Category: Philanthropy

Dem Celebrities and Politicians Cultivated Crony Ties to FTX Fraudster Bankman-Fried

(p. B1) About 10 months before he was arrested on fraud charges, the cryptocurrency mogul Sam Bankman-Fried posed for a photograph at the 2022 Super Bowl in Inglewood, Calif.

On one side of him were Orlando Bloom and Katy Perry, the celebrity couple. On the other was the actress Kate Hudson. Standing in the center, with his arm slung over Mr. Bankman-Fried’s shoulder, was a lesser-known figure: Michael Kives.

Mr. Kives, a Hollywood agent turned investor, played an unusual role in Mr. Bankman-Fried’s business empire: super connector. He and his business partner, Bryan Baum, helped the young founder cultivate relationships with Mr. Bloom, Ms. Perry and former President Bill Clinton, and offered introductions to a who’s who of celebrities and business leaders, from Leonardo DiCaprio to the governor of Saudi Arabia’s Public Investment Fund.

The relationship was mutually beneficial. Mr. Bankman-Fried invested $700 million in Mr. Kives’s venture-capital firm, court records show, an extraordinary level of support for a fund with a short track record of start-up investments. Mr. Kives, the founder and face of the firm, and Mr. Baum each received $125 million as part of the deal.

For the full story, see:

David Yaffe-Bellany and Erin Griffith. “The Celebrity Super Connector Who Brought Big Names to FTX.” The New York Times (Saturday, June 24, 2023): B1 & B4.

(Note: the online version of the story has the date June 23, 2023, and has the title “The Super Connector Who Built Sam Bankman-Fried’s Celebrity World.”)

Fuzzy Goals of ESG Firms Challenge Investors to Guess Their Future Success

(p. A13) Some movies not only entertain and inspire but convey broader lessons. “Air” is one of them. The film is about Nike’s efforts in 1984 to secure Michael Jordan’s endorsement of its basketball shoes, which soon after became the iconic Air Jordans. But it also tells anyone who will listen that ESG investing—environmental, social and governance—is a trap.

. . .

The Jordan family’s meeting with Adidas makes it apparent that the company has no clear leader or vision on how it would deal with Mr. Jordan in the future. This sense of confusion helps persuade the Jordans to sign with Nike, where leader Phil Knight is securely ensconced, ensuring against any radical change of direction in Nike’s relationship with Mr. Jordan.

. . .

Michael Jordan wasn’t willing to invest his personal brand in a fluctuating operation.

Investors should be even more wary when considering companies that pursue ESG. At the time of Mr. Jordan’s sponsorship decision, everyone at least agreed that the lone goal of a company was to maximize value for shareholders. Under ESG investing, by contrast, conflicts arise not only over how best to pursue company goals but over what the goals are.

For the full commentary, see:

Donald J. Boudreaux and David R. Henderson. “‘Air’ Is a Cautionary Tale About ESG.” The Wall Street Journal (Friday, April 14, 2023): A13.

[Note: ellipsis and bracketed year added.]

(Note: the online version of the commentary has the date April 13, 2023, and has the same title as the print version.)

Poor People Benefit More From “Entrepreneurial Capitalism” Than From Philanthropy

(p. A15) Paul David Hewson said it best during a 2012 speech at Georgetown University. Wait, who? “Aid is just a stopgap,” said Mr. Hewson, whose stage name is Bono. “Commerce [and] entrepreneurial capitalism take more people out of poverty than aid. We need Africa to become an economic powerhouse.” We still haven’t found what he’s looking for. An economic powerhouse would be able to afford mosquito nets and malaria drugs without handouts. That should be the endgame.

. . .

At its best, lots of philanthropy is very useful, but may not be sustainable over time—a sugar high that rarely enables that “teach a man how to fish” thing. Effective altruism may be an oxymoron. And it’s hard to miss that much of philanthropy is to fix government failures in education, welfare or medicine. I think that was Bono’s point.

But at its shadiest, philanthropy drives the misallocation of capital, overvaluing professors, the U.N. and climate poets and undervaluing those who can productively increase societal wealth to fund solutions to the future’s harder problems.

If only there were a way to use capital to provide opportunity, train workers, pay middle-class wages, help people build wealth . . . wait, it just came to me. How about starting new companies and investing in entrepreneurs and world-changing technology?

