CANADIAN CRIMINAL CRYPTO CAPITALI$T

Crypto tycoon is Canada's richest person, but U.S. prison stay awaits

Changpeng Zhao is Canada’s richest person, but the crypto tycoon is about to spend four months inside a U.S. prison.

Author of the article:Postmedia News
Published May 08, 2024 • 

Former Binance CEO Changpeng "CZ" Zhao arrives at U.S. federal court in Seattle on April 30, 2024. PHOTO BY JASON REDMOND / AFP /Getty Images

The 47-year-old Chinese-born businessman, founder of the world’s largest cryptocurrency-exchange Binance, ranks 30th in the world with a net worth of $40.5 billion as of Tuesday, according to the Bloomberg Billionaires Index.

Zhao’s family immigrated to Vancouver in the late 1980s when he was 12 after his father, a university instructor in China, was hired by the University of British Columbia

By 16, Zhao was learning how to code and eventually attended McGill University in Montreal where he majored in computer science.

After graduation, Zhao — also known as CZ — moved to Shanghai in 2005 and founded a technology startup company that automated high-frequency trading platforms and systems for stockbrokers.

In 2013, he learned about Bitcoin and was so enamoured by its potential that he invested all of his money in the cryptocurrency.

Four years later, Zhao launched Binance and his wealth exploded. He was named one of the richest people in cryptocurrency a year later by Forbes.

However, in March 2023, a federal lawsuit was filed by the U.S. Commodity Futures Trading Commission against Binance and Zhao, which accused the company and founder of breaking rules intended to thwart money laundering operations after alleging transactions by Palestinian militant group Hamas and other suspected criminals were using the crypto exchange

Fallen Crypto Mogul Sam Bankman-Fried Sentenced To 25 Years In Prison

FTX founder Sam Bankman-Fried was sentenced Thursday to 25 years in prison for a cryptocurrency fraud that a prosecutor has described as one of the biggest financial frauds in U.S. history. His parents left the courthouse without comment.

Three months later, Zhao and Binance were also sued by the U.S. Securities and Exchange Commission, accused of 13 violations of securities rules.

Zhao resigned as Binance CEO after pleading guilty last November to one count of failing to maintain an anti-money-laundering program. He was sentenced in April to four months in prison.

Binance agreed to pay $4.3 billion to settle related allegations from the U.S. government.

“I failed here,” Zhao told a Seattle court Tuesday. “I deeply regret my failure, and I am sorry.”

Zhao also agreed to a fine of $50 million while avoiding what a U.S. Justice Department’s request for three years behind bars upon conviction.

FTX says most customers will get all money back, less that 2 years after collapse

HUNTER: Billion dollar crypto crook Scam Bankman-Fried caged 25 years

In a letter to the court, Zhao wrote that there was “no excuse for my failure to establish the necessary compliance controls at Binance.”

“I wish I could change that part of Binance’s story,” he added. “But under my direction, Binance has now implemented the most stringent anti-money laundering controls of any non-U.S. exchange, and those controls have been in place since 2022.”

— with files from the Associated Press.

CRIMINAL CRYPTO CAPITALI$M

FTX has billions more than required to repay bankruptcy victims

FTX's recovery is aided by cryptocurrency resurgence and asset liquidation

ByMudit Dube

May 08, 2024

02:26 pm

What's the story

FTX, once a leading cryptocurrency exchange, has successfully gathered billions in surplus funds following its November 2022 collapse.This unexpected financial turnaround enables the firm to fully compensate its customers for their losses under its bankruptcy plan.Newly appointed CEO John Ray announced, "We are pleased to be in a position to propose a chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors."

Asset liquidation

FTX anticipates over $16 billion in cash post asset sale

Following the sale of all its assets, FTX expects to have up to $16.3 billion in cash available for distribution, according to a company announcement.The firm's debts total around $11 billion, owed primarily to customers and other non-governmental creditors.Earlier this year, the company had approximately $6.4 billion in cash due to a surge in cryptocurrency prices, including Solana, a token heavily backed by FTX's disgraced founder Sam Bankman-Fried.

Recovery process

FTX's recovery aided by cryptocurrency resurgence and asset liquidation

In addition to the cryptocurrency surge, FTX has also liquidated various other assets such as stakes in venture capital projects like Anthropic, an artificial intelligence company.Despite comparisons to the fraudulent collapses of Enron and Bernie Madoff's Ponzi scheme, no funds will remain for equity holders once all debts and interest have been fully paid.The task of locating the company's assets and deciphering a complex network of global accounts has been undertaken by restructuring advisers.

