Sam Bankman-Fried just lost his job as CEO of FTX because he allegedly lost billions of dollars. The real problem is that it was his investor’s money and there is evidence Sam is going to unseat Bernie Madoff as the biggest corporate crook in the history of planet Earth. The guy who replaced the potential multibillion dollar fraudster is named John Ray. John Ray has filled the role of CEO in cases like this before, such as Enron. Ray said it was the worst failure of governance controls that he had ever seen. It is my belief that this case will help people finally understand why the G is in ESG. The Chapter 11 filing is filled with a detailed description of what governance controls were absent. It’s shocking. Here is one quote from the new FTX CEO, John Ray.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Said John Ray.
Many people are confused as to why the G is in ESG and what governance really means. I just met the most confused guy I ever talked to about the G in ESG. This very well educated, nice and very bright guy was making an argument against ESG. He was making less sense than most people I had talked to about their problems with ESG. I was puzzled until I figured out he thought the G in ESG stood for government. I told him it was about the governance of the company; you know… a board, audit committee, ethical culture, an effective compliance program, independent board members, annual audits, the implementation of a simple low maintenance conflict of interest management program, etc. He and FTX’s over 1,000,000 customers who may lose almost everything they invested in Sam Bankman-Fried’s company… are about to all learn about the value of the G in ESG.
These FTX investors and customers, all 1 million of them, are going to find out that Sam had no governance controls. FTX clearly had no effective annual outside independent audits. The conflicts of interest are shocking. I find no evidence of an ESG program let alone effective governance controls anywhere in FTX. Sam is one of several overrated wonderkids that have popped up lately, all talk, no experience and zero integrity… think Martin Shkreli and Elizabeth Holmes.
Chamath Palihapitiya the CEO of the investment firm Social Capital was asked by Sam to invest in FTX. Britney Nguyen from the Insider reported the following about the exchange between Palihapitiya and Bankman-Fried.
“Investor Chamath Palihapitiya said his firm gave Sam Bankman-Fried’s FTX two pages of recommendations in order to proceed with a potential investment, including forming a board of directors, after a Zoom pitch that didn’t ‘make much sense.’
The person that worked there called us back and literally, I’m not kidding you, said, ‘go f*** yourself,'” Palihapitiya said on the podcast.”
Elon Musk had a similar reaction to his conversation with Sam. Elon and Chamath both saved themselves millions simply by asking a few good governance/leadership questions that must be answered “yes” or you should run, not walk away. The list of investors, celebrities, and venture capitalists that did not check on FTX’s governance before investing hundreds of millions of dollars is a who’s who list of the best and brightest. They and over 1,000,000 customers now wish they knew about the G in ESG before they invested in FTX.
Sam has ruined the lives of many people but some good always comes from situations like these. Millions of people will now be more focused on an organization’s work hard on their environmental, social, and GOOD GOVERNANCE before they work for, partner or invest.
In my opinion… the FTX failure would have never occurred if FTX had an effective ESG program.