For the full commentary, see:

Andy Kessler. “INSIDE VIEW; A Wrench Thrown Into Capitalism.” The Wall Street Journal (Monday, April 17, 2023): A15.

(Note: ellipsis between paragraphs, added; ellipsis internal to last quoted paragraph, in original; bracketed word in original.)

(Note: the online version of the commentary has the date April 16, 2023, and has the same title as the print version.)

Sam Bankman-Fried’s Brother Gabe Helped Send Misappropriated Funds to Dems, and Then Got “The Rock Star Treatment” From Biden White House

(p. B1) The group, Guarding Against Pandemics, raised more than $22 million in its first full year in 2021, turning it into an overnight lobbying force in Washington. The group’s founder, Gabe Bankman-Fried, a former legislative assistant, started getting the rock star treatment: two White House meetings with senior staff and invitations to speak on panels with government officials.

But almost all the money raised by Guarding Against Pandemics appears to have come from Gabe Bankman-Fried’s brother, whom federal prosecutors have accused of misappropriating billions of dollars from customers of his crypto exchange, FTX. The collapse of FTX prompted federal authorities to investigate allegations (p. B6) that sweeping fraud drove the exchange into bankruptcy in November [2023], as well as potential campaign finance law violations by both brothers.

Federal prosecutors in Manhattan have charged Sam Bankman-Fried, 31, with orchestrating a scheme to evade limits on corporate political donations. Prosecutors have said he recruited FTX executives and others to serve as proxies for the crypto exchange and make tens of millions of dollars in illegal political donations using customer money.

The authorities are investigating whether Gabe Bankman-Fried, 28, and some of his colleagues were part of the same so-called straw donor scheme, five people familiar with the matter said, speaking on the condition of anonymity. And they are trying to determine whether he knew some of the funds that his organization received had been misappropriated from customers.

Last month, a top FTX executive, Nishad Singh, pleaded guilty to using company money to make millions of dollars in straw donations to Democratic campaigns and committees.

. . .

The Bankman-Fried brothers relied on a small set of political consultants to guide their spending, applying the principles of effective altruism, the philanthropic movement that has a large following in the tech industry. A top adviser to both brothers was Michael Sadowsky, a committed effective altruist who had worked with the younger Mr. Bankman-Fried at the data firm Civis Analytics.

. . .

With a $25 million cash infusion from Sam Bankman-Fried, Mr. Sadowsky’s PAC became an instant force in Democratic politics. His group supported dozens of progressive candidates and got widespread attention when it spent more than $11 million on an unsuccessful House primary candidate in Oregon, an astonishing sum for such a race.

. . .

Two other key figures in the Bankman-Frieds’ political network had ties to prominent Democrats: Jenna Narayanan, a former political adviser to the billionaire investor Tom Steyer, and Sean McElwee, the founder of Data for Progress, a progressive think tank.

For the full story, see:

Matthew Goldstein, David Yaffe-Bellany and Lora Kelley. “Fraternal Turn to FTX Inquiry.” The New York Times (Friday, March 24, 2023): B1 & B6.

(Note: ellipses added.)

(Note: the online version of the story has the same date as the print version, and has the title “The Younger Brother Caught in the Middle of the FTX Investigation.”)

The “Affordable” Care Act Gives Huge Drug Subsidies to Rich, Urban “Nonprofit” Hospitals

(p. A1) A decades-old federal program that offered big drug discounts to a small number of hospitals to help low-income patients now benefits some of the most successful nonprofit health systems in the U.S.

Under the program, hospitals buy drugs at reduced prices and sell them to patients and their insurers for much more, often at facilities in affluent communities.

One participant is the Cleveland Clinic’s flagship hospital, which reported $1.35 billion in net income last year. The hospital doesn’t admit enough Medicaid and low-income Medicare patients to qualify for low-cost drugs under the program’s original requirements. But a quirk in federal law allowed the hospital to qualify as a “rural referral center,” despite its location near the center of Cleveland.

Despite the benefits, the program hasn’t resulted in new drug discounts for low-income Cleveland Clinic patients, nor has it caused the hospital to increase the financial assistance it offers to those who can’t afford care. (p. A10) The charity care the main hospital writes off represents less than 2% of its patient revenue, according to a Wall Street Journal analysis of hospital Medicare filings.

. . .

