Patrick McKenzie: evaluation

Transcript context

…Wasn’t it more about getting people to look the other way politically rather than figuring out how to structure the wire in a way that won't get flagged? It's not merely a matter of getting them to look the other way. Go back to the original SBF interviews where he's telling the founding myth of Alameda. He says very loudly that the reason why he got this opportunity to do bitcoin arbitrage between Japan and the United States is because he was able to do something that the rest of the world wasn't. He doesn't say this in these many words. I will say it. He suborned a Japanese bank. You need that as one of the pieces to run this arb and then he pulled tens of millions of dollars out of this. I don't think people really listened to what he was saying there. He literally says in the interview on Bloomberg, "if I was a compliance person, this would look like the sketchiest thing in the world. This looks like it's obviously money laundering." Because it is money laundering. Interestingly, Michael Lewis retells the story and locates the story in South Korea rather than in Japan. Some people who were involved say they tried it in South Korea and Japan. I wish people would pull on more threads there. There's still lots of that story that we don't know. Anyhow, how sophisticated do you have to be to launder tens of billions of dollars? SBF did that. That is a bar for sophistication. He was eventually caught. He was not caught for laundering tens of billions of dollars. He wasn't even under suspicion for laundering tens of billions of dollars around. SBF was Tether's banker. Alameda Research — one of the parts of the corporate shell game they were playing — moved tens of billions of dollars of cash around the financial system. It did so largely under full color of law on behalf of Tether. It moved it from wherever Tether or their customers had it to, at the moment, I think it's mostly at Cantor Fitzgerald. Some shoe has to drop there eventually. I will eat a lot of popcorn when it does. Be that as it may. There's many other ways to launder money. Let's say I establish a shell corporation and I buy a piece of real estate in New York City. I rent that real estate out to people. I collect a stream of rents from that. That money looks clean because there is an excellent business. It's my shell corporation that is renting this real estate that really exists, to a totally legitimate person. This money is clean. The money that I put into the system to buy this on behalf of the shell corporation, I'm just going to wire it to a lawyer. The lawyer is going to answer any question from the bank with, "I don't know where it came from. I don't have to tell you. I'm a lawyer. It's a real estate transaction. What do you want from me?" In one sense, that's money laundering if the original money was the proceeds of crime. In another sense, that's how every real estate transaction goes down at those scales. Often a facility at money laundering is just a facility at operating the economy, plus willingness to do that to hide the proceeds of some other crime. I would be really good at money laundering. les. Often a facility at money laundering is just a facility at operating the economy, plus willingness to do that to hide the proceeds of some other crime. I would be really good at money laundering. I'm glad I haven't done it professionally. It's fascinating intellectually. Previous communications departments I've worked at probably explicitly anti-endorse that sentiment. What can one do?…

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