The Rise and Fall of the American Fraudster

The Rise and Fall of the American Fraudster

The Rise and Fall of the American Fraudster

From crypto titan Sam Bankman-Fried to snake oil doctor Mehmet Oz, financial and political scam artists are finally getting what’s coming to them.


Without much notice, the American scene now boasts an array of professional scam artists meeting a richly deserved comeuppance. The tangle-haired crypto titan Sam Bankman-Fried has presided over an epic meltdown at his FTX empire; the trading platform had yielded him an estimated net worth of $15.6 billion, and that number now stands at a nice round zero, with Bankman-Fried facing a host of legal smackdowns in the offing. Elon Musk, lauded far and wide as the genius tech disrupter of the age, has run his latest acquisition, Twitter, straight into the ground, displaying rank ignorance, insatiable bro-hubris, and rudderless right-wing conspiracy-mongering in equal parts. Elizabeth Holmes, the founder of the phony blood-testing app, Theranos, is bound for prison for more than 11 years on fraud charges.

Meanwhile, a host of political hucksters, from snake oil doctor Mehmet Oz to election denier on autopilot Kari Lake to Peter Thiel action figure Blake Masters, were kicked to the curb in the 2022 midterms. (Though it must regretfully be noted that one of their rank, Ohio Senator-elect J.D. Vance, managed to scurry safely out of range of his own rendezvous with karma, thanks in no small part to the $30 million pumped into his flailing campaign by Mitch McConnell’s Senate super PAC.) And as a perfect grace note, nearly all of the most high-profile failed political frauds of the 2022 cycle were handpicked protégés of the greatest scammer in American public life, former president Donald Trump, who tried to head off a series of legal and political reckonings with his low-energy announcement of his 2024 run for the presidency.

It’s wise not to read too much into the present moment’s Fraudsterdämmerung; this is America, after all, the premier breeding ground of boodlers and mountebanks of all description, from John Jacob Astor, Henry Fricke, and Bernie Madoff on one hand, to Richard Nixon, Warren Harding, and James Buchanan on the other. Still, students of the close alignment of rampant scamming and financial entrepreneurship note that we could be on the verge of a new culture-wide reassessment of late-capitalist fraud.

“The instinct to geographic expansion and asset invention in capitalism tends to, historically, be accompanied by fraud,” says Ian Klaus, a senior fellow with the Chicago Council of Global Affairs and the author of Forging Capitalism: Rogues, Swindlers, Frauds, and the Rise of Modern Finance. “In this sense, fraud is an inseparable part of capitalism, especially at its frontiers, such as crypto now.” In some ways, the rise of mogul-driven digital capitalism has produced a convergence between financial fraud and the political variety, rendering the two increasingly difficult to distinguish. “What’s so strange right now is the way in which fraud has seen a parallel breakdown in the realm of business, where we normally see it, and the realm of politics,” says University of Georgia historian Stephen Mihm, author of A Nation of Counterfeiters: Capitalists, Conmen, and the Making of the United States. “I do think that much of the proliferation of scamming and hucksterism has flourished in an environment of extreme political polarization. The two things are linked insofar as people become wedded to a political wing over reality and facts, and will not consider an alternative view.”

This calls to mind other grifters in the right-wing house of election denialism, such as MyPillow CEO Mike Lindell and all-purpose agitprop hack Dinesh D’Souza. But Mihm also notes that an important augur of today’s great fraud shakeout was the pair of civil lawsuits targeting the deranged hard-right conspiracy merchant Alex Jones, who’s now facing more than $1 billion in penalties for promulgating the hateful lie that the massacre of schoolchildren and teachers at Sandy Hook elementary school was a false-flag operation perpetrated by “crisis actors” in thrall to the liberal agenda of the deep state. “He’s also representative of this extreme polarization, selling vitamins and survivalist gear, while he’s got people in his audience migrating to these really dark places,” Mihm says. “You know, it’s one thing to sell vitamin supplements, and it’s another thing to tell lies about dead children. That’s a line that hucksters historically haven’t crossed.”

Jones’s brand of amoral cruelty is clearly a selling point of ideologically tinged hucksterism, as the land rush of lies and conspiracy theories surrounding the attack on emeritus House Speaker Nancy Pelsoi’s husband, Paul, made nauseatingly clear. It’s also long been the franchise of Trump, dating back to his media campaign to reintroduce the death penalty in New York to use against the since-exonerated suspects in the Central Park jogger case right up through his courtship of the alt-right and QAnon.