You're 66% through

Pending approval

FTX's revised reorganization plan awaits court approval

FTX's revised reorganization plan suggests that most creditors will receive approximately 118% of their claims within two months.The plan is yet to be approved by a US bankruptcy court, with Judge John Dorsey set to consider the creditors' vote when deciding whether to approve the plan later this summer.FTX declared bankruptcy in November 2022. Its founder swindled customers and investors out of billions, using the cash for personal gain and to cover his hedge fund, Alameda Research's debts.

Done!

‘Eugenics on steroids’: the toxic and contested legacy of Oxford’s Future of Humanity Institute


Founded in 2005 and lauded by Silicon Valley, the Nick Bostrom’s centre for studying existential risk warned about AI but also gave rise to cultish ideas such as effective altruism



Andrew Anthony
Sun 28 Apr 2024

The Observer
Technology

Two weeks ago it was quietly announced that the Future of Humanity Institute, the renowned multidisciplinary research centre in Oxford, no longer had a future. It shut down without warning on 16 April. Initially there was just a brief statement on its website stating it had closed and that its research may continue elsewhere within and outside the university.

The institute, which was dedicated to studying existential risks to humanity, was founded in 2005 by the Swedish-born philosopher Nick Bostrom and quickly made a name for itself beyond academic circles – particularly in Silicon Valley, where a number of tech billionaires sang its praises and provided financial support.

Bostrom is perhaps best known for his bestselling 2014 book Superintelligence, which warned of the existential dangers of artificial intelligence, but he also gained widespread recognition for his 2003 academic paper “Are You Living in a Computer Simulation?”. The paper argued that over time humans were likely to develop the ability to make simulations that were indistinguishable from reality, and if this was the case, it was possible that it had already happened and that we are the simulations.

I interviewed Bostrom more than a decade ago, and he possessed one of those elusive, rather abstract personalities that perhaps lend credence to the simulation theory. With his pale complexion and reputation for working through the night, he looked like the kind of guy who didn’t get out much. The institute seems to have recognised this social shortcoming in its final report, a long epitaph written by FHI research fellow Anders Sandberg, which stated:

“We did not invest enough in university politics and sociality to form a long-term stable relationship with our faculty… When epistemic and communicative practices diverge too much, misunderstandings proliferate.”

Nick Bostrom: ‘proudly provocative on the page, wary and defensive in person’. Photograph: The Washington Post/Getty Images

Like Sandberg, Bostrom has advocated transhumanism, the belief in using advanced technologies to enhance longevity and cognition, and is said to have signed up for cryogenic preservation. Although proudly provocative on the page, he was wary and defensive in person, as if he were privy to an earth-shattering truth that required vigilant protection.


His office, located in a medieval backstreet, was a typically cramped Oxford affair, and it would have been easy to dismiss the institute as a whimsical undertaking, an eccentric, if laudable, field of study for those, like Bostrom, with a penchant for science fiction. But even a decade ago, when I paid my visit, the FHI was already on its way to becoming the billionaire tech bros’ favourite research group.

In 2018 it received £13.3m from the Open Philanthropy Project, a non-profit organisation backed by Facebook co-founder Dustin Moskovitz. And Elon Musk has also been a benefactor. Bostrom’s warnings on AI were taken seriously by big tech. But as competition has heated up in the race to create a general artificial intelligence, ethics have tended to take a back-seat.

Among the other ideas and movements that have emerged from the FHI are longtermism – the notion that humanity should prioritise the needs of the distant future because it theoretically contains hugely more lives than the present – and effective altruism (EA), a utilitarian approach to maximising global good.

These philosophies, which have intermarried, inspired something of a cult-like following, which may have alienated many in the wider philosophy community in Oxford, and indeed among the university’s administrators.


According to the FHI itself, its closure was a result of growing administrative tensions with Oxford’s faculty of philosophy. “Starting in 2020, the Faculty imposed a freeze on fundraising and hiring. In late 2023, the Faculty of Philosophy decided that the contracts of the remaining FHI staff would not be renewed,” the final report stated.
Torres has come to believe the work of the FHI and its offshoots amounts to a ‘noxious ideology’ and ‘eugenics on steroids’

But both Bostrom and the institute, which brought together philosophers, computer scientists, mathematicians and economists, have been subject to a number of controversies in recent years. Fifteen months ago Bostrom was forced to issue an apology for comments he’d made in a group email back in 1996, when he was a 23-year-old postgraduate student at the London School of Economics. In the retrieved message Bostrom used the N-word and argued that white people were more intelligent than black people.