The hospital’s $1.35 billion net income figure for 2021, she said, includes investment returns.

Cleveland Clinic’s adoption of the drug-discount program at its main hospital in April 2020 produced about $136 million in savings on drugs that year, the spokeswoman said.

The federal drug-discount program, known as 340B after the statutory provision that created it, requires pharmaceutical companies to sell drugs to participating hospitals at reduced prices. The program has grown rapidly in recent years. It now includes about 2,600 nonprofit and government hospitals, which spent at least $38 billion on discounted drugs last year, according to the Health Resources and Services Administration, the federal agency known as HRSA that oversees the program.

What the hospitals do with their valuable discounts isn’t always clear.

The program doesn’t require participating hospitals to pass on drug discounts to patients, insurers or Medicare. There is no rule limiting how much they can charge for the drugs. They don’t have to report how much they make from such sales, nor do they have to spend any profits to benefit low-income patients.

. . .

The 2010 Affordable Care Act brought a big expansion of 340B, adding new categories including critical access hospitals, which are small, typically rural facilities, and rural referral centers, which are supposed to be rural hospitals that treat a large volume of patients, including many complicated cases.

Under the federal definition of rural referral centers, hospitals that aren’t in rural locations could still qualify if they meet other criteria—minimally, having at least 275 beds. There is no requirement to serve rural patients.

. . .

“We were trying to help rural hospitals,” said Robert Kocher, an Obama White House health adviser involved in crafting the ACA who is now at venture-capital firm Venrock. “It would not be our intention to have a medical center in Cleveland, Boston or Chicago be included.”

For the full story, see:

Anna Wilde Mathews, Paul Overberg, Joseph Walker and Tom McGinty. “Drug Discounts Aimed at Needy Boost Hospitals.” The Wall Street Journal (Wednesday, Dec. 21, 2022): A1 & A10.

(Note: ellipses added.)

(Note: the online version of the story has the date December 20, 2022, and has the title “Many Hospitals Get Big Drug Discounts. That Doesn’t Mean Markdowns for Patients.”)

Super PAC Heavily Funded by Associates of Bankrupt and Corrupt FTX, Donated $212,000 to John Fetterman Senate Campaign

(p. A1) In the three years since Mr. Bankman-Fried launched FTX, the company, its executives and its philanthropic arm spent or pledged hundreds of millions of dollars in political and charitable (p. A17) contributions, consulting fees, investments in media outlets and even real estate.

A network of political action committees, nonprofits and consulting firms funded by FTX or its executives worked to court politicians, regulators and others in the policy orbit, with the goal of making Mr. Bankman-Fried the authoritative voice of crypto, while also shaping regulation for the industry and other causes, according to interviews, email exchanges and an encrypted group chat viewed by The New York Times.

. . .

Mr. Bankman-Fried and Ryan Salame, another FTX executive, burst onto the big-money political scene during the 2022 election campaign.

. . .

In early March [2022], representatives for one super PAC, Web3 Forward, were pleased when the campaign of John Fetterman, the Pennsylvania Senate candidate, returned a completed questionnaire expressing support for the cryptocurrency industry, according to people familiar with the situation.

“Need nothing further from Team Fetterman. Thrilled he is pro crypto,” a consultant for Web3 Forward emailed an ally of Mr. Fetterman.

About two months after the email, Web3 Forward began airing an ad casting Mr. Fetterman as a working class champion who was not “gonna get schmoozed by lobbyists.” The super PAC spent nearly $4.7 million boosting Democratic candidates in the midterm elections, mostly in their primary campaigns, including more than $212,000 supporting Mr. Fetterman, who won his race and is set to begin his term Jan. 3 [2023].

. . .

In a statement, Adam Goldberg, a spokesman for Web3 Forward, said that neither Mr. Bankman-Fried, Mr. Salame “nor anyone else at FTX or representing its interests had any role in deciding the candidates we supported.”

But campaign filings show that Web3 Forward received almost all of the roughly $5.9 million it raised in 2021 from GMI PAC, a super PAC for which Mr. Salame was a founding board member. GMI, in turn, received about 32 percent of its nearly $11.6 million from Mr. Salame, Mr. Bankman-Fried and an FTX affiliate.

