Finance as alchemy

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Finance as alchemy​

When the German banking giant Wirecard collapsed in June 2020 amid a roaring fraud scandal, public opinion was shocked. The company, praised as the country’s innovative answer to the fintech industry of Silicon Valley, had been widely seen as a ‘German miracle’ following recovery from the 2008 financial crisis. Its bankruptcy involved a massive state prosecution that sent shockwaves through world markets. To the astonishment of German and international observers, Wirecard executives were found to be involved in all manner of deception: direct falsification of accounts, fake cash-flows, re-routing of payments through non-existing shell companies, ghost subsidiaries. While forging profits, they had obscured a mammoth debt of €3.5 billion.

This, of course, is not an unfamiliar tale. The explosive growth of finance as a percentage of the ‘real’ economy in recent decades has been matched by an equally dazzling scale of financial fraud, from the Enron scandal to Bernie Madoff’s pyramid scheme (the largest recorded fraud in world history) in the 2000s, to more recent scams in cryptocurrency markets such as FTX. Denizens of finance – both system insiders (Madoff was a former chairman of the Nasdaq exchange) and ‘maverick’ outsiders (Sam Bankman-Fried of FTX had been seen as a challenger of mainstream banking elites) – have displayed a unique capacity for alchemy: whipping up distorted realities in which false truth and true fact become indistinguishable. Their plotting is often aided by regulatory bodies, rating agencies and consultancies that firm up such distorted realities through either action or inaction.

More:

Finance fraud is not a deviation from the norm but a reflection of it | Aeon Essays

Finance fraud is not a deviation from an essentially rational system but a window onto the reality-distortion of markets

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