The Nonlinear Library EA - To what extent & how did EA indirectly contribute to financial crime - and what can be done now? One attempt at a review by AnotherAnonymousFTXAccount
Apr 13, 2024
42:35
Welcome to The Nonlinear Library, where we use Text-to-Speech software to convert the best writing from the Rationalist and EA communities into audio. This is: To what extent & how did EA indirectly contribute to financial crime - and what can be done now? One attempt at a review, published by AnotherAnonymousFTXAccount on April 13, 2024 on The Effective Altruism Forum.
[I wrote this back in November 2022. Now that Bankman-Fried has been sentenced to 25 years, there have been
several related
updates and
calls for more reflection. I went back to my google doc, made some minor cosmetic updates such as changing tenses, and am now sharing it anonymously to contribute to that debate.]
Like many others in November 2022, I was glued to the FTX crisis, unhealthily consuming as many Forum posts/comments, tweets and articles as I could. In this post I want to focus on what I thought then and think now is the key problem, and gather together thoughts on a key next step that has not yet happened. This is all based on public, not private, information.
In summary, the crucial issue was fraud/financial crime - not bankruptcy, risky bets, bad financial management or the loss of donations. A key next step that seems not to have happened yet is a large, long reckoning of how and to what extent the EA community may have indirectly contributed to this crime, and what EA can do to prevent any such contribution in the future.
As Samo Burja
noted: "FTX is insolvent because it lent assets including customer deposits to Alameda, which then lost money in a series of cryptocurrency deals earlier in the year [...] FTX is responsible for one of the larger illicit losses of customer funds in financial history, with the size of the lost funds currently estimated at around $8-10 billion."
The FTX leadership, who were major donors and high-profile supporters of effective altruism, committed one of the most high-profile financial crimes of the century. In the
words of a former SEC official "This is worse than Theranos, this is worse than Madoff". We need to work out what contributed to that crime, and how to prevent contributing to any other again. This is not for PR reasons - this is for basic reasons of integrity and accountability.
Three next steps - one not done
The first priority was and is of course for everyone to cooperate fully with formal regulatory, law enforcement and legal action. The SEC and DoJ investigated, there are civil lawsuits, and Bankman-Fried was sentenced to jail.
We cannot get to the bottom of this all by ourselves. Nevertheless, the EA community can take two steps itself. The first step (investigation) is one that most organisations, such as businesses or political parties etc, would do themselves alongside cooperation with regulatory, law enforcement and legal actions. If they found anyone did know, they could pass that information along to those bodies, which could help the formal investigations. An independent investigation was
carried out by the law firm Mintz for Effective Ventures.
The second step (review of indirect contribution and recommendations) is more of an ethical reflection and assessment of EA's indirect moral responsibility for the crimes, and figuring out what changes EA itself needs to make. That won't and can't be done by e.g. the SEC, DoJ or lawsuits - it's something we have to do ourselves. It's an add-on to the formal processes. My understanding is that after almost a year and a half, and Bankman-Fried's sentencing, this has not yet occurred.
The rest of this post is a contribution to that process.
Review of how and to what extent the EA community may have indirectly contributed to this crime, and what EA can do to prevent any such contribution in the future
Ryan Carey
suggested that we need "an investigation more broadly into how this was allowed to happen. We need to ask:
How did EA ideology play into SBF/FTX's decisions?
Could we have seen this coming, or at least known to place less trust in SBF/FTX?
Can...
[I wrote this back in November 2022. Now that Bankman-Fried has been sentenced to 25 years, there have been
several related
updates and
calls for more reflection. I went back to my google doc, made some minor cosmetic updates such as changing tenses, and am now sharing it anonymously to contribute to that debate.]
Like many others in November 2022, I was glued to the FTX crisis, unhealthily consuming as many Forum posts/comments, tweets and articles as I could. In this post I want to focus on what I thought then and think now is the key problem, and gather together thoughts on a key next step that has not yet happened. This is all based on public, not private, information.
In summary, the crucial issue was fraud/financial crime - not bankruptcy, risky bets, bad financial management or the loss of donations. A key next step that seems not to have happened yet is a large, long reckoning of how and to what extent the EA community may have indirectly contributed to this crime, and what EA can do to prevent any such contribution in the future.
As Samo Burja
noted: "FTX is insolvent because it lent assets including customer deposits to Alameda, which then lost money in a series of cryptocurrency deals earlier in the year [...] FTX is responsible for one of the larger illicit losses of customer funds in financial history, with the size of the lost funds currently estimated at around $8-10 billion."
The FTX leadership, who were major donors and high-profile supporters of effective altruism, committed one of the most high-profile financial crimes of the century. In the
words of a former SEC official "This is worse than Theranos, this is worse than Madoff". We need to work out what contributed to that crime, and how to prevent contributing to any other again. This is not for PR reasons - this is for basic reasons of integrity and accountability.
Three next steps - one not done
The first priority was and is of course for everyone to cooperate fully with formal regulatory, law enforcement and legal action. The SEC and DoJ investigated, there are civil lawsuits, and Bankman-Fried was sentenced to jail.
We cannot get to the bottom of this all by ourselves. Nevertheless, the EA community can take two steps itself. The first step (investigation) is one that most organisations, such as businesses or political parties etc, would do themselves alongside cooperation with regulatory, law enforcement and legal actions. If they found anyone did know, they could pass that information along to those bodies, which could help the formal investigations. An independent investigation was
carried out by the law firm Mintz for Effective Ventures.
The second step (review of indirect contribution and recommendations) is more of an ethical reflection and assessment of EA's indirect moral responsibility for the crimes, and figuring out what changes EA itself needs to make. That won't and can't be done by e.g. the SEC, DoJ or lawsuits - it's something we have to do ourselves. It's an add-on to the formal processes. My understanding is that after almost a year and a half, and Bankman-Fried's sentencing, this has not yet occurred.
The rest of this post is a contribution to that process.
Review of how and to what extent the EA community may have indirectly contributed to this crime, and what EA can do to prevent any such contribution in the future
Ryan Carey
suggested that we need "an investigation more broadly into how this was allowed to happen. We need to ask:
How did EA ideology play into SBF/FTX's decisions?
Could we have seen this coming, or at least known to place less trust in SBF/FTX?
Can...