Smoke and Mirrors

We at the Ribotsky Institute have long stated that cryptocurrencies are just the newest in a long line of scams perpetrated on society through financial engineering.   Since cryptocurrency does not really exist and is somewhere in cyberspace, it is a great tool to perpetuate fraudulent behavior. We certainly are not surprised that FTX was forced to file for bankruptcy protection and billions of dollars are missing.  Of course, we were not aware that these billions were customer deposits at the now defunct FTX crypto house of cards, but nothing surprises in today’s technologically advanced markets.

After all the hype, political donations to the democratic party, and countless guest speaking engagements, it is all the same thing ostensibly.  A guy who may or may not be brilliant in terms of cryptocurrency charmed a lot of people, most of them of who were ashamed to admit they did not understand the business model he was touting, (or a thing he said), and when the scheme could not continue any longer and boom.   Financial explosion and bankruptcy protection. 

Then the dust starts to settle and little do you know, FTX is owned and operated alongside a hedge fund known as Alameda Research, owned, and operated by the same people.  (Conflict of Interest?)   Ok, that sounds about right.  As the dust continues to settle, it is determined that FTX transferred customer money to its hedge fund and the rest is, as they say, history.  Shocked?  Not exactly, but there is a list of basic do’s and don’ts when managing other people’s money.  You get that when you sign up for money management 101.   Transferring client funds from one enterprise where you are supposed to be holding their funds as a fiduciary and giving it to a hedge fund that you control to make trades, cover losses, or what other crazy notion you concocted for yourself to be able to sleep at night; is an example of what not to do.  At the end of the day, billions are unaccounted for.

 Is this part of a broader scheme, well you know most say where there is smoke there is fire.   Fortunately for Sam Bankman-Fried, he gave to the right politicians and while the street claims he is being investigated, by The Department of Justice and The United States Securities and Exchange Commission, he is still hanging out at his $40 million Bahamas condo.   Yes, you read that right, Bahamas.  You see, FTX is based in the Bahamas for regulatory and tax purposes.   (Interesting right?)

There may be a rational explanation for all of it, but Bankman-Fried has basically admitted the wrongdoing on Twitter, been interviewed by many news outlets where he admits some wrongdoing, and FTX’s new management team has uncovered lots of other failures on the part of management and executives who oversaw regular people’s money.  Yet Bankman-Fried is walking the planet a free man with assets. 

How does that work you wonder?  Well, first one needs to donate to the right politicians.  (Back in the day I missed that memo) Then, set up your enterprise in another country that does not have the same rules and regulations as other major countries.  (Missed that memo too I guess) This makes it all harder for the regulators in major countries to execute on stopping it all.   Oh and make the thing you are selling everyone a groundbreaking revolutionary item that most do not understand, but afraid to not be a part of.  Brilliantly done and laid out.  Except for one thing……someone is going to figure it out eventually. 

All we know, from personal experience, is that if you or I did this we would have been indicted already and probably still incarcerated as public enemy number one.   But with some political connections to the current administration in Washington, popular famous people who were paid spokespeople, an enterprise that most do not understand, and a web of interlinked businesses around the globe that may take two years of forensic accounting to figure out, all of this points to one thing.

A scam is a scam.  No matter how you package it.  Maybe regulatory bodies should think twice about the cases they spend their time on while these things are happening in the world.  Or better yet, hire people who know what to look for.  Maybe there would be a different outcome next time and the public at large does not have to pay the check…

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