart of a dark continent who accumulated vasts stores of ivory and who acquired a firm hold on the imagination of the novel's central character, a riverboat captain named Marlow.

Marlow's description of Kurtz sounds very much like the Obamacrats' obsequious praise for Professor Gruber:

Hadn't I been told in all the tones of jealousy and admiration that he had collected, bartered, swindled or stolen more ivory than all the other agents together. That was not the point. The point was in his being a gifted creature, and that of all his gifts the one that stood out pre-eminently, that carried with it a sense of real presence, was his ability to talk . . . .

And of course Professor Gruber is just one of the many elitists who surround Barack Obama--all graduates of America's most prestigious colleges and universities. Almost all of them have an air of arrogance and condescension, and an unseemly sense of their own intelligence. Like the characters who grub for wealth in Heart of Darkness, most seem propelled solely by greed or the desire for power and recognition.

For some reason, Americans  have been willing to put the nation's destiny into the hands of these hollow and soulless people, most of whom have done nothing with their lives except attend elitist universities where they learned to do little more than talk. We even want our children to get degrees from the fancy colleges where Obama's bureaucrats have been spawned. We are willing to borrow vast sums of money to pay tuition costs so our children can take classes from professors like Jonathan Gruber.

And so we journey upriver into America's own Heart of Darkness: the elite colleges and universities that suck up our money and produce nothing but emptiness.  "The horror! The horror!" we will say to ourselves when we get our first student-loan bill and find we don't have the money to pay it.

MIT Professor Jonathan Gruber
"The horror! The horror!