Billion Dollar Whale: By B. Hope and T. Wright — The Consequences of Financial Corruption
Money is one of the single most important commodities in an economically driven world. Capitalism, power, and developed global economies all play into the reasons why money is as enticing as it is. The coined saying “money makes the world go round” couldn’t be truer in modern society. However, with money becoming such a highly valued component of life, financial crimes and corruption rates have risen drastically. Individuals have become more susceptible to taking advantage of the flaws within the financial system to illegally benefit, with numerous examples occurring over time. Either through stealing financial funds from investors, defrauding banks, cooking financial records, tax evasion, and the list goes on. People who have partaken in such crimes have often times profited immensely, and lived extraordinary lives. Stemming from the lengths of greed, corruption, and deception individuals are willing to go to. Jho Low’s incredibly true story gives a look into the types of people to look out for in a flawed financial system, and insight into what endless stolen amounts of money can do to and for a person.
Within the story of “Billion Dollar Whale”, we are introduced to an individual named Low Taek Jho — more commonly referred to as Jho Low. Jho Low grew up within a wealthy Malaysian family which provided him the ability to attend the prestigious Harrow School in England, where he academically excelled. Eventually landing himself admission to the Wharton School of Business at the University of Pennsylvania. Jho Low was always considered to be a pudgy and shy guy growing up, however, when he arrived at college, he developed strong intentions to change his social standing and perception. He was now attending a university with some of America’s most elite and wealthiest families, and he was desperate to fit in and be just like them. Seeming to come practically out of nowhere, he began spending the money his parents would provide for school to throw expensive parties, where he would host all of his most popular and successful peers. Instead of being the center of and enjoying the parties he was providing, Jho Low preferred to stay in the background and observe his peers in an effort to eventually be able to embody what it was like to be like them. Low was always seen as someone who kept to themselves, but he still managed to develop connections and build relationships that would ultimately strengthen his credibility and access to a higher social class. He would often lie and utilize deception to gain connections and build trust among his established peers during his time in university, with the hopes that he would eventually be able to piggyback off of them into everlasting wealth once he graduated.
Early into adulthood, Low realized his main goal in life was to fit in and live like the wealthiest of people on the planet, no matter the cost. And by pulling off one of the biggest financial heists the world has ever seen, he was able to achieve just that. Low was able to construct a fraudulent investment fund, named 1MDB, which in its time of operation was backed by some of the most influential financial institutions — including the prime minister of Malaysia, Najib Razak. Due to the deception created by all of the support Low’s fund had from entities that were more than credible at the time, Low was able to lure plenty of prominent investors into engaging in business with him. Eventually, siphoning billions of dollars from 1MDB and using them to live the billionaire lifestyle that he had always dreamed of.
Jho Low used his stolen money to fund excessive partying, expensive real estate, bribery, money laundering, and on plenty of other personal pleasures. All right under the nose of well-regulated financial institutions and other highly wealthy individuals. Much of Low’s fraudulent success was made possible due to the cracks of corruption within global financial institutions, and powerful global figures willing to partake in unethical or illegal business practices. Which ultimately played a large role in Jho Low’s ability to stay undetected for as long as he did, and get away with as much as he did. The most shocking aspect that “Billion Dollar Whale” depicts, would be the well-researched and in-depth examination of the fragile and easily manipulated global financial system, along with the levels of greed individuals are willing to go to. Scandals within the financial sector have been occurring for centuries, but the story of Jho Low and 1MDB clearly exposes key flaws within the current global financial system that have been continuously misused, along with supplying important lessons that can be studied in order to prevent similar events occurring in the future.
