As we look at public policy, and the concept of market failure, here seems to be an example of the problem posed by one type of market failure: uneven information.
The problem with fraud is the person perpetuating the fraud knows what they are doing, the victim does not. Laws related to fraud are meant to punish such actions. Bankman-Fried is an example.
- Click here for the Wikipedia page on him.
The public success of Bankman-Fried masked significant problems at FTX, and in November 2022 when evidence of potential fraud began to surface, there was a rush by depositors to withdraw funds forcing the company into bankruptcy. On December 12, 2022, Bankman-Fried was arrested in the Bahamas and extradited to the United States where he was indicted on seven criminal charges including wire fraud, commodities fraud, securities fraud, money laundering, and campaign finance law violations.
Here's more on some of the charges:
- fraud: In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compensation) or criminal law (e.g., a fraud perpetrator may be prosecuted and imprisoned by governmental authorities), or it may cause no loss of money, property, or legal right but still be an element of another civil or criminal wrong.
- wire fraud: Mail fraud and wire fraud are terms used in the United States to describe the use of a physical or electronic mail system to defraud another, and are U.S. federal crimes. Jurisdiction is claimed by the federal government if the illegal activity crosses interstate or international borders.
- commodities fraud: The illegal act of obtaining (or the attempt of obtaining) a certain amount of currency in accordance with a contract that promises the later exchange of equated assets, which ultimately never arrive, is a type of fraud, known as commodities fraud.[40] Alternatively, the term can relate to: the failure of registering in an exchange; the act of deliberately providing falsified information to clients; the action of executing transactions with the sole purpose of making a profit for the payee; the theft of client funds.
- securities fraud: Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information. The setups are generally made to result in monetary gain for the deceivers, and generally result in unfair monetary losses for the investors. They are generally violating securities laws. Securities fraud can also include outright theft from investors (embezzlement by stockbrokers), stock manipulation, misstatements on a public company's financial reports, and lying to corporate auditors.
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- U.S. Code: Title 18.
- Texas Penal Code, Chapter 7.