The apology did little to placate Bostrom’s critics, not least because he conspicuously failed to withdraw his central contention regarding race and intelligence, and seemed to make a partial defence of eugenics. Although, after an investigation, Oxford University did accept that Bostrom was not a racist, the whole episode left a stain on the institute’s reputation at a time when issues of anti-racism and decolonisation have become critically important to many university departments.

Cryptocurrency mogul Sam Bankman-Fried after being arrested in the Bahamas in December 2022. He later received a 25-year jail sentence for defrauding FTX customers out of billions.
Photograph: Dante Carrer/Reuters

It was Émile Torres, a former adherent of longtermism who has become its most outspoken critic, who unearthed the 1996 email. Torres says that it’s their understanding that it “was the last straw for the Oxford philosophy department”.

Torres has come to believe that the work of the FHI and its offshoots amounts to what they call a “noxious ideology” and “eugenics on steroids”. They refuse to see Bostrom’s 1996 comments as poorly worded juvenilia, but indicative of a brutal utilitarian view of humanity. Torres notes that six years after the email thread, Bostrom wrote a paper on existential risk that helped launch the longtermist movement, in which he discusses “dysgenic pressures” – dysgenic is the opposite of eugenic. Bostrom wrote:

“Currently it seems that there is a negative correlation in some places between intellectual achievement and fertility. If such selection were to operate over a long period of time, we might evolve into a less brainy but more fertile species, homo philoprogenitus (‘lover of many offspring’).”
Bankman-Fried’s downfall has done little for the moral arguments put forward by the FHI and its associate groups

Bostrom now says that he doesn’t have any particular interest in the race question, and he’s happy to leave it to others with “more relevant knowledge”. But the 28-year-old email is not the only issue that Oxford has had to consider. As Torres says, the effective altruism/longtermist movement has “suffered a number of scandals since late 2022”.


‘What if everybody decided not to have children?’ The philosopher questioning humanity’s future

Just a month before Bostrom’s incendiary comments came to light, the cryptocurrency entrepreneur Sam Bankman-Fried was extradited from the Bahamas to face charges in the US relating to a multibillion-dollar fraud. Bankman-Fried was a vocal and financial supporter of effective altruism and a close friend of William MacAskill, an academic who has strong links to the FHI and who set up the Centre for Effective Altruism, where Bankman-Fried worked briefly.

It was MacAskill who was said to have persuaded Bankman-Fried a decade ago to seek to earn as much money as possible so that he could give it away. The entrepreneur seemed to follow the first part of that injunction, but then went on to spend $300m in fraudulently earned money on Bahamian real estate. His downfall and subsequent 25-year prison sentence have done little for the moral arguments put forward by the FHI and its associate groups.

If that wasn’t enough, the coup last November that briefly dislodged Sam Altman as the CEO of Open AI, the company behind ChatGPT, was attributed to company board members who were supporters of EA. Altman’s speedy return was seen as a defeat for the EA community, and, says Torres, “has seriously undermined the influence of EA/longtermism within Silicon Valley”.

All of this, of course, seems a long way from the not insubstantial matter of preserving humanity, which is the cause for which the FHI was ostensibly set up. No doubt that noble endeavour will find other academic avenues to explore, but perhaps without the cultish ideological framework that left the institute with a bright future behind it.

Biden campaign surrenders tainted crypto cash

Alexandria Jacobson, Investigative Reporter
April 22, 2024 

President Joe Biden speaks during a campaign event on April 18 in Philadelphia. 

(Photo by Drew Hallowell/Getty Images)


A joint fundraising committee for President Joe Biden returned a $50,000 donation from Sam Bankman-Fried, the disgraced CEO of now-defunct cryptocurrency exchange FTX, according to a Raw Story review of new federal records.

The Biden Victory Fund surrendered the Bankman-Fried donation to the U.S. Marshals Service in January, Federal Election Commission records indicate.

Bankman-Fried, who made his donation to Biden in 2022, was sentenced to 25 years in prison last month for stealing $8 billion from customers, which he used in part to finance contributions to politicians and political interests across the ideological spectrum.

Former FTX CEO Sam Bankman-Fried arrived at a bail hearing at Manhattan Federal Court on Aug. 11, 2023. (Photo by\u00a0Michael M. Santiago/Getty Images)

The Biden Victory Fund is composed of Biden’s reelection campaign and more than 50 other Democratic political committees. It raised more than $280.9 million between January 1, 2023, and March 31 2024, according to the FEC.

