As regular readers of this blog know, our most common form of post arises from our reading of a book or major media exposé about a business scandal. We then mine those sources for any information that might tell us how behavioral ethics concepts might enlighten us as to how and why the scandal occurred and how it might have been prevented.

This particular blog post is prompted by Michael Lewis’s controversial new book about 31-year-old Sam Bankman-Fried (SBF) and the now-defunct cryptocurrency exchange, FTX. The topic is timely because, as this entry is being written, SBF is on trial in federal court in New York for various forms of fraud.

A simplified version of the factual background here is that SBF was a very bright physics major at MIT who went to work for a Wall Street trading firm where he did very well. As the crypto currency industry exploded, its potential attracted SBF who dived in head first. In 2017, he helped found a crypto trading company, Alameda Research, which did very well exploiting an arbitrage opportunity in the South Korean crypto market. Then, in 2019 he formed a crypto trading exchange, FTX, that had its own crypto token, the FTT.

Soon, FTX was making nearly unimaginable sums of money (it had a billion dollars of revenue in 2021), and Alameda appeared to be doing fine as well. To many, SBF became the global face of the cryptocurrency industry.

In the few years we are talking about here—roughly late 2017 to late 2022—the late twenties SBF raised FTX’s value to $32 billion while simultaneously doing some really crazy sh**.

  • SBF was a devotee of the Effective Altruism (EA) movement and for a time hired primarily EA followers, even if they possessed no particular skills useful to Alameda or FTX. [Effective altruism has been defined as: “(i) the use of evidence and careful reasoning to work out how to maximize the good with a given unit of resources, tentatively understanding ‘the good’ in impartial welfarist terms, and (ii) the use of the findings from (i) to try to improve the world.” (McAskill)]
  • He hired architects nearly sight unseen and gave them tens of millions of dollars and virtually no instructions other than to acquire land in the Bahamas and build offices and living quarters for FTX employees.
  • He put multiple friends and acquaintances in important positions for which they had little or no training or experience. For example, he put his friend (and girlfriend) Caroline Ellison in charge of Alameda, a job she knew that she was spectacularly ill-prepared to handle.
  • Knowingly little about marketing but figuring that linking crypto to sports stars might be good, he gave huge sums to Tom Brady, Steph Curry, Shohei Ohtani, Trevor Lawrence, and others to endorse FTX.
  • He donated tens of millions of dollars to political campaigns, particularly of Democrats, hoping in part to curry favor for cryptocurrency and partly to help save the world consistent with his EA beliefs.
  • He spent tens of millions of dollars acquiring other crypto firms, sometimes apparently with good reason and sometimes without.
  • He dressed primarily in cargo shorts and wrinkled T-shirts, and seemed unconcerned with personal hygiene.
  • He often slept on the floor or on a beanbag chair, and was seldom where he said he would be.
  • While on Zoom in important meetings with important people, he would simultaneously play video games at his end.
  • He often simply failed to appear at scheduled meetings, even with very important people.
  • He didn’t (and still doesn’t) read books.

Other actions seemed more sinister.

  • SBF ran two businesses making huge amounts of money with no org chart, no CFO, no clear board of directors, no audits, no internal controls, no HR department, etc. The bankruptcy trustee who took over FTX said he’d never “seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
  • He falsely represented that Alameda and FTX were independent organizations.
  • He falsely told investors that their investments would be secure.
  • He created an $8 billion hole (although some of that money was someplace….SBF just needed to find it) in Alameda’s balance sheet.

In our blog posts of other scandals (Theranos, WeWork, Volkswagen, Boeing 737 MAX, etc.), we typically examine the statements of the fraud’s principals and witnesses thereto for evidence of the thinking behind the decisions and actions that created the fraud.

There is much of that here. SBF is freakishly smart and his meteoric financial success clearly seems to have stoked his overconfidence bias (see our video at SBF even thought there was a 5% chance he would become president. Thus, the overconfidence bias may have led him to underestimate the possibility that he just might not succeed in an industry that was incredibly volatile. And his commitment to EA (“Look at me, I’m going to save the world!”) may have caused him to be overconfident regarding his ethicality and to just assume that his actions were morally fine because he was the one doing them.

And the self-serving bias (  also seems on full display as SBF repeatedly interpreted evidence in a self-serving manner that assuaged any doubts he might have had about the rightness of his actions. He repeatedly made management decisions that gave himself the overwhelming percentage of control of and monetary reward from the firms’ actions.

Also, in Alameda’s early days when a big chunk of cryptocurrency went missing, other members of the management team wanted to stop trading until it was found and believed they should inform investors and employees. SBF disagreed, believing that there was an 80% chance that the currency would be found and therefore that Alameda should act as though it possessed 80% of the currency. Realizing that such reasoning was hardly consistent with GAAP, many employees then quit out of “concerns over risk management and business ethics,” according to Alameda co-founder Tara Mac Aulay. SBF’s moral reasoning appears to have been infected by the self-serving bias.

