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Stupidity, Ignorance or What?

“Stupid is as stupid does.” George Bernard Shaw

Many people think this phrase originally came from the film “Forest Gump”, but it’s actually from the play “Major Barbara”, written by George Bernard Shaw more than a century ago. Stupidity and ignorance is not the same thing; stupidity is a lack of intelligence, whereas ignorance is a lack of knowledge. Back in Shaw’s day we could actually use these words to describe someone’s actions with a clarity of understanding as to what was meant; unfortunately today saying something so obvious is deemed insensitive and derogatory, making you subject to condemnation, cancellation or even dismissal from employment.

Listening to mass media exposes you to many instances where either of these words would succinctly and aptly describe people’s actions; what is astounding is how often this occurs in finance, academia and politics. Any person with common sense should immediately ask themselves if they are witnessing stupidity, ignorance or perhaps something else. There are, and likely always will be people who depend on the stupidity, ignorance, greed, or the delusions of others as a way to make a buck; Bernie Madoff famously comes to mind and now we have Sam Bankman-Fried, both of whom saw such instances as opportunities for their fraudulent schemes.

In the case of Bernie, he was much more skillful than Sam, running the largest Ponzi scheme ever for more than 20 years for some $65B before he got caught.  Fortunately nearly 88% of the assets were recovered and returned to investors. On the other hand we have Sam, whose $8B scheme began in 2019 and recently ended with his arrest. Bernie’s was a classic and simple Ponzi scheme, doing the usual return on investments to existing clients from funds secured from new ones; it was inherently unsustainable as kicking the can down the road means you will eventually run out of road. Few made excuses for Bernie or expressed sympathy for his demise, which is as it should be.

Now we have the case with Sam, a bewilderingly obvious fraudulent scheme diverting funds from FTX where his clients invested their money, to Alameda, his private hedge fund, with which he made huge real estate purchases and political donations. Prior to FTX announcing that it had financial problems in early November, many in the media and academia lauded Sam as the new face of socially responsible investment management, praising his progressive approach, while saying nothing about the risky assets FTX was involved with. Even when FTX announced bankruptcy there was this fawning reaction of many as to the altruistic motives and intentions of Sam, deploring not the theft of his clients’ money, but the failure to fund the grants he made for biodiversity and other worthy causes. 

Eventually, so obvious was this fraudulent machination that many financial commentators began wondering why anyone would have invested with FTX and why it took so long for it to be exposed. To add to the stupidity and ignorance of this story is how to explain the focus of some of the politicians involved on the risky assets Sam invested in, principally cryptocurrencies; it’s not the assets that he invested his client’s money in that was a crime, but his fraudulent actions in siphoning off investor’s money into his own pockets from which he bought extravagant real estate and political favor. While the real estate bought can be liquidated, what about the political donations? This is where we need to look beyond the stupidity and ignorance of these actions, and the media coverage. We have learned that these donations were made to both Democrats and Republicans, and in violation of campaign finance laws. 

As the office of the U.S. Attorney for the Southern District of New York reports on the names of the recipients, some have stated that they will be refunding the donations; however, that fails to explain whether or not they were aware of the source of or manner in which these donations were made. The fact that politicians are making so much of the assets invested in by calling for investigations into cryptocurrencies appears more as a deflection given their acceptance of the donations, especially as they were made illegally. Considering that 60% of the House, and 66% of the Senate are attorneys, and Congress makes such laws as those governing campaign contributions, it seems impossible to explain their involvement as either a case of stupidity or ignorance.

We should not be deceived here into thinking that those intelligent enough to win an election, even if disingenuously, and who have a considerable level of education, often in the legal and business professions, were not at least aware of the source of or manner in which these donations were made; neither should we be distracted by the purported altruistic intentions of our poor misguided Sam, who incredulously claims he was unaware of what was going on, any more than we should consider the same from the politicians involved.

“When you have eliminated the impossible, whatever remains, however improbable, must be the truth.” Arthur Conan Doyle (Sherlock Holmes)

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Author: jvi7350

Politically I am an independent. While I tend to avoid labels, I consider myself a Libertarian. I find our politics to have deteriorated to a current state of ranting tribialism, and a growing disregard for individual rights; based on the axiom that silence is consent, I choose instead to speak out and therefore launched this blog.

4 thoughts on “Stupidity, Ignorance or What?”

  1. Two things.
    1. As I have heard or read, and this could be wrong he donated to Democrats and his partner donated to Republicans i.e. He did not contribute to Republicans.
    2. You say “ Considering that 60% of the House, and 66% of the Senate are attorneys, and Congress makes such laws as those governing campaign contributions, it seems impossible to explain their involvement as either a case of stupidity or ignorance.”