For the full story, see:

Kenneth P. Vogel, Emily Flitter and David Yaffe-Bellany. “‘It Was Relentless’: Inside a Crypto Exchange’s Bid for Influence.” The New York Times (Wednesday, November 23, 2022): A1 & A17.

(Note: ellipses, and bracketed years, added.)

(Note: the online version of the story has the date Nov. 22, 2022, and has the title “Inside Sam Bankman-Fried’s Quest to Win Friends and Influence People.”)

Dolly Parton’s Favorite Fictional Hero Is the Little Engine That Could

(p. 10) Who is your favorite fictional hero or heroine? . . .

My favorite hero is the Little Engine That Could. . . .

What kind of reader were you as a child? Which childhood books and authors stick with you most?

When I was a little kid, my dad didn’t want us to have library books around the house because the younger kids would ruin them and he couldn’t afford to replace them. I have always loved “The Little Engine That Could,” so I started my Imagination Library with it to show kids that they can do anything. I’m really proud that we’ve given away over 145,000,000 books to kids and have more than 1.7 million children registered around the world — in fact, last September [2020] was our highest enrollment of children yet. Books were a lifeline to me as a child — I know they make a difference.

For the full interview, see:

“BY THE BOOK; Dolly Parton.” The New York Times Book Review (Sunday, December 6, 2020): 10.

(Note: ellipses added. Questions quoted above are by the anonymous NYT interviewer. Answers are by Dolly Parton.)

(Note: the online version of the interview has the date Dec. 3, 2020, and has the title “BY THE BOOK; Dolly Parton Likes to Read by the Fire in Her Pajamas.”)

Dolly Parton’s favorite fictional hero is the focus of:

Piper, Watty. The Little Engine That Could. New York: Grosset & Dunlap, 1990 [1930].

Bruce Yandle has argued that books like The Little Engine That Could, can help build a culture of entrepreneurship:

Yandle, Bruce. “I Think I Can! Does the Little Engine That Could Matter?” Journal of Private Enterprise 26, no. 2 (Spring 2011): 127-42.

Funding People Instead of Projects Allows Researchers to Nimbly Pivot in the Light of Unexpected Discoveries

(p. A2) Patrick Collison, the Irish-born co-founder of payments technology company Stripe Inc., has spent a lot of the past five years pondering the problem of declining scientific productivity.

. . .

Clearly, scientific productivity has something to do with how research is done, not how much. One culprit, in the view of Mr. Collison and many others, is that the institutions that fund science have become process-oriented, narrow-minded and risk-averse. Wary of failure, they favor established researchers pursuing narrowly focused, incremental ideas over younger scientists with more heterodox agendas.

. . .

Yet Mr. Collison criticizes the federal government for failing to bring a much deeper and eager pool of talent to bear on a multitude of pandemic challenges. Top virologists “were stuck on hold, waiting for decisions about whether they could repurpose their existing funding for this exponentially growing catastrophe,” he wrote in an essay last year with George Mason University economist Tyler Cowen, and University of California, Berkeley bioengineering professor Patrick Hsu.

Sensing a need, the three in April, 2020 launched Fast Grants, $10,000 to $500,000 awards funded primarily by private donors and approved in 14 days or less.

. . .

When Messrs. Collison, Cowen and Tsu surveyed their recipients about their experiences with traditional funding, 57% told them they spent more than a quarter of their time on grant applications and 78% said they would change their research program a lot if they weren’t constrained in how they spent their current funding.

This reinforces a key insight from metascience, also known as the science of science, namely the value of curiosity-driven research. Heidi Williams, an economist at Stanford University and director of science policy at the Institute for Progress, said grants typically commit a scholar to complete a specific project, even if during the research the project proves less promising than expected.

. . .

In a 2009 paper, Massachusetts Institute of Technology economist Pierre Azoulay and his co-authors demonstrated the benefits of funding people over projects. Researchers backed by the Howard Hughes Medical Institute, which takes such an approach, produce far more widely cited papers—a metric of significance—than similar researchers funded by the National Institutes of Health. Drawing on those lessons, last year, Mr. Collison co-founded the Arc Institute to pre-fund scientists studying complex human diseases for renewable eight-year terms.

For the full commentary, see:

Greg Ip. “CAPITAL ACCOUNT; To Boost Growth, Rethink Science Funding.” The Wall Street Journal (Friday, Nov. 18, 2022): A2.

(Note: ellipses added.)

