What Would the Amazing Randi Say?
It’s International Fraud Awareness Week, according to the trade group Association of Certified Fraud Examiners. As the week draws to a close, a sentence for Theranos founder and convicted fraudster Elizabeth Holmes is set to be delivered. Meanwhile, the long winter of woes in the crypto world notched its latest sub-zero run, as it were. Exchange owner and operator FTX recently suffered a lightspeed collapse last week from a valuation of $32 billion to bankruptcy in a matter of just days. As one door closes, another opens, as the saying goes.
Accounts of the events leading up to and following FTX’s spectacular implosion have been grabbing top of the fold real estate in The Wall Street Journal, The New York Times, and The Washington Post, among other outlets. FTX founder Sam Bankman-Fried, or SBF as he became known in the wake of favorable media coverage for his role in stepping in to prop up digital currencies, was, for a hot minute, the friendly, doughy face of crypto. Like Holmes, his public persona as a founder and owner eclipsed the actual nuts and bolts of the business he operated (or failed to operate, as more details come to light).
SBF publicly embraced calls for more crypto regulation and was a prolific donor to Democratic Party candidates, while Holmes was a near perfect poster child for the cultural mythology we’ve embraced around visionary founders and the sacrifices they make to move their industries. Her bona fides, of course, were also front run by an all-star board of Silicon Valley and other luminaries while a recently published series of text exchanges between SBF and a Vox journalist put the lie to the public persona and positions he advocated.
Rather than pursue further treatment of SBF and Holmes and the ways in which they hoodwinked their investors and the markets, I would instead like to suggest that the investing public and other market participants (re)acquaint themselves with James Randi. Randi, known by his stage name “the Amazing Randi,” was an accomplished magician, escape artist and sleight of hand practitioner who, in the 1970s and 1980s, took to exposing as frauds and charlatans figures including faith healer Peter Popoff and Uri Geller, who grew famous for his purported ability to bend spoons through his psychic and paranormal powers. In other words, Randi targeted those wielding stagecraft to deceive the public.
The Amazing Randi went on to create the Committee for Scientific Investigation of Claims of the Paranormal, which later became the Committee for Skeptical Inquiry and reportedly counted among its recruits Carl Sagan and Isaac Asimov. Had Randi been an investor, I dare suggest he would have been a short seller and Holmes’ claims of the magic of Edison, Theranos’ blood testing technology, and the world of shiny-object crypto would have attracted his attention and invited his inquiry and skepticism, if not his short position.
And if fraud is predicated in part on deception, then the Amazing Randi might encourage people not to let themselves be deceived. A big part of due diligence properly conducted is not just searching and analyzing public information, but talking to people, subjecting self-serving claims to pressure testing and sometimes getting out and visiting a business and the workplace that will take your money. As the adage goes, after all, an ounce of prevention is worth a pound of cure.
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