Tech Bros Breaking Bad

What the trillion dollar crypto crash tells us about the culture of modern capitalism

NB THE AUDIO VERSION IS AT THE FOOT OF THIS PAGE. CLICK ON BLUE TIMELINE

Sam Bankman Fried, sometime CEO of the bankrupt crypto exchange FTX, is the archtypal tech bro.  Tousled hair, wears shorts to meeting,  plays video games during conference calls, boasts that he never reads books.  He is political too - in the Silicon Valley consensus.

SBF, as he is known in tech land, is the second largest donor to the Democratic Party after the financier, George Soros. He’s also been a big investor in the Oxford-based philanthropy movement “Effective Altruism” run by the philosopher William MacAskill.  EA is for people who “get rich in order to change the world”.  He got the first bit right at least - for a while SBF was worth thirty two billion.

He was also a charlatan and huckster who applied the oldest scam in the financial book to the supposedly new world of crypto finance:  gambling with other peoples’ money.  He deceived investors in his FTX crypto exchange, the second largest in the world, with a new version of the derivatives scam that blew up banks like Lehman Brothers in 2008. Instead of dodgy mortgage loans, repackaged as collateralised debt obligations, FTX repackaged crypto currencies and traded them as if they carried real value.  It’s the Greater Fool principle applied to cyberspace.

We are all addicted to novelty. We all want a fast buck and perhaps we are all partly responsible for the one trillion dollar crypto crash.  Even pension funds had started dabbling in it.  But not really.  Most of us have only the vaguest knowledge of Bitcoin,  the original crypto currency which has just lost 70% of its value.

Yet there are more than twenty thousand of these coins in virtual circulation. Etherium, Litecoin, Monero.  One of them, Dogecoin, started as a joke, and then became a tradeable asset that even Elon Musk held.  Maybe that should have told us something.

These coins are not assets in any rational sense of the word, they are pure speculation. They have no intrinsic value like conventional currencies which are based either in precious metals or, increasingly nowadays, have a value guaranteed by the state. The so called “fiat currencies”.

The snake oil that the cryptos sold was based on the conspiracy theory that fiat currencies are a sham.  A way for governments to steal your money by inflation and taxes. Crypto was supposed to be free of any government or state control. A realm of true freedom in which people could exchange their wealth in cyberspace using a decentralised block chain ledger instead of bank deposits. 

It was the ultimate libertarian, anti-government dream which makes it so odd that the left bought into it.  Cryptos are only really of value to criminals who can launder and exchange drug money and to financial conmen.

Bankman Fried was feted by politicians, financial commentators and the press as a 30 year old Wunderkind.  Why didn’t regulators see through him? Because he was using very sophisticated public relations - so sophisticated indeed that it didn’t actually involve PR.

Like many billionaires SBF discovered the value of financial virtue signalling.  Giving away a portion of your wealth, through conspicuous philanthropy, and supporting left wing causes. This lent his operations a line of moral credit. It assured he got a good press in universities, media and by governments.

This is not to say that other philanthropists like Bill Gates or George Soros are crooks.  The Bill and Melinda Gates Foundation gives billions in real money to eradicate diseases like malaria and polio. George Soros may have been the original bond vigilante -  a financial  speculator who made a billion from Britain’s departure from the European Exchange Rate Mechanism -  but he is now known for financing pro democracy movements in Eastern Europe and backing left wing publications like Open Democracy.

This isn’t dark money, it is very much open and transparent money.  They want everyone to know about it.  The Oak Foundation, created by the luxury goods trader, Alan Parker, gave Open Democracy a million pounds to promote LGBTQI journalism in developing countries.

Capitalists have of course been using charitable foundations for centuries to launder their reputations.  The Rockefeller and the Carnegie Foundations were created by people who were called Robber Barons in their day and used private armies to break strikes. But today the Scottish-born steel magnate Carnegie’s name is linked to cultural institutions, libraries, university scholarships.  John D Rockefeller, who monopolised the oil industry in the 1890s, promoted what he called “retail philanthropy”: giving money to liberal think tanks and noble causes: “which should be so large as to attract the attention and intelligence of the world”

Capitalists like Rockefeller also used to trade in national pride, the flag,  belief in god. That’s all changed.  Modern robber barons are secular globalists who don’t recognise borders or god. Bankman Fried is a hyper-liberal individualist who based his effective altruism from a luxury polyamorous penthouse in a Bahamas tax haven.

He worshipped diversity and inclusion.  That’s why he went under the radar. He was wearing a moral invisibility cloak. The press, regulators and the police assumed he was a good guy. But in the real world of crypto the good guys are breaking bad.