DAVID BUCKHAM: Beware of powerful faux-moralist leaders

In December of 2021 I was left behind by an elite group of mountain bikers, unable to keep up with the pace, and found myself cycling alone on the N2 outside Plettenberg Bay, listening to Sam Harris’ Christmas edition of his podcast Making Sense.

Harris was interviewing Sam Bankman-Fried, who at the time was still CEO of cryptocurrency exchange FTX, with the episode airing roughly a year before he would experience his spectacular fall from grace.

Aged only 29, Bankman-Fried was the antithesis of a typical corporate CEO, with his unruly hair and signature baggy T-shirts feeding his public image as the poster boy for crypto. Adding to his public appeal at the time, in this particular podcast episode Harris was discussing Bankman-Fried’s signing of the Giving What We Can pledge as a quintessential example of the billionaire’s larger philosophy of “earning to give”.

With uncharacteristic flattery, Harris introduced Bankman-Fried, who was worth $29bn at the time, as a man who had selflessly “set out to make all this money explicitly for the purpose of giving almost all of it away to the most effective charities and thereby do as much good in the world as he possibly can”. 

Somewhere between the turn into Kwanokuthula and the SA National Parks Garden of Eden sanctuary, I began to lose my temper with the disingenuity of the conversation, and I recall banging my front wheel somewhat aggressively repeatedly against the tarmac.

As someone already philosophically opposed to the concept of cryptocurrency and generally sceptical of the grandiose claims of ultra-wealthy philanthropists, it seemed a personal injury to me to have someone I respect as much as Sam Harris extol this crypto billionaire’s virtues.

Even in 2021 there were simply too many questions in my mind as to the sincerity and veracity of Bankman-Fried’s claims regarding his embodiment of what has become known as “effective altruism”.

A simple look at the numbers confirmed this for me. In the 12 months before his interview with Harris, Bankman-Fried donated about $50m, less than 1% of his net worth at the time, earning him the lowest possible philanthropy score of one out of five in the Forbes list of the 400 wealthiest Americans that year.

To put this into perspective, had Bankman-Fried instead sold all his financial assets and simply let his wealth sit in a conservative savings account that paid out 2% a year, the interest earned annually would have been almost 10 times more than the total value of his donations in 2021.

Bankman-Fried launched FTX in 2019, which grew rapidly to become one of the largest cryptocurrency exchanges in the world, valued at $32bn by early 2022. But by November of that year FTX was bankrupt and Bankman-Fried had resigned as CEO. A month later he was arrested in the Bahamas, where FTX is headquartered, and extradited to the US, where he was indicted on seven criminal charges including wire fraud, commodities fraud, securities fraud, money laundering and campaign finance law violations.

As revealed during the trial that followed last year, in which Bankman-Fried was found guilty on all seven charges, money deposited by customers on FTX was routinely being transferred to Alameda Research, where the funds were used to make speculative bets and finance loan repayments and real estate purchases.

Political campaigns

Even more egregiously in my opinion, some of the money that was in effect stolen from customer deposits at FTX was also actively used to prop up Bankman-Fried’s reputation as “the most generous billionaire in the world”, as it was put in one particularly noteworthy biographical interview. Yet not only was the size of his donations unimpressive in relation to his personal wealth, but worse still most of the donations were not channelled into charitable endeavours, but rather into political campaigns in the US.

This included donations to two super-PACs supporting Joe Biden in the run-up to the 2020 US presidential election and several seemingly strategic donations to politicians and political groups in the 2022 midterm primary elections, including Carrick Flynn, a crypto-friendly lawyer and activist.

Bankman-Fried also provided donations for the two main super-PACs supporting Democratic candidates for Congress in the 2022 elections, as well as personal donations to more than a dozen members of Congress, many of whom were connected to the development of new cryptocurrency regulations. In fact, with donations totalling $40m, Bankman-Fried was the second-largest individual donor to Democratic causes during the 2022 elections, behind Hungarian American hedge fund manager George Soros.

Bankman-Fried will be sentenced on Thursday for his crimes. While federal prosecutors have argued for 40-50 years of jail time, Bankman-Fried’s lawyers said this recommendation was appropriate only for a “depraved super villain”, at odds with the picture they tried to paint of a young entrepreneur who found himself out of his depth.

While such a sentence is undeniably an extreme punishment for someone who has not committed a violent crime, the failure of FTX is not simply a story of corporate mismanagement, but one in which billions of individual investments were lost while one man actively attempted to influence democratic systems and the outcomes of elections, all the while presenting himself to the world as ethically untouchable.

It’s a story of greed and what Francis Fukuyama would call megalothymia, the desire to be recognised as superior to others. And it’s a dangerous impulse when it manifests in faux-moralist leaders who wield too much power, with no consequences for their actions. 

• Buckham is founder and president of Johannesburg-based international management consultancy Monocle Solutions.