Crisis Update – New FTX CEO Oversaw Enron Cover Up

Central banks and deep state poised to gain power from crypto drama

Nov 19, 2022

FTX shares aspects of the most notorious politico-financial scandals.
Multiplayer fraud has political, regulatory and venal aspects.
Central banks pilot digital currencies; G20 calls for ‘health’ passports.

Ten poly amorous crypto kids undermine mining.
Truth will emerge slowly if at all.
What corruption of public life makes possible, crisis will make inevitable.

See also: Moneycircus, Nov 15, 2022 — Crisis Update - FTX, High Connections And Dark Pools

(Words 2,500 or 11 minutes’ read.)

Nov 19, 2022

There is a glaring contrast between the amphetamine-dropping Millennials at FTX and those on the Enron board: Frank Wisner Jr, son of a founder of the CIA; and CEO Kenneth Lay, a Pentagon official during the Vietnam War.

Appearances can deceive — the beach attire as much as the expensive suit — for it was the heady mix of top-level political access in Washington that enabled, and perhaps motivated, both crimes.

We now know that FTX did not have a board; nothing on paper or public. Unless this most complicated fraud was directed by hands behind the curtain — but we must not get ahead of ourselves.

The Texas energy company, linked to president George H W Bush, was known for partisan price-gouging to hurt Democrat-run California, and its collapse took many investors’ savings with it. That was just a small part of the story.

Its network of companies profited from the first Gulf War; leveraged CIA connections to secure pipeline and energy contracts around the globe; and laundered money, paying off Congressmen who tried to investigate it.

There’s another blast from the past. Who is installed as crisis CEO of FTX but John J. Ray III, a lawyer who helped liquidate Enron.

He was praised for helping creditors recover billions of dollars. There is no evidence to doubt his good intention. The trouble is, the team of which he was part may have destroyed evidence in the process.

As the investment banker Catherine Austin Fitts said, investigators should not rush into repayments. The first thing investigators must do is gain control of documents and lock down the cash.

“And yet we've seen the government readily permit the transfer of Enron Online — which I believe was a money-laundering and slush fund operation — to the Swiss bank, UBS, one of their largest creditors. So now it’s very possible that a great deal of information that would be needed for a proper investigation is under the protection of the privacy laws of a Swiss bank,” she wrote at the time. [1]

Big four accountant Arthur Andersen shredded documents, along with its reputation, something it would scarcely have done except under pressure; the tax records relating to the inquiry were destroyed on Sep 11, 2001 in the collapse of World Trade Center building 7 that was not hit by an aircraft.

Austin Fitts, former assistant secretary of housing under the first Bush administration, reckons Enron was one of the ways in which “the owners” were looting U.S. taxpayer funds.

Sure enough, the first comments by FTX liquidator John Ray on taking over as CEO: there’s not a lot of records.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

And just in case his shock at FTX’s fraud of epic proportions was not clear enough, he adds that “from compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”

Baffled, I tell you!

He says he has located “only a fraction” of the digital assets: about $740 million of cryptocurrency in offline cold wallets, compared to a missing $5 billion in cash and up to $50 billion in FTX liabilities disclosed in its bankruptcy filing.

FTX went on a acquisition spree absorbing indebted rivals that allowed it to write off assets, or disguise the lack of them.

As the black hole deepened, CIA-linked lawyers Sullivan & Cromwell (CIA-founder Allen Dulles’ old firm) were brought in to provide “restructuring advice and support to debtors.”

As the journal Forbes notes, “FTX would adopt the tag line — ‘built by traders, for traders’ — a subtle spin on the one Enron once used for its trading platform.”

More brazen than subtle — while state corporate media is paid not to notice the crime scene.

Enron of course had hard assets. Through its merger with InterNorth it had, for example, the second-biggest gas pipeline network in the U.S. — but gas is so-last century. And thus we find the deep state playing not with energy assets but crypto.

FTX also bears resemblance to Theranos in having a practical agenda whose purpose lay in its conjunction with future plans — thus invisible to observers at the time. All three escapades served a higher purpose in addition to being a financial scam — the “greater good,” perhaps.

