History on Repeat
Fraud, money laundering, and corruption on a global scale, yet regulators seem asleep at the wheel. This has happened before...
Capital Thinking • Issue #1153 • View online
“History never repeats itself, but it does often rhyme.”
As the FTX-Alameda criminal enterprise continues to unwind, onlookers have been treated to an ever-more-shocking series of revelations.
It appears that FTX functioned as a slush fund for insiders who misappropriated billions of dollars in customer funds through unsecured loans. FTX apparently covered trading losses on the Alameda side and made venture investments using stolen customer money.
To buy legitimacy, FTX spread hundreds of millions of dollars among politicians, prominent charities, Ivy League universities, and influencers.
A forgotten banking scandal suggests FTX is the tip of the crypto iceberg
Meanwhile, regulators and legislators have failed to explain their abject failure to identify or intervene in this massive fraud.
Despite many warning signs and people sounding the alarm for years, FTX continued to grow and insinuate itself into both the nation’s financial and political spheres. SBF openly described his business model as a Ponzi scheme, yet found open doors when he came calling to Washington, DC.
Legislators who received donations from FTX actively intervened to prevent the SEC from investigating FTX, and SBF was allowed to help craft cryptocurrency regulations that are still under consideration in Congress.
While the scope of the FTX saga may seem unprecedented, it turns out that this has happened before. Thirty years ago, the collapse of a major international bank exposed a rat’s nest of fraud, money laundering, terrorism, and corruption.
The firm cloaked itself through its philanthropy, making donations to prominent figures and charities. The firm’s allies included a former U.S. Secretary of Defense and former U.S. President Jimmy Carter, among other prominent figures across the world.
The bank’s name was BCCI, and the similarities between this forgotten scandal and the FTX saga are stunning.
The Bank of Crooks and Criminals
The Bank of Credit and Commerce International (BCCI) was founded in 1972 by a Pakistani banker named Agha Hasan Abedi. BCCI was initially backed by investments from the Bank of America and the ruler of Abu Dhabi.
In his career prior to founding BCCI, Abedi had cultivated close ties with a number of wealthy Arab magnates and political figures, and these individuals would continue to play a critical role in the course of the bank’s development.
BCCI grew rapidly. By 1980, it had over $4 billion in deposits and was doing business in over two dozen countries.
Despite increasing concerns in the United States about the bank’s legitimacy, in 1982 BCCI managed to secretly take over a Washington, DC bank called Financial General Bankshares by funding a group of straw buyers.
To provide further cover, the bank holding company named Clark Clifford, a former U.S. Secretary of Defense and well-connected political figure, as its chairman.
On the surface, BCCI appeared to be a legitimate bank offering services to many countries where few others were willing to do business. Behind the scenes, however, was one of the largest criminal conspiracies in the history of finance.
From the earliest days of its existence, BCCI used customer deposits to finance its growth and expenses. BCCI covered massive trading losses using customer money, and made billions in unsecured loans to insiders.
BCCI also operated as a money launderer extraordinaire for all comers. Its client list reads like a who’s who of infamy: Saddam Hussein, Manuel Noriega, the Marcos family, the Medellin cartel, and many other terrorists, criminals, and corrupt political figures.
Perhaps the most fascinating, and controversial, aspects of BCCI’s business was its relationship with U.S. intelligence agencies.
According to extensive reporting by Time magazine and others, the bank was used by the CIA and other intelligence agencies to launder funds, finance illegal arms deals, and finance operations throughout the world:
*Featured post photo by Mariia Shalabaieva on Unsplash