Maybe Sam Bankman-Fried is an Altruist and a Crook

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Last week, a jury convicted Sam Bankman-Fried on seven counts of fraud and conspiracy arising out of his role in the collapse of the cryptocurrency trading platform he created, FTX. The result was all but a foregone conclusion. Together with Bankman-Fried’s own very shaky performance under cross-examination, testimony from members of his inner circle rendered unbelievable his claim that the missing billions of dollars of investor funds resulted from sloppy but non-culpable mismanagement.

At the heart of the government’s case against Bankman-Fried were two main forms of financial misconduct. First, the government offered evidence that he diverted assets from investors’ accounts on the FTX platform into the account of Alameda Research, a separate trading fund in which Bankman-Fried was the principal investor. Second, testimony, documents, and even computer code showed that statements by Bankman-Fried and others acting under his direction exaggerated the size, stability, and value of FTX. Inflating the perceived value of FTX drove up the price of FTT, a special-purpose cryptocurrency that allowed investors to own shares in FTX itself. And that, in turn, enriched Bankman-Fried because Alameda was heavily invested in FTT.

Despite the fact that FTX and Alameda were involved in the esoteric and often-impenetrable world of cryptocurrency investment, and despite the fact that many of the key players (including Bankman-Fried himself) in both firms were math-whiz graduates of MIT, the case against Bankman-Fried was low-tech. As U.S. Attorney Damian Williams said after the jury’s verdict, “this kind of corruption is as old as time. This case has always been about lying, cheating, and stealing . . . .” Bankman-Fried lied to cheat investors in FTT and enrich himself, while stealing their money from the supposedly safe accounts on FTX and directing it to Alameda.

In voting to convict Bankman-Fried, the jury not only rejected his protestations that he acted in good faith but seemingly also rejected the image that he had projected of a radically different kind of capitalist. With his wild hair, cargo shorts, and professed commitment to giving away his money to worthy causes, Bankman-Fried did not appear to be just another tech billionaire.

Do the jury verdict and the very substantial evidence on which it rested mean that Bankman-Fried not only perpetrated a fraud but was himself a fraud? Perhaps, but it is also possible that he was an altruist and a crook.

Robin Hood or Con Man?

Aided by his band of merry men, the Robin Hood of legend robbed from the rich to give to the poor. Sam-Bankman Fried, aided by his band of melancholic nerds, robbed from greedy crypto bros to give to Democratic candidates for office and philanthropic organizations engaged in “effective altruism”—seeking to do the most good that can possibly be done.

To see Bankman-Fried as a latter-day Robin Hood requires one to accept that he really did intend to give away nearly all of the riches he amassed. However, even as Bankman-Fried was giving away millions, he benefited from the billions he was stealing. During his fifteen minutes of fame, he got to lecture Congress, hobnob with superstar athletes like Tom Brady and Steph Curry, and live in a custom-designed multi-million-dollar beachfront compound in the Bahamas. That hardly looks like the life of a philanthropic ascetic.

And yet there is also evidence that Bankman-Fried’s ideals were sincere. As Michael Lewis recounts in Going Infinite: The Rise and Fall of a New Tycoon, Bankman-Fried showed no interest in and did not actually utilize any of the luxuries of the Bahamian compound. Instead, he worked long into the night, rarely leaving his office. Lewis also quotes emails from Bankman-Fried to Caroline Ellison, who was CEO of Alameda Research and his oft-neglected girlfriend. They show Bankman-Fried to be at least as indifferent to his own emotional wellbeing as he was to Ellison’s.

To be sure, as Jennifer Szalai explained in her review for The New York Times, there is a procrustean quality to Going Infinite, as Lewis attempts to fit the story to his previously very successful template of the iconoclastic innovator who outfoxes the big boys. By the time FTX collapsed, which was well before the publication date of Going Infinite, Lewis should have realized that Sam Bankman-Fried was not like Billy Beane (the protagonist of Moneyball), Michael Burry (The Big Short), or Brad Katsuyama (Flash Boys). Bankman-Fried was at best a well-motivated crook. Although Lewis notes that the guilty pleas of Bankman-Fried’s inner circle would be problematic for Bankman-Fried’s defense, Lewis does not seem overly interested in why.

Indeed, in the final pages of Going Infinite, Lewis describes his own amateur foray into forensic accounting, which, he says, indicates that the billions of dollars Alameda appropriated from investors on the FTX platform were not actually missing at all. Interestingly, however, that claim was never advanced by Bankman-Fried’s attorneys. And even had it been, that would not be a defense. If you steal someone’s money, you have committed theft, even if you plan to pay it back with interest—indeed, even if you do pay it back with interest.

Ends and Means

Despite Lewis’s credulousness, much of the portrait he paints of Bankman-Fried rings true even after what we learned during the trial. Bankman-Fried really does appear to be a committed effective altruist—at least of a certain sort.

Bankman-Fried was persuaded to become an effective altruist by Oxford philosopher William MacAskill, who popularized but did not invent the concept. It can be traced at least as far back as an influential 1972 essay by philosopher Peter Singer (currently of Princeton). In its most banal and common-sense version, effective altruism states what sounds like a truism: If you plan to donate your money or time to a good cause, you should do so in a way that is most effective. For example, as between two charities that provide food and shelter for unhoused persons, give to the one that has the better track record of improving the lives of the people it serves.

Yet even the simple version of effective altruism is, upon inspection, controversial. In deciding where to give, say, $100, you need to choose not only among different organizations that serve the same goals but also among very different goals. You might conclude that your $100 can do more good serving the needs of unhoused persons in your community than by increasing the amount of scholarship money available at your alma mater, but you also need to consider the good it can do by combating famine. Indeed, Singer’s 1972 essay made just this point: the diminishing marginal utility of money makes virtually any program in the developed world a less effective use of your donation than the use to which it could be put in the developing world.

In recent years, effective altruists have added twists along two dimensions. First, some effective altruists who have special talents have come to embrace the approach of “earn-to-give.” If someone has the talent to go to medical school or make a fortune running a hedge fund, the earn-to-give branch of effective altruism says they should choose the latter career. Although a skilled surgeon might save hundreds or even thousands of lives in the course of a career, a hedge-fund billionaire can save even more lives through the billions they donate to worthy causes (which could even include funding multiple doctors to save lives).

Second, many effective altruists now focus on reducing the danger from existential threats to the human species from phenomena like global pandemics, nuclear war, and the risks posed by artificial intelligence. As MacAskill explained the argument in a 2018 TED talk, money and effort spent to address existential threats is arguably the most effective form of altruism because realizing an existential risk would entail not only the deaths of all living humans but the prevention of a potentially glorious future for our species for millions of years.

Once one accepts that Bankman-Fried embraced both earn-to-give and prioritizing addressing existential threats, any contradiction between his good-guy persona and his crimes dissolves. If you believe that the salvation of humanity for millions of years into the future could depend on the financial success of your trading fund, you might not be especially troubled by playing fast and loose with investments from cryptocurrency speculators. Seen through this lens, the lying, cheating, and stealing were not a bug in the operations of FTX and Alameda; they were a feature; the only bug was getting caught, because much of the money Bankman-Fried gave away might now be clawed back and, from his prison cell, he will be a very ineffective altruist.

Is Sam Bankman-Fried an altruist or a crook? He could well be both.

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