    The percent of lawyers in Congress is irrelevant. What we need to know to support your “seems” is the percent of Congress who received his contributions who were lawyers. It is thus “possible” that none of his contributions went to lawyers. Thus negating your “seems.”

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    1. Item no.1:
      Actually what SBF said was that they (he and his partner) made most of their political contributions to Democrats and their PACs, with some to a few Republicans, but noted that “All my Republican donations were dark. The reason was not for regulatory reasons, it’s because reporters freak the f—k out if you donate to Republicans. They’re all super liberal, and I didn’t want to have that fight.”
      Item no. 2
      Actually most of the 11 of the 53 House Financial Services Committee members who received FTX donations are lawyers, and only a few have said they will “donate” the money received; so far none have returned or said they plan on returning those donations. This is the same committee that was investigating the collapse of FTX and was about to have SBF testify, but of course his arrest prevented that, at least at this point. “Donating” stolen money is a curious action to say the least, as that money belongs to the investors that SBF stole from. Then there are all the other candidates who received stolen money as campaign contributions. What the DOJ should do here is investigate every one of them, get the money back and into bankruptcy court so at the least creditors (victims) have a shot at getting something back.
      General Items:
      3. It’s relevant how many in Congress are lawyers as that establishes a higher level of knowledge of those that can less credibly claim ignorance; it’s true that they may more credibly claim stupidity (that’s dark humor as I find that impossible).
      4. It’s irrelevant whether the candidates who received FTX (or Alameda) donations were Democrats or Republicans as a crook is a crook regardless of political affiliation.
      5. It’s not political donations that make this such a horrible case of corruption, but both the source of the funds and the knowing acceptance of same from an entity initially cited as a concern by both the House and Senate committees prior to the elections, and certainly shortly thereafter that should have initiated disclosure and returns of those funds immediately. Using “donations” as a method of reparation does not relieve these candidates of the responsibility to do all in their power that the funds are returned to the victims of this fraud.

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      1. You brought up the percentage of congressman who were lawyers, not me, and specifically “[c]onsidering that 60% of the House, and 66% of the Senate are attorneys, … it seems impossible to explain their involvement as either a case of stupidity or ignorance.” And clearly the use of the terms “their” and “involvement” from the context it would seem to mean receipt of contributions by lawyers. If that is the case, then you should be telling us the percentage of lawyers who received contribution versus the total of congressman if any. As for his contributions this is what I found: “He personally gave at least $40 million to politicians and political action committees ahead of the 2022 midterm elections, mostly to Democrats and liberal-leaning groups.” And then there is this: “FTX Digital Markets Co-CEO Ryan Salame has donated $4 million to a political action committee aligned with Republican candidates”and this “Ryan Salame, the CEO of cryptocurrency firm FTX Digital Markets and founder of the American Dream Federal Action super PAC, said that he spent $13.4 million in this year’s Republican primary races.”

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      2. 1. My previous reply did not say you brought up the percentage of congressman who were lawyers. I brought up the percentage in both the House and the Senate.
        2. Their involvement is not just as recipients, but as members of the committees who were, and to some extent, still are investigating both FTX, Alameda and cryptocurrencies.
        3. You seem particularly hypersensitive to the topic of those in Congress who are attorneys. The fact that they are in the majority has been a fact for quite a long time. Many scholars have cited the network syndrome as an explanation for that which, coupled with the fact that the US has more lawyers per capita that any other country in the world (about 1/250) provides for the imbalanced representation.
        3. Now you are telling me that I should further report as to a percentage of the percentage. What I have already found out as to how many are lawyers, and how many received contributions is most and most. If you want more detail, there are reports in Time, Newsweek, Forbes, and other journals, and the USA/SDNY that get down to names, amounts, dates, etc.
        4. My post is an overview or summary of all that, presented as a thesis. As such, it will be ongoing and as is always the case, the thesis will be either empirically sustained, in need of revision, or will end with hypothesis in the unfortunate event that these same politicians will give the case a slow mind numbing death in committee, as they do with anything that cast light on their corruption.
        5. As I have already said, both Democrats and Republicans were recipients of these illegal contributions, and that party affiliation is really not the issue, and neither does it matter what party SBF, his partner or anyone at FTX and Alameda support or contributed to. Neither should the type of assets that FTX was involved with matter as it’s not cryptocurrencies that should be under investigation, but the perpetrators of the criminal act that defrauded billions from their clients.

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