Context: Sadly, FTX
FTX defrauded users in a way that is normal for cryptocurrency. But the FTX fraud is a function of the normal system working normally. Like ordinary financialized firms, FTX grew by making leveraged promises. Spotty regulatory attention to cryptocurrency gave it sufficient legal cover to make it easy for people to speculate on it, while effectively allowing participants puff up a speculative bubble by engaging in more aggressive leverage than is tolerated in other areas, often shading into overt fraud.
If you were to randomly audit the books of institutions run by people who look from the outside like Bankman-Fried did prior to the FTX blowup, the level of shenanigans he engaged in would not look like an outlier; his ability to do unusual things with a disproportionate amount of capital was approximately titrated to his willingness to take on liability, i.e. borrow more than he could pay.
I do not have a strong opinion on whether South Africa's Truth and Reconciliation Commission was too merciful, but I do not think anyone can legitimately think that it was not merciful enough; amnesty extended to those who have not yet confessed, and continue to occupy positions of power that can choke off their critics' access to resources and attention, is not part of a reconciliation, but license to continue to offend. If the investigation of the FTX fraud goes no farther than the individual at its nominal head, then it is extending such a license to those who created and endorsed the system in which Bankman-Fried was trying to do the right thing.Continue reading