Another relevant behavioral ethics concept is framing (, the simple notion that our decisions are heavily influenced by what is in our frame of reference at the time we decide. If ethical considerations are in our frame of reference at the time we make decisions, we are obviously much more likely to make a proper choice than if we are blind to ethical matters. And there is substantial evidence that if money is in our frame of reference, it can crowd out ethical concerns and lead to immoral choices. (See Vohs, Kochaki, and Mogilner). If you are running a cryptocurrency operation, crypto money is necessarily in your frame of reference 24/7 and the danger that it will crowd out moral consideration is omnipresent. At a minimum there is circumstantial evidence that this happened to SBF.

And one could make the argument that moral equilibrium ( ) may well have played a big role here as well. EA advocates want to save the world and many, including SBF, concluded that the most efficient way to do that was to make a shipload of money and then dedicate it to saving the world from its biggest problems—climate change, runaway AI, global hunger, etc.). The notion of moral equilibrium is that most of us carry a sort of running scoreboard in our heads where we continuously match our vision of ourselves as good people with our actions. If we do something we’re not exactly proud of, morally-speaking, there arises a deficit on our moral scoreboards and we may look for opportunities to do something good to erase that deficit. This is called “moral compensation.”

On the other hand, if we do something particularly good or even just plan to do so, we now have a surplus on that mental moral scoreboard and may give ourselves permission to not live up to our own moral standards…just this once. This is called “moral licensing.” SBF envisioned being the world’s first trillionaire and imagined what he might be able to accomplish via EA in that eventuality. Such dreams might well have motivated him to grant himself license to do whatever it took to become that trillionaire who can save the world.

Michael Lewis, who is well known for writing only about subjects whom he likes, has been criticized for going too easy on SBF in Going Infinite. On the face of things, SBF seems very much in the vein of other perpetrators of recent fraud. He is, like Theranos’s Elizabeth Holmes and WeWork’s Adam Neumann, very bright, very ambitious, and very confident.

There are differences. Unlike Holmes and Neumann and most other people, he seems incapable of feeling happiness. Or empathy.

In retrospect, as is almost always the case with these huge business frauds, people should have seen it coming but didn’t. Why not here? An FTX employee who had known SBF in high school suggested the reason was: “Sam’s oddness.  His oddness mixed with just how smart he was allowed you to wave away a lot of the concerns. The question of why just goes away.” (Lewis, p. 209)

Does SBF’s unique oddness make it problematic to apply standard behavioral ethics concepts to his thinking and conduct? Is he truly different as Lewis seems to suggest? We may know more after the trial concludes. His closest associates have already pleaded guilty to fraud. And at this writing, early in the trial, they are testifying that the FTX scandal looks just like those that have preceded it—animated and controlled by a well-meaning, charismatic leader whose moral decision-making went off the rails.



Christopher Beam, “Michael Lewis Doesn’t Do Bad Guys,” New York Times, Oct. 8, 2023.

John Carreyrou, Bad Blood: Secrets and Lies in a Silicon Valley Startup (2018).

Erin Griffith, “The End of Faking It in Silicon Valley,” New York Times, April 15, 2023.

Maryam Kouchaki et al., “Seeing Green: Mere Exposure to Money Triggers a Business Frame and Unethical Outcomes,” Organizational Behavior and Human Decision Processes 121(1): 53-61 (2013).

Sheelah Kolhatkar, “The Parent Trap,” New Yorker, Oct. 2, 2023.

Michael Lewis, Going Infinite: The Rise and Fall of a New Tycoon (2023).

Megan McArdle, “Sam Bankman-Fried Is a Product of Our Time,” Washington Post, April 17, 2023.

Will McAskill, “The Definition of Effective Altruism,” in Effective Altruism: Philosophical Issues (H. Greaves & T. Pummer eds., 2019).

Cassie Mogilner, “The Pursuit of Happiness: Time, Money, and Social Connection,” Psychological Science 21(9): 1348-1354 (2010).

Joshua Oliver, “’FTX Was Not Fine,’: How Sam Bankman-Fried’s Tweets Became Central to His Trial,” Financial Times, Oct. 7, 2023, at

Molly Roberts, “Sam Bankman-Fried Doesn’t Read. That Tells Us Everything,” Bloomberg News, Nov. 29, 2022.

Peter Singer, The Most Good You Can Do: How Effective Altruism Is Changing Ideas About Living Ethically (2015).

Eli Tan & Tory Newmyer, “Caroline Ellison, Start Witness in Bankman-Fried Trial, Says He Led Fraud,” Washington Post, Oct. 10, 2023.

Katherine Vohs et al., “Merely Activating the Concept of Money Changes Personal and Interpersonal Behavior,” Current Directions in Psychological Science 17(3): 208-212 (2008).

Katherine Vohs et al., “The Psychological Consequences of Money,” Science 314(5802): 1154-1156 (2010).

Reeves Wiedeman, Billion Dollar Loser: The Epic Rise and Spectacular Fall of Adam Neumann and WeWork (2020).

David Yaffe-Bellamy et al., “’Lied to the World’ or Act in ‘Good Faith’: Sam-Bankman-Fried’s Trial Opens,” New York Times, Oct. 4, 2023,


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