The Sad Saga of Sam Bankman-Fried and His Cryptocurrency
By now people who follow the news have probably heard of FTX and its wunderkind creator, Sam Bankman-Fried. Very simply put, Bankman-Fried created a form of cryptocurrency and encouraged a lot of people to invest in it. He and the investors made billions, and then lost it because FTX was basically a Ponzi scheme.
But this story has more layers than just ripping off investors. First, it involves a form of exchange that practically no one really understands. Second, its eccentric young founder, the son of Stanford professors, claimed to be donating a high percentage of his income to progressive causes. Third, Bankman-Fried was a major face for a cult-like organization called Effective Altruism.
Cryptocurrency is a digital medium of exchange designed to operate through a computer network and does not rely on any central authority, such as a government or bank, to uphold or maintain it. The first crypto was Bitcoin, but there are now over 12,000 different cryptocurrencies worldwide. Fans of this medium say it eliminates banks and their rules which favor rich people and are brutal to poor people. Anyone with a smart phone can set up a cryptocurrency account, there are no fees and the transactions are worldwide and immediate.
The detractors (I live in this camp) point out that it is largely unregulated, fluctuates widely in value, is not well understood, relies on people having a lot of technological knowledge and constant access to the internet. Further, the energy required to run the blockchain technology that cryptocurrency uses makes it a big contributor to climate change. None of these variables describe something that is good for poor people.
Effective Altruism is both an organization and a movement, the motto of which is “doing good better.” They posit that you should make as much money as you can so that you can donate most of it to making the world better. To be sure, a great deal of money has been given to organizations and movements that are critically important. But the fundamental flaw is the overemphasis on the role of the individual in addressing problems that can only be solved by appropriate public policy and public investment.
Some small part of many of us are still thrilled by the idea of Robin Hood—robbing the rich to give to the poor. And, as a movie or an interesting topic of conversation, I love Robin Hood. But at the end of the day, Robin Hood and those who want to imitate him set themselves up to know exactly who is rich and who is poor, who is deserving and who is not; they justify all action to gain money by the end result of giving it away.
The values of people of faith stand in stark contrast. We believe in simplicity, hospitality, working alongside people, listening to what people think they need and building the beloved community. By extension, we believe in fair and just tax policy, we believe that how you make money is as important as how you spend it or give it, and that collective action, not individual heroics, is what brings about lasting change. Sam Bankman-Fried is young enough to experience a big change of mind and heart and to ultimately do good work. I pray that he does. But more, I pray that we watch closely our own temptations to fall into any of the enticing honey traps that are embedded in this fascinating, if tragic, story.