WeWork and FTX tell us visionary hype is always dangerous

In the New York trial of Sam Bankman-Fried, founder of the collapsed FTX crypto exchange, there was never a moment when he looked like talking his way to freedom: he was found guilty on seven charges of fraud and conspiracy and now awaits what’s likely to be a very long sentence. Justice has been swift and sure, barring an extraordinary reversal on appeal. But what should worry thoughtful observers is the fact that during the period of the trial, from 3 October to 2 November, the price of bitcoin rose from £22,700 to £28,700.

Perhaps investors saw the crypto currency as a safe haven after Hamas’s attack on Israel. Perhaps they just jumped on an irrational uptrend. More certainly, we can deduce that they paid little heed to the cautionary tale of FTX, which grew to be one of the world’s largest crypto businesses without regulatory oversight or any serious internal governance. That absence of controls enabled Bankman-Fried and his crew to divert billions of dollars of customer funds – and you might think crypto players would be deterred, at least temporarily.

But apparently not. The doctrine put about by Bankman-Fried and his ilk, that it’s cool to dabble in volatile crypto tokens beyond the reach of staid auditors and authorities or corrupt central bankers, is somehow pervasive. It connects to the idea, vividly displayed in the Covid Inquiry, that smart people make radical stuff happen through no-holds-barred social media, scorning conventional management structures.

It was evident too in the rise of WeWork, the shared-office venture once valued at $47 billion that liked to call itself a ‘community company committed to maximum global impact’ and acquired cult-like status under its founder, Adam Neumann. That was before he departed, having cashed out $700 million, in 2019. Having run up giant losses, the company declared bankruptcy this week.