(Note: the online version of the commentary has the date November 17, 2022, and has the title “CAPITAL ACCOUNT; Stagnant Scientific Productivity Holding Back Growth.”)

The published version of Azoulay’s co-authored 2009 NBER working paper, mentioned above, is:

Azoulay, Pierre, Joshua S. Graff Zivin, and Gustavo Manso. “Incentives and Creativity: Evidence from the Academic Life Sciences.” RAND Journal of Economics 42, no. 3 (Fall 2011): 527-54.

“Woke” Bankman-Fried’s FTX Played “Dumb Game” of Virtue Signaling

(p. A17) There was a time when people engaged in doing good addressed problems that, so to speak, you could get your arms around, such as improving school performance, providing potable water or preventing malaria. But at some point, the impulse to do good transformed into a combination of moral tendentiousness and grandiosity.

. . .

. . ., inside the Bankman-Fried fairy tale rests a smaller tipping point, which suggests his generation senses that their preachy elders may have led them down a moral garden path.

In an exchange with Mr. Bankman-Fried, a writer for Vox asserts, “You were really good at talking about ethics.” He replied that “I had to be” because of “this dumb game we woke westerners play where we say all the right shibboleths and so everyone likes us.”

He is describing what has come to be known in our time as virtue signaling, . . .

For the full commentary, see:

Daniel Henninger. “WONDER LAND; The Moral Vanity of FTX.” The Wall Street Journal (Thursday, December 1, 2022): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date November 30, 2022, and has the title “WONDER LAND; The Moral Vanity of Sam Bankman-Fried.”)

Corrupt and Bankrupt FTX Got Higher ESG Rating for “Leadership and Governance” Than Exxon Mobil

(p. A14) Crypto dark knight Sam Bankman-Fried may have deceived investors, customers and various journalists and politicians. But now the FTX founder is at least telling the truth about a few things. Lo, he says that environmental, social and governance (ESG) investing is a fraud, and so was his progressive public posturing.

. . .

“Problems were brewing. Larger than I realized,” he tweeted. “In the future, I’m going to care less about the dumb, contentless, ‘good actor’ framework,” he added. “What matters is what you do—is *actually* doing good or bad, not just *talking* about doing good or *using ESG language*.”

Mr. Bankman-Fried is also acknowledging that he genuflected to regulators and Democratic lawmakers to win political protection. ESG ratings company Truvalue Labs even gave FTX a higher score on “leadership and governance” than Exxon Mobil, though the crypto exchange had only three directors on its board.

For the full editorial, see:

The Editorial Board. “Sam Bankman-Fried, ESG Truth-Teller.” The Wall Street Journal (Friday, Nov. 18, 2022): A14.

(Note: ellipsis added.)

(Note: the online version of the editorial has the date November 17, 2022, and has the title “Sam Bankman-Fried Becomes an ESG Truth-Teller.”)

Musk’s Private Starlink Infrastructure “Played a Crucial Role” in Saving Ukraine

(p. A6) KYIV, Ukraine—Elon Musk backtracked on his complaints over the cost of funding Starlink internet terminals in Ukraine and said his company would continue to pay for them, as explosions rocked the Russian-held city of Donetsk in eastern Ukraine on Sunday [Oct. 16, 2022].

Mr. Musk, the billionaire chief executive of SpaceX and Tesla, pledged to continue funding the Starlink service for Ukraine just a day after he said SpaceX couldn’t finance the service indefinitely on its own.

“The hell with it,” Mr. Musk tweeted on Saturday. “Even though Starlink is still losing money & other companies are getting billions of taxpayer $, we’ll just keep funding Ukraine govt for free.”

The 20,000 Starlink terminals estimated to be in operation across Ukraine have played a crucial role in maintaining the country’s communications during the war and are deployed at hundreds of Ukrainian military outposts where they allow commanders to call in artillery strikes or coordinate operations in areas where cell service is jammed by Russia.

For the full story, see:

Matthew Luxmoore. “Musk Says SpaceX to Cover Starlink Costs in Ukraine.” The Wall Street Journal (Monday, Oct. 17, 2022): A6.

(Note: ellipsis, and bracketed date, added.)

(Note: the online version of the story was updated Oct. 16, 2022, and has the title “Elon Musk Says SpaceX Will Continue to Cover Starlink Costs in Ukraine.”)