Biden’s own campaign ended March with $85.5 million in cash on hand, while former President Donald Trump, the presumptive Republican nominee, had $45 million in cash, according to The New York Times.

Biden’s campaign committee did not respond to Raw Story’s request for comment.


Raw Story first reported in April 2023 that the U.S. Marshals Service began collecting money donated to prominent politicians and political committees by Bankman-Fried and other former FTX executives — an all-but-unprecedented occurrence for the federal agency best known for hunting down fugitives.

By September, the Marshals had collected upwards of $1.35 million from more than 150 political campaigns and committees, Raw Story reported.

Now, the Marshals have collected more than $2.35 million in FTX donations, according to Raw Story’s review of a new batch of Federal Election Commission records, which include financial information from early 2024.

A spokesperson for the U.S. Marshals did not respond to Raw Story’s request for comment.

RELATED ARTICLE: Democrats surrender huge stash of FTX crypto cash

Another recent FTX-related disgorgement came from the campaign of Rep. Abigail Spanberger (D-VA). Her principal congressional campaign committee, Spanberger for Congress, sent a $2,900 donation from former FTX executive Nishad Singh.

Singh, FTX’s director of engineering, pleaded guilty in February to charges of wire fraud, securities fraud, money laundering and campaign finance violations, the New York Times reported.

Spanberger announced in November that she would not seek reelection and would instead run for Virginia governor in 2025.

Spanberger’s congressional office did not respond to Raw Story’s request for comment.


Last month the Democratic National Committee and an associated joint fundraising committee surrendered $765,000 from FTX, Raw Story reported.

Republican committees forfeited five and six-figure donations, too, including the National Republican Senatorial Committee ($109,500) and the Republican National Committee ($25,000).

Campaigns for prominent politicians ranging from House Speaker Emerita Nancy Pelosi (D-CA) to House Republican Conference Chair Rep. Elise Stefanik (R-NY) also sent the Marshals money from FTX-related executives.

Bankman-Fried donated more than $40 million to political causes during the 2022 election cycle, according to a CBS News analysis.

Crime & Crypto: How cryptocurrencies enable money laundering & terror funding

PRIMITIVE ACCUMULATION OF CAPITAL

Issued on: 28/03/2024 -

The case of Sam Bankman-Fried highlights how crypto-currency is being used more and more to commit crimes. The untraceable currency can be used for money laundering and even for financing terrorism. Siobhan Silke reports. Monte Francis speaks to Renato Mariotti, a former prosecutor in the US Justice Department’s Securities and Commodities Fraud Section.

08:15  Video by:  Monte FRANCIS

 

Fallen crypto mogul Sam Bankman-Fried sentenced to 25 years in prison

SHOULD BE 25 TO LIFE

Issued on: 29/03/2024 -

Crypto entrepreneur Sam Bankman-Fried was sentenced Thursday to 25 years in prison for a massive fraud on hundreds of thousands of customers that unravelled with the collapse of FTX, once one of the world’s most popular platforms for exchanging digital currency.

01:33 Video by:Vedika BAHL

CRYPTO CRIMINAL CAPITALI$M

Sam Bankman-Fried, the fallen wunderkind of cryptocurrency


By AFP
March 28, 2024

Samuel Bankman-Fried, founder and former CEO of FTX, faces a potential de facto life sentence after being found guilty of a massive fraud scheme 

- Copyright AFP SAUL LOEB
Thomas URBAIN

He was the face of cryptocurrency, and a young one at that — a media darling seemingly destined to unite the sector.

But the stunning rise of Sam Bankman-Fried and his FTX platform would be matched by an equally spectacular fall when it was revealed that billions of dollars of clients’ funds had been moved and spent without their consent.

After a jury in 2023 found him guilty of seven counts, a federal judge in New York sentenced Bankman-Fried on Thursday to 25 years for leading the fraudulent scheme.

Before it all came crashing down, the native Californian had amassed a fortune at one point estimated to be worth $26 billion. “Save for Mark Zuckerberg, no one in history has ever gotten so rich so young,” read a headline in Forbes, which put Bankman-Fried on its cover in October 2021.

In the span of a few months, the Massachusetts Institute of Technology graduate with a degree in physics had taken the startup he co-founded in 2019 and built it up into the world’s second largest crypto exchange platform.

He quickly became more than just a young entrepreneur, fashioning himself as an ambassador of crypto and making his first appearance in Congress in December 2021, testifying before lawmakers on the then-novel form of currency.

