FTX worked hard on its green image, something its founder now admits was just a con
One of the biggest financial scandals since Bernie Madoff is brewing in the US. A cryptocurrency exchange called FTX collapsed this week, with estimated debtsof $8 billion. It is estimated that up to 1 million creditors could have lost out.
Just as with Madoff, FTX appears to be another massive ponzi scheme, with investors’ money being siphoned out of the business.
FTX was run by Sam Bankman-Fried (SBF), and he transferred at least $4 billion to prop up another of his companies, Alameda Research, which was already in financial trouble after a series of losses from deals.
For the last three years, the 30 year old SBF has been the darling of the woke, famous and powerful. FTX, only set up in 2019, was recently valued at over $30 billion. Tom Brady, Gisele Bunchen, Steph Curry, and other celebrities had advertising and marketing deals with the firm.
He has also been a big contributor to the Democratic Party this year, his $40 million making him the second biggest donor behind George Soros. There are already demands for the Democrats to pay back what is in effect stolen money. (In contrast, the Republicans received only $105,000).
SBF certainly worked hard on his image, setting up the FTX Climate Program, which used investors’ funds to purchase carbon offsets and fund other climate initiatives. He also bragged about how he gave most of his income to good causes, something he now admits was just a front.
As the American Institute for Economic Research put it, “SBF’s humble, geek-chic image (unruly hair, unpretentious attire, driving an unremarkable vehicle) presents a picture of guilelessness. The emergence of a simple figure using cryptocurrency trading to selflessly tackle changing the world was no doubt irresistible to an increasingly left-leaning financial establishment.”
Inevitably, FTX appeared high in the ESG ratings. And this highlights a much wider problem. There are now serious question marks about the US Securities and Exchange Commission (SEC), who failed to anticipate the problems leading to the collapse of FTX, despite many warning signs.
Instead of rooting out fraud, the SEC seems to spend most of its time pursuing its ESG and climate agenda. One of its own Commissioners complained earlier this year that pursuing ESG mandates “distracts us” from “other important work to do,.
Meanwhile companies are increasingly being forced to report on climate risks. The SEC is currently planning to introduce a “climate disclosure” rule, which would require public companies to extensively calculate climate-related data on their operations on a micro level not relevant to most investors’ bottom lines.
As one expert noted, “What the agency is now proposing is to impose substantive environmental regulation thinly disguised as financial reporting. That does not protect investors.” .
Similar climate disclosure rules are already in operation in the UK, being enshrined in law after last year’s COP26, whilst companies are falling over themselves to look good at ESG.
But if the US experience is anything to go by, none of this will be of any benefit to shareholders.