The current fragility of the global financial system and institutions allows for many of persisting flaws to be exploited by individuals, which is a prominent theme throughout the book. Jho Low was able to steal over 10 billion dollars under the nose of a well-established financial system, all the while remaining to appear legitimate to the public eye. He utilized foreign banks, offshore accounts, shell companies, and other corrupt business partners to disguise his financial crimes — all of which are still capable of being utilized by individuals to conduct similar actions. The story exposes very detailed descriptions of how Low achieved the levels of fraud that he did, which heavily relates to several other financial scandals that have occurred throughout history. For example, the Wirecard scandal that occurred in 2020 presents striking similarities to the case of 1MDB. Wirecard’s scandal was composed of fraudulent financial reporting and inadequate external auditing from the well-established firm of EY (Storbeck 2). This allowed Wirecard to incur profits that weren’t properly earned, and do so for a prolonged amount of time. This ultimately resulted in the loss of 1.9 billion dollars, leaving investors and shareholders with immense losses and the eventual arrest of their CEO Markus Braun.
Bernie Madoff’s Ponzi Scheme is another financial scandal that correlates heavily to “Billion Dollar Whale”. Madoff swindled thousands of big-time investors with the use of his Ponzi Scheme, where he stole billions of dollars by posing as a credible financial manager and appearing to lead a legit investment firm. Through the connections and credibility Madoff established, he was able to steal billions of dollars while being undetected — similar to Jho Low. Madoff’s experienced knowledge of financial institutions and his accessibility to them allowed him to conduct his corruption behind closed doors while maintaining an illegitimate positive public perception. Clearly, financial systems and institutions have been repetitively abused over the course of time, and are still very susceptible to corruption. With such few individuals having strong enough influence to inflict practical and ethical changes within the industry, the fragility of financial institutes remains a prevalent concern. In order to negate the constantly abused flaws, the foul practices demonstrated must be examined and supported with follow-up changes, or similar white-collar crimes will continue to occur in the future and are practically inevitable.
Another underlying theme of the story would be deception, corruption, and greed and their roles in people’s behavior. As depicted in the story, there were plenty of people in power who played into Jho Low’s scandal, even when knowing that Jho Low’s actions seemed suspicious. Some of the most prominent people involved would be Najib Razak, the Prime Minister of Malaysia, Tim Leissner who was an executive at Goldman Sachs, and the other individuals who were a part of Low’s organized group of workers. A large part of these individuals even getting involved with 1MDB was through their own levels of greed and corruption. Razak wanted to remain in power as Prime Minister, knowing he would need large amounts of capital in order to pull off his objectives. This led him to engage in deceiving, corrupt, and greedy behavior, for he knew he would be able to provide Jho Low with the cover for 1MDB as long as the money kept coming in. Tim Leissner also showed his traits of greed and deception through primarily wanting to get involved with 1MDB based off the desire to build his reputation by reeling in clients and increase Goldman’s revenue and profit. He only cared about making money and it’s shown through his actions of partaking in bad business.
“Billion Dollar Whale” does an excellent job of shining a spotlight on the powerful influence of greed, and the lengths people are willing to go to in order to satisfy it. Legitimate and well-established companies such as Goldman Sachs and other international banks involved in 1MDB’s scandal are primarily due to individual corruption and greed. Goldman’s executive wanted to make more money and generate more revenue, while international banks wanted to keep large amounts of finance flowing through their business. When greed toward finance begins to take such strong precedence over legal and ethical practices, it raises concerns about other massive investment funds and their true intentions and motives. Especially when so many credible financial institutions are willing to turn a blind eye to suspicious behavior, playing into the inclusivity of the financial sector and their attempt to maintain the influence they hold. For example, Deloitte audited 1MDB’s financial statements for 2013 and 2014, before it resigned as the fund’s auditor in early 2016. It had taken over after 1MDB fired its earlier auditors, KPMG and Ernst & Young (Reuters 1). Highlighting the multiple highly accredited financial firms that had the chance to see and expose 1MDB for what it was, but instead chose to keep quiet. Mostly due to the bribery committed by Low, and the banks’ motives of financially profiting over doing what is right. Deception and greed from individuals or entities in positions of power have shown to be very detrimental over the course of history and should be closely scrutinized in order to limit the number of scandals going forward.