The public would come to know a seemingly oddball whiz kid with a mop of curly dark hair who, when not suited up for appearances on Capitol Hill, wore shorts and a T-shirt.

– Center of crypto world –

The son of two Stanford University professors, Bankman-Fried ventured outside the world of cryptocurrencies, making donations to US politicians and persuading celebrities like American football star Tom Brady or basketball player Stephen Curry to pitch FTX — endorsements for which they were richly rewarded.

The young man known as SBF would charm US lawmakers with his straight talk and vision of crypto’s future, including recommendations for an extensive regulatory regime — a position at odds with many in the sector.

He devised project after project, from a platform for people to make donations in cryptocurrency to Ukraine to a market for financial derivative products that stepped on the toes of Wall Street.

A vegan, Bankman-Fried said he believed in the concept of effective altruism — finding the best way to help other people, in particular by donating all or part of one’s wealth to charity rather than, say, volunteering at a soup kitchen.

When the cryptocurrency world lurched into crisis in the spring of 2022, Bankman-Fried billed himself as a savior, buying the troubled platform BlockFi, and shares in another company that was in trouble, Voyager.

“We take our duty seriously to protect the digital asset ecosystem and its customers,” he tweeted at the time, as some people were comparing him — barely 30 years old then — to the legendary investing guru Warren Buffett.

– Financial high wire –

But behind his reassurances, Bankman-Fried was walking a financial high wire, as revealed later in court documents and testimony.

Without their knowledge, Bankman-Fried’s team used the money of FTX customers to cover risky operations by an affiliated trading company called Alameda Research, as well as to buy posh real estate and to make political donations.

In November 2022, the crypto news outlet CoinDesk revealed that Alameda had converted a large part of its assets into FTT, a crypto token created by FTX. The news caused that currency to plummet.

Hours later Changpeng Zhao, the head of Binance, the world’s largest crypto exchange platform, announced it was selling all the FTT tokens it held, causing it to lose 90 percent of its value in a matter of days and taking the Bankman-Fried empire with it.

His fortune having vanished overnight, Bankman-Fried was extradited from the Bahamas, where FTX had its headquarters. In December 2022 he was indicted on charges of fraud and racketeering.

After five weeks of trial, the jury quickly reached a guilty verdict on all seven counts, which carry a potential maximum sentence of 110 years behind bars.

In closing arguments, the defense said their client had acted in “good faith” and was overtaken by circumstances and the financial ineptitude of close associates who testified against him to gain leniency from prosecutors.

Prosecutors portrayed the defendant as an extremely smart man consumed by greed who knew what he was doing when FTX funds were secretly funneled to his personal hedge fund.

According to prosecutors, at the time of the bankruptcy of FTX, just over $8 billion belonging to customers had vanished into bad investments at Alameda.

“Who had control? That’s the question. It was one person: the defendant,” the lead prosecutor concluded.

THE MYSTERY CONTINUES

Bitcoin not invented by computer scientist Wright: court

Agence France-Presse
March 14, 2024 

 A collection of Bitcoin (virtual currency) tokens are displayed in this picture illustration taken December 8, 2017. 

REUTERS/Benoit Tessier/File Photo

Australian computer scientist Craig Wright is not "Satoshi Nakamoto", the pseudonym used by the creator of the cryptocurrency bitcoin when it launched in 2008, a UK court ruled Thursday.

The decision follows a trial in London's High Court after the Crypto Open Patent Alliance (COPA), a nonprofit organization set up to keep cryptocurrency technology free from patents, sued Wright.

Wright, 53, has claimed since 2016 that he was Satoshi Nakamoto and the author of a white paper that unveiled what would grow to be the world's most popular cryptocurrency -- and which Thursday reached a record high.

But in his ruling handed down Thursday, judge James Mellor dismissed Wright's claims, calling the evidence for his decisions "overwhelming".

"Dr Wright is not the author of the bitcoin white paper," Mellor said.

"Dr Wright is not the person who adopted or operated under the pseudonym Satoshi Nakamoto in the period 2008 to 2011."

The judge added: "Dr Wright is not the person who created the bitcoin system... he is not the author of the initial versions of the bitcoin software."

Wright, an enigmatic programmer who has described himself as "creator of bitcoin" on social media platform X, had initiated a number of lawsuits over the issue but faced legal action brought by COPA on this occasion.

The organization brings together heavyweights in the industry, including the cryptocurrency platform Coinbase and Block, which specializes in digital payments.

Wright had yet to react publicly to the ruