The Faulty Moral Universe of Sam Bankman-Fried

While the con itself was huge and sprawling, it’s not mere scale that makes the FTX fiasco the most riveting corporate fraud in living memory. There’s also the sheer panoply of stories within the broader narrative – the polycule, the political donations, the failure of investor due diligence, the strategic philanthropic pose. Every angle of FTX seems to highlight some deeper 21st century social, technological or political quandary.

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But for my money the most important and bizarre twist in the downfall of Sam Bankman-Fried is that his parents were, until their son’s crimes were exposed, respected scholars of corporate tax law and ethics at Stanford University.

On an interpersonal level, the situation is Shakespearean: The legal scholar parents are likely to have both their livelihoods and their legacies destroyed by the sins of their child. The parents have direct ethical exposure to the con, through both a $16 million house purchased in their names in the Bahamas and payments they received from the company, as revealed this week in testimony by FTX liquidation CEO John Jay Ray III.

See also: How Sam Bankman-Fried's 'Effective' Altruism Blew Up FTX | The Node

Seemingly as a consequence of these entanglements, Bankman-Fried’s father, Joseph Bankman, has been removed from the Stanford teaching schedule for next year. The parents have also reportedly told friends they foresee total financial ruin from the costs of their son’s legal defense.

But the specifics of the parents’ ideas, and how they might have influenced Sam Bankman-Fried’s actions, are at least as fascinating as the interpersonal drama.

Joseph Bankman and Barbara Fried’s scholarly work on corporate ethics in some cases advocated for unorthodox attitudes towards right and wrong. Their ideas share many of the underpinnings of the “effective altruism” movement that Bankman-Fried espoused. Those included rationalism, the idea that decisions can be made entirely on the basis of known facts and predictable outcomes; utilitarianism, the idea that outcomes are more important than principles or intentions; and a thread of disdain for the conventional ethics shared by mere mortals.

Unpacking the entirety of that ideology will be the work of many months and many hands, but a colleague recently pointed me towards a very convenient encapsulation of it: A 2013 paper by Barbara Fried titled “Beyond Blame.” The paper is summarized as arguing that “the philosophy of personal responsibility has ruined criminal justice and economic policy. It’s time to move past blame.”

I know – it’s so on the nose it’s hard to believe.

There’s some nuance to Fried’s argument, but the core idea is that individuals should not face moral criticism for their mistakes because individual free will is an illusion. The question of human free will is still very unresolved in both scientific and philosophical terms. There is the “nature-nurture” question: Are we responsible for our actions if we had a terrible upbringing? There is also the deeper question of biology, consciousness and the soul: If our actions are determined by the sequenced firing of neurons in our brain, where is the “me” making decisions?

See also: Understanding the FTX Fallout From the Eyes of a Bitcoiner | Opinion

These questions have not been definitively answered, and may never be. But Barbara Fried seems to take the nonexistence of free will as a settled matter in her 2013 paper. This assumption that human beings are little more than automata is deeply woven into the very Silicon Valley-friendly neoliberal worldview. Neoliberalism broadly conceives of the world as a mass of largely interchangeable individuals engaged in purely rational decision-making in a marketplace, and would just as soon throw out inconveniences like religion, community and, yes, ethics, as impediments to the smooth global flow of data and economic units.

The ultimate insignificance of individuals – up to and including the blamelessness of very powerful individuals – is deeply baked into the neoliberal ethos. Fried’s 2013 paper spells out the ethical dimension of this worldview, taking aim at “retributivists” who would punish wrongdoers despite their lack of free will (which, again, Fried seems to take as given). It’s quite notable that this paper emerged in the years after the subprime mortgage collapse of 2008, for which effectively no one ever faced punishment.

The paper features many passages that are damning in light of what came after, but one in particular stands out.

“In the hands of hardcore retributivists,” Fried writes, “the argument [for individual blame] has a decidedly Dickensian cast. To quote one proponent, when we punish someone, we respect his ‘fundamental human right to be treated as a person’ by permitting him to ‘make the choices that will determine what happens to him’ and then respecting his ‘right to be punished for what [he has] done.’ Lord save us all from such respect.”

Barbara Fried here displays a frankly unnerving disdain for the very basic principle of individual moral responsibility. That disdain seemed to manifest in at least two recent moments of FTX fallout.

First, there was the staggeringly evasive testimony Sam Bankman-Fried planned to give before the House Financial Services Committee – testimony forestalled by his arrest in the Bahamas. In that testimony, Bankman-Fried would have blamed his company’s failure on everyone from Binance CEO Changpeng Zhao to, hilariously, the bankruptcy law firm and interim CEO who are currently cleaning up his massive mess.

The testimony is first and foremost disturbingly delusional. It does not even remotely square with the known facts of the situation, which are that Sam Bankman-Fried engaged in elaborate self-dealing and theft of his customers’ funds. But viewed through the lens of his mother’s ideology, the testimony is not merely delusional. It is also a reiteration of the belief that all of our actions are merely the product of circumstance, and that we can’t really ever be blamed for anything.

The second episode that seems to connect to Barbara Fried’s determinist anti-humanism is far sadder. She and Joseph Bankman were present for their son’s arraignment in the Bahamas on Tuesday. A source present in the courtroom has told me that Barbara Fried laughed with audible disdain as the allegations against her son were read aloud – laughed with a kind of manic intensity, so loudly and repeatedly that she seemed on the verge of disrupting the hearing.

We can only speculate at what was going through Barbara Fried’s head as she watched her supposedly brilliant son in shackles, but her disrespect for the court seems clear. After downplaying personal moral responsibility and the enforcement of ethical behavior as mere petty "retributivism," she was getting a harsh reminder that most humans alive today still believe that there is a clear difference between right and wrong, and that violators of that norm deserve both punishment and condemnation. She was also realizing – perhaps at the exact moment her son was denied bail – that she and her family were about to pay a huge price for disregarding thousands of years of human morality.

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In the face of that staggering realization, maybe all you can really do is laugh.