There are many lessons that can be learned from this story, along with the highlighting of issues within the financial system that warrant scrutiny and change. The first lesson would be that large financial activity such as the case in “Billion Dollar Whale” should be subject to more scrutiny and whistleblowing. Numerous individuals caught on to the crimes that Low was committing early on, however, feared coming out about them due to the mass amounts of influence and power Low possessed. Even big-time auditing firms bit their tongues when dealing with 1MDB, showing that entities with such large amounts of finances should have to answer to an organization as strong itself. The robbery of billions of dollars should not go unnoticed for as long as it did in the case of 1MDB, showing clearly that there are not adequate security measures in place to prevent scandals such as this from happening. These security measures should be addressed and modified accordingly based on the loopholes that were abused by individuals such as Jho Low. Over time, the financial system has seen slight changes in its structure as a result of the numerous scandals nevertheless. One of the biggest changes in the financial landscape is sharply curtailed international activity (McKinsey & Company 4). Meaning less money flowing across country borders, and a lower chance for independent financial crises ricocheting across the globe. This, however, does not resolve the issues surrounding offshore banking accounts and foreign financial institutions, which were also used by Jho Low throughout the book. There are still plenty of wealthy individuals who utilize these flaws in the global financial system to invade tax policies and mask shady financial behavior.
This leads to the next lesson regarding the slippery slope created regarding financial regulation, due to countries having different financial laws or being in contention with one another. As exposed by Jho Low in the story, it was seamlessly easy to defraud foreign economies and transfer funds across borders due to countries having different financial policies. Even obtaining loans from foreign countries through his use of deception and connections. With this being as disastrous as it was, global financial institutions have since caught on and have lowered foreign loans and other claims by $7.6 since 2017 (McKinsey & Company 5). Fluctuating over time as economies continue to grow and mature. I believe that more global financial policies will have to align before assurance can be made that money will be closer regulated moving across borders, but it is a step in the right direction.
One of the most important lessons provided by the book would be, to be careful of who is trusted with financial power. As depicted throughout the story, it’s hard to catch and stop financial crime once it’s underway. Individuals such as Jho Low gained the trust of his peers and connections, which he ultimately used to fuel the bulk of his crimes. All the while not getting caught until the damage was undoable. A strong counter to this would be to conduct ample due diligence when selecting an individual to enter positions of power, to attempt to diminish corrupt individuals from assuming the positions to begin with.
The story told within “Billion Dollar Whale” is most certainly an intriguing and eye-opening one. The accuracy and well-detailed account of the events that happened during the life of 1MDB, provide insights into the financial sector that are not commonly seen. Providing value that goes well beyond just a good story. With the event of the 1MDB scandal being just a few years in the past, it will be very interesting to see if any large scandals similar in its nature occur in the near future. The financial system will only become more advance and complex, and if the flaws that were exploited as they were in the book are not addressed, acts of prevention and surveillance will always be one step behind. Jho Low may have committed one of the most astonishing financial heists in modern history, but due to the current state of the financial system, one day someone else will likely join him in the ranks of individuals who have committed heinous financial crimes.
Bibliography
Lund, Susan, et al. “A Decade after the Global Financial Crisis: What Has (and Hasn’t) Changed?” McKinsey & Company, McKinsey & Company, 4 Sept. 2018, https://www.mckinsey.com/industries/financial-services/our-insights/a-decade-after-the-global-financial-crisis-what-has-and-hasnt-changed#part4.
Reuters Staff. “Malaysia Probing Audit Firms’ Conduct in 1MDB Scandal.” Reuters, Thomson Reuters, 26 Jan. 2019, https://www.reuters.com/article/us-malaysia-politics-1mdb-auditors/malaysia-probing-audit-firms-conduct-in-1mdb-scandal-idUSKCN1PK079.
Storbeck, Olaf. “EY and Wirecard: Anatomy of a Flawed Audit.” Financial Times, 25 Oct. 2021, https://www.ft.com/content/bcadbdcb-5cd7-487e-afdd-1e926831e9b7.
Wright Tom and Bradley Hope. Billion Dollar Whale : The Man Who Fooled Wall Street Hollywood and the World. First edition First ed. Hachette Books 2018. INSERT-MISSING-DATABASE-NAME https://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=1714498. Accessed 9 Nov. 2022.
