This Is How the System Works
Oligarchy Is Entrenched in Financial Institutions, and Also Why Crypto Is a Scam
I intended to write this piece focused solely on cryptocurrency, financial risk and the white-collar crime inherently rampant and accepted in the system, but Russia's invasion of Ukraine changed circumstances significantly. It's a fast moving situation, innocent people are dying as I type this, and I'm not sure what will be the case by the time this publishes, and then by the time you read this piece. In the last edition of Let's Do the Panic Again I added some tips for how to follow verified news from the war and contextual pieces on how we got here; if you haven't read it, I recommend it.
But I wanted to talk about the money issue here. Since actually sending NATO troops to Ukraine would start World War III (and despite what some truly bad takes are saying, it would not be a survivable event), the rest of the world has resorted to economic sanctions. Sanctions serve a point, especially the ones targeting Putin himself, but keep in mind that as the ruble tumbles it's going to be innocent Russians (many of whom are bravely protesting the war) who feel the burden.
Credit firms are downgrading Russian bonds, but let's be honest, is this going to seriously impact the oligarchs and Putin's inner circle?
This is because Putin, his inner circle and the oligarchs he's allied with have their money hidden away. It's in offshore accounts, it's in foreign investment, it's in major real estate across the United States and Europe. It's in association football teams. To actually hurt Putin and company Western powers will need to go after that. And they won't. Because that's the basic system the whole world uses.
Once again, Wu-Tang was right.
This is not just the dozen or so “bad apples” acting independently and hiding their ill-gotten gains away on their own—there is a massive infrastructure of legitimate firms, services and workers focused on helping corrupt people quietly stash their money away to avoid paying their fair share and helping others, and in turn increasing the corruption in the system. And this isn't something that sprouted up just in the last two or three years. This is the system. These firms are acting and interconnecting with the global banking and investment system. This isn't the paranoid ramblings of this journalist; these systems are well documented in the Panama Papers, the Paradise Papers, the Credit Suisse leaks and other leaks on the financial tools the rich use to avoid taxes and disclosing their wealth.
Maybe I'm being jaded on this. Over the weekend the White House said it would go after freezing the assets of sanctioned Russians. The United Kingdom announced it would go after “dirty” money Russia on its soil (worth noting that it could have done this for years, it just has not). Roman Abramovic, oligarch and owner of Chelsea FC, announced he would give “stewardship” of the club to its foundation's trustees. That keeps the team in his ownership, so he gets away, but it's clearly an effort to avoid more punitive measures.
On the other side of the Atlantic, and not directly related to Russia, there's the crypto matter. Cryptocurrency isn't exactly “new,” as bitcoin and other ones have existed for years, but it's exploded everywhere. Perhaps you've seen Matt Damon hawk it in a commercial. Perhaps you've heard someone say that it's revolutionary and will democratize finance and give regular people power. Of course, it's being bought up as a speculative market by the very financial institutions such claims go against, because that's where money and power is and the rich are getting richer. Also, sure, some places take Bitcoin, but is there a widespread use of crypto to buy groceries or basic goods? No. It's a speculative market. An unregulated, volatile, shady market full of theft. Nearly every week there's been a story of some big crypto hack.
Meanwhile, take the case of Ilya Lichtenstein and Heather Morgan. The two were arrested Feb. 8, charged with laundering billions of dollars in Bitcoin that was stolen from Bitfinex in 2016. Hackers stole the coins from the exchange; Lichtenstein and Morgan are not charged with the hack itself. But the two are regular entrepreneurs with focuses on tech and finance. Morgan also is known as “Razzlekhan,” a would-be social media influencer and very bad rapper. Take this video, for instance, which just boils down to “have money, delegate, don't do actual work.” Why bring up these two in light of Putin and Russia? Because this is behavior not that far removed from the regular Wall Street attitude, the regular global investment and finance attitude. They just went (allegedly) a step further and got caught.
The idea is to profit. To avoid losing money or giving it to help the masses. It's all about loopholes, laundering and other activities that if governments actually cracked down on could cripple some economic sectors. The same system that props up oligarchs hiding their money fuels Wall Street. It's all couched in the same finance bro “grind” and “hustle” mindset. Remember, for this set money isn't real and it's not actual concrete, actionable steps, just the “grind never stops” idea. I like the Rock as an entertainer, and I'm big into fitness, but you see this a lot from any successful influencer or wannabe influencer or the like, where there's nothing material, just vague ideas of success that come only from being insulated from reality because they have enough money to not deal with the stress of paying rent or the like. And once you're in that world it's harder and harder to both realize reality and to feel the consequences of it.
As for why crypto is exploding, well, look around. There are no stimulus checks going out, people are struggling economically in a pandemic that's still going on, so why not buy into the advertisements from celebrities like LeBron James or Larry David of all people saying to be brave and buy crypto? It's a get rich quick scheme that's blatantly a scam. When nothing is real, when no help is given, why not throw it all on, as Howard Ratner of Uncut Gems would say, a crazy risk, a gamble?
Money to fix failing bridges, to help feed starving children, it's all there. Holding corrupt oligarchs, Russian or otherwise, and making it harder for them to engage in acts of war, it's all there.
Also, if you think that “decentralized” currency market would use such “freedom” to stand up to an aggressive government, sorry, here's some predictable bad news:
Today's Panic Reading
Despite my pessimism on the cracking down of oligarchical wealth, some people chose a more direct approach. Here's the story of a Ukrainian sailor who tried to sink a Russian oligarch's mega yacht. He regrets nothing.
Jack Crosbie’s reporting in Ukraine remains essential reading. Here’s his latest dispatch.
Since I mentioned celebrities shilling crypto, I highly recommend following the reporting Jacob Silverman and Ben McKenzie (yes, Commissioner Gordon, Batman and “The O.C.”’s Ryan Atwood) are doing. They’re getting a book on it!
And in case you were thinking the interconnected wealth network was just about assets like homes and sports teams, take a look at how Saudi Arabia—itself committing horrific atrocities in Yemen—is helping Russia boost oil prices.
Today's Panic Music
It's a classic but fitting the financial theme of today's newsletter, here's Dead Kennedys' “Kill the Poor.” Because irony is dead, when I pulled this up on YouTube, I got an ad from billionaire developer Rick Caruso's campaign for mayor of Los Angeles.