The Billion Dollar Whale — Tom Wright & Bradley Hope
So apparently it’s possible to raise billions (with a “B”!) of dollars as if it is for a sovereign wealth investing fund, and then live like a prince with that cash for years without anyone catching on…
Billion Dollar Whale by Tom Wright and Bradley Hope is an avalanche of financial figures and opulent displays of wealth from start to finish. The story centers around Jho Low, a Malaysian businessman (child?) that started 1MDB, a sovereign wealth fund in Malaysia, and managed to steal almost half of the fund’s value for his own spending. Spending which primarily consisted of yachts, bottle service in Vegas, and jewelry for supermodels.
The entire story of Jho Low is comical until you recognize how sad it is. It’s sad for a couple of reasons. First, apparently it’s not that hard to jumble your accounting records enough to steal $4.5 billion dollars from a fund that is supposed to build wealth and investment opportunities for an emerging country and instead spend it to boost your own ego. A lot of the financial nuts a bolts went a little above my head but the bottom line is that Low didn’t need to do much to throw people off of his trail. One of his primary tactics was transferring money back and forth between various off-shore accounts to the point that the specific cash could get lost. And it always managed to get lost into his pocket. Is the system built on this much trust that a bad actor can fraud the system so easily? Or is this kind of activity way more common than we think?
Low didn’t work alone either though. One of his primary skills was his capacity to seduce people into following along with his plan. The book makes the compelling argument that a lot of people and firm (primarily Goldman Sachs) got involved in the 1MDB fund when proper due diligence should have raised immediate red flags. And those red flags didn’t get raised because the banks and investors, that are expected to police themselves on potential fraudulent deals, are incentivized to not do so. When there are billion dollar potential payouts at the end of a deal, it’s only human nature that people are going to look the other way on some ledgers that raise a couple of questions. This kind of self-policing works in cycles. After something like the 2008 financial housing crisis, standards are tightened. But gradually, as more and more money is at play and space is put between now and the financial scars of such crisis, those standards start to wane.
The saddest part of the entire story is the tangible investment opportunity that got stolen from the Malaysian people. Sometimes, it’s hard to wrap my head around what something like a million dollar might mean in a trillion dollar national budget. Yeah, a million is a lot of money but in a massive national budget, what does that actually mean for an average Malaysian citizen? In this case, the investment opportunity stolen from the Malaysian people, many of whom bring in around $35 dollars a day, is pretty maddening. Especially when all of that money went to stroking the ego of one guy who wanted Leonardo DiCaprio to think he was cool.