The private equity manager Alex Krainer has drawn comparisons between the FTX affair and that of Theranos and founder Elizabeth Holmes who on Nov 18 was sentenced to 11 years for fraud. [2]

Theranos’ objective was to have a ubiquitious blood testing system in every pharmacy, ready for the pandemic. The board was stacked with deep state perennials: Kissinger, Shultz, Perry, Nunn. When Holmes’ fraud was exposed, the PCR test had to be co-opted instead from its inventor Kary Mullis, who died shortly thereafter, and the unqualified German “virologist” Christian Drosten was tasked with declaring the PCR test fit for purpose.

The libertarian author Jeffrey Tucker tweeted: “So far, this FTX scandal seems like many past scandals all rolled into one: the Iran-Contra funding caper, the S&L debacle of 1986, Enron, Bernie Madoff and Theranos. The FTX value added: it roped in the Covidians too.”

Lev Tolstoy wrote: “All happy families are alike, but every unhappy family is unhappy in its own way.” The same might be said of broken companies.

Augean stables

He wanted to short crypto and ended up frying his circuits, or circus, because there is more than a dash of the clownish to Sam’s world.

The showmanship was not just sophomoric: it was almost bad on purpose —only lacking some multi-coloured hair dye. If people were slow to activate their BS detectors during the brief, three-and-a-half year life of FTX, they shall reminisce at leisure.

Head of FTX crypto exchange Sam Bankman-Fried seems to have a long record of undermining the industry — as has been diligently exposed by several specialists who did not get the attention they deserved at the time.

By repeatedly selling crypto to drive down prices, he destablized exchanges including, his own. This was no side effect but likely the objective: he lobbied hard in Washington for regulation of the sector, with ample campaign donations to the very senators overseeing it.

After the collapse of FTX U.S. treasury secretary Janet Yellen demanded the policing of the crypto space:

“The unfortunate impact that has resulted for holders and investors of crypto assets demonstrate the need for more effective oversight of cryptocurrency markets.”

In 2019 Sam took aim at other crypto exchanges, including the biggest, Binance, dumping hundreds of Bitcoin, apparently intending, as a plaintiff alleged in a lawsuit against him, to stoke a domino effect of liquidating customers.

The Binance systems detected the attempted manipulation, and the plaintiffs said Sam’s team had manipulated the market on other occasions “in a long-running, continuing enterprise engaging in a pattern of racketeering activity.” [3]

Sam took credit for predicting the collapse of stablecoin Terra (Luna) but industry watchers suspect FTX had the scale to short it (sell it, betting on a price fall) triggering panic in the market, which is what happened in May this year.

Incidentally, I wonder if the name stablecoin was ever appropriate in the sense of steady —the name recalls an in-house horse that wears the colours of the stable. Performance is linked to the financial stability or wealth of the owner. People perhaps missed this nuance.

In July it was the turn of Three Arrows Capital, whose founder Kyle Davies just this week accused FTX of trying to force its hand during the Terra collapse by targeting stop-loss positions to drive prices below recent trading bands.

FTX was not only hurting rivals; driving down prices undermined its own sister company Alameda, a proprietary trading firm.

It turned out that Alameda was largely capitalised by the house token, FTT, as the outlet CoinDesk revealed on Nov 2. The tokens, which offer discounted trading fees were raised in the FTX stable then sent to pasture in Alameda.

Printing tokens out of thin air is, of course, how central banks create money. The difference is that banks have the backing of government muscle to make the population pay taxes and interest. Tokens attracted holders of crypto or currency who eeked a return as exchanges re-lent them. It worked so long as the market went up.

The founder of the world’s dominant exchange Binance, Changpeng Zhao, finally took his revenge by announcing on Twitter that he would be liquidating his holdings of FTT.

On Nov 8, FTX announced it was in talks to be acquired by Binance which, after a look at the books, said neigh.

On Nov 15 Sam gave an interview to the outlet Vox, a recipient of grants from the Bankman-Fried family foundation, Building a Stronger Future. It’s also funded by the Rockefeller Foundation. With a straight face Vox raises the question of whether it’s okay to do unethical things “for the greater good.” [4]

Friendly media was crucial in assisting Sam’s meteoric rise, similar to the way the legacy Operation Mockingbird has had the media squawking in unison throughout Event Covid.

Regulatory alligators

Commentator Wall Street Silver points out that in the week since FTX’s collapse there have been no arrests. In contrast, Bernie Madoff was seized within 24 hours of his sons alerting the Securities and Exchange Commission.

Madoff sat on the Securities Industry Association; his niece was married to the director of the SEC’s Office of Compliance Inspections and Examinations who warned his staff not to investigate Madoff. However the fraudster, who died in prison last year at the age of 80, is left in the pale by FTX.