Indeed, Trump has been the country’s great naked emperor of fraud ever since the MAGA grift first leached into the bloodstream of the American body politic in 2016. It could well be that he, too, will face some measure of long-delayed accountability, with US Attorney General Merrick Garland’s recent announcement that he was appointing veteran Justice Department official Jack Smith as a special prosecutor to investigate Trump’s role in fomenting the January 6 insurrection at the US Capitol, as well as his illegal transferral of classified documents to his Mar-a-Lago lair in Florida.

But here, again, a major caveat is in order. The American legal system is loath to bring even former presidents to justice, and the two prior impeachments of Trump did virtually nothing to curb his Caligulan will-to-power. (Quite the contrary, in fact, given that his administration’s bungling of the early stages of the Covid crisis stemmed in no small part from his typically megalomaniacal obsession with his first impeachment.) What’s more, the performance of recent special prosecutors has been underwhelming, going back to Lawrence Walsh’s dilatory work on the Iran/Contra scandal—the first significant inquiry of its kind since the Watergate crisis.

Trump also benefits from the plutocracy-friendly administration of justice at the federal level. “The [Justice] Department seems to have lost its mojo and the ability to effectively tackle elite financial fraud on a national scale,” says Paul Pelletier, a former federal prosecutor who specialized in white-collar crime. “I think a turning point may occur when they charge Trump. And to me, the appointment of a special counsel makes that likelihood more certain. We all watched as [Attorney General Merrick] Garland initially expressed reticence to proceed with the case against Trump, conflating insurrection with political jousting by announcing the well worn notion that ‘DOJ doesn’t prosecute political opponents.’ Career federal prosecutors, in turn, fell so far behind the eight ball at DOJ that during the January 6 hearings, Congress ultimately told DoJ to go fuck themselves when they sought to make up for lost time by collecting evidence in the possession of congressional investigators.”

This laggard track record seems to represent a long-standing posture of learned helplessness. “They simply have not taken the steps necessary to prepare and activate their troops to attack sophisticated white collar crimes as they occur in the 21st century,” Pelletier argues. “And this is principally why elite fraudsters routinely get away with it, at least until the house falls down.”

He adds that this ineptitude also reflects a full-scale repudiation of institutional wisdom within the department. “DoJ actually has the playbook for what it takes to be effective in this arena. During the savings and loan crisis thousands of crooked bank execs went to jail. Then you had the Enron corporate task force, and another 900 to 1000 criminal execs go to jail. So it is a fact that at least until the mid 2000’s DoJ had built a record of holding people accountable. That wasn’t by accident; DoJ leaders had the competence, the courage and the commitment to effectuate appropriate law enforcement techniques to deal with the problem. Then you move to the next economic crises grounded in criminal activity—in 2008—and the whole fucking operation falls apart; the wheels just came off. You have all this predatory lending and Wall Street deceit leading to a near collapse of our economy, yet DoJ’s criminal enforcement side does absolutely nothing about it. The department’s feckless behavior was obvious to everyone in the world except to DoJ’s political leaders. And to this day there still has not been a reckoning.”

Mihm agrees: “The failure to prosecute bankers was a major unforced error, one that was reflective of the Democrats’ relationship to Wall Street.” It’s also the sort of unforced error that aspiring fraudsters pay special attention to. “Hucksters depend on the credulous,” Mihm says, “and they depend on the policing mechanisms and regulators failing to do their jobs.” In this sense, the corrupt dealings at Sam Bankman-Fried’s smoldering ruin of a crypto empire were very much of a piece with the Obama administration Justice Department’s no-harm-no-foul handling of the 2008 meltdown—and the business press’s failure to detect any structural weakness in the paper prosperity of the early aughts. Any comprehensive canvassing of the behind-the-scenes architects of today’s great rolling spectacle of fraud has to include “the enablers in the press and the regulatory system,” Mihm says. “Caroline Pham, one of the commissioners with the Commodity Futures Trading Commission, has frantically been scrubbing online images of her with Bankman-Fried. It’s like a fox doing a selfie in front of the henhouse.”

Since legal and regulatory regimes, like political orders, rot from the top down, there’s a chance that a successful Trump prosecution could be a long-overdue statement from on high that the rule of law matters again. It’s true, Pelleteir says, that federal prosecutors working on Trump’s dizzying record of malfeasance “were late to the party, because of leadership’s expressed reticence. But Garland seems to have learned from these mistakes.The appointment of the special counsel to investigate all of Trump’s facially criminal conduct should be both a lesson and a turning point. In reality, it’s the line people”—the regional prosecutors below Garland—”who are waiting to follow Garland’s lead. Maybe, just maybe, DoJ leaders will again realize that a focused national effort, buttressed by resources and training sufficient to accomplish the task, might restore Americans’ confidence in the department’s ability to bring powerful individuals to justice.”

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