Sam had a direct line to the chairman of the Securities and Exchange Commission, whom he met in March, and who was a former colleague of Alameda CEO Caroline Ellison’s father Glenn at MIT (more below).

A memo of the SEC meeting memo mentions “conditional no-action relief.” As Mike Dalton at CryptoBriefing writes: “According to a 2020 statement from the SEC, conditional no-action relief is “a mechanism that allows registrants to obtain certain assurances when their conduct may touch upon a gray area of regulation, or even may be technically proscribed, but does not raise the policy concerns underlying a particular rule.” However, there is no evidence that FTX was granted this consideration.” [5]

Sam supported a bill that would strengthen the Commodity Futures Trading Commission’s oversight of crypto regulation. He made campaign donations to the senators on the agriculture committee. Those senators were John Boozman, Debbie Stabenow and John Hoeven. [6]

The objective was to create a licensing system for decentralized finance that would restrict the activities of FTX rivals.

FTX may have been supporting regulation in the hope it that it could be used to fortify its own derivatives exchange, FTX-US. On the other hand there are grounds to suspect one aspect of the plan was always to implode FTX, taking the industry with it and leaving the path clear for the central banks.

Central banks in the wings

The Wall Street Journal wrote on Nov 9, 2022 — “Crypto’s FTX Moment Shows Danger of Centralized Finance With No Central Bank.” And the same day White House said “prudent regulation of cryptocurrencies” was needed.

On Nov 15, four days after the implosion the U.S. central bank, the Federal Reserve and a slew of big banks announced they would be testing digital tokens for wholesale transactions — related to plans for a retail central bank digital currency (CBDC).

The G20 meeting of “top” countries in Bali on Nov 16 published a declaration pursuing vaccine passports as preparation for Bill Gates’ next pandemic. Digital identity is essential to CBDC and the inevitable social credit system. [7]

Epstein connection

MIT’s Media Lab was founded with contributions from Jeffrey Epstein and fellow channel for Epstein’s funds Leon Black. It was there that director Joichi Ito, set up MIT’s Digital Currency Initiative.

Its alumni have gone on to work on Facebook’s now canceled Libra, and Algorand, a digital currency with a lottery-based consensus algorithm.

Epstein sang the praises of Bitcoin in a 2017 interview although he never revealed his direct involvement in any project. “If we learn tomorrow that half of Montana contained a secret cache of gold, the value of gold would decrease instantly. Bitcoin doesn’t have this problem.” [8]

The key connection is Securities and Exchange Commission chairman Gary Gensler for he was an senior adviser to MIT’s Digital Currency Initiative for three years in his position as an economics professor. The head of MIT’s economics department is the father of Alameda CEO Caroline Ellison, Glenn Ellison.

As Forbes noted in Oct 2021, one might have thought Gensler’s stint in charge of the DCI would have given him an enlightened approach to crypto, “no such luck.”

It speculated that the appointment had been a “resume builder… It’s part of the DC playbook: the regulatory white knight confirmed on the premise to make things right, implements some industry-friendly policy marketed as pro-consumer, and then takes the next plumb job.”

In fact Gensler has little expertise in crypto or blockchain, and less in technology. He is a two-decade Goldman Sachs broker so he represents not new money but old, not innovation but vested interests.

The real discussion was whether to declare cryptos to be securitie and thus subject to costly regulation.

In their speeches and interviews, Ito and Gensler provided little clarity, saying cryptos that have an issuer are securities (effectively investments in the instruments of a company) but on another occasions suggesting that digital assets like Ripple could exist independently of its issuer as token and ledger.

These shades of grey allow the SEC, CFTC and the central banks to freely interpret the laws as they like, which is perfect if their true objective is to launch a central bank digital currency. [9]

Gensler’s apparent lack of experience with crypto and digital coin goes some way to explain how a fraud of this scale might slide by him but there are simply too many warning lights to be confident that the regulators drove through the reds accidentally.

On top of what didn’t happen — Sherlock Holmes’ dog — there’s what did. If regulators didn’t suspect something smelled bad, they should have.

Take your pick: Is it the case, as Sam says, that “I just f***d up.”

Or as we witness a cohort of unelected corporate manipulators and their official stooges charge, whips snapping, in a chariot to Hell… have they means, motive and opportunity to pull a fast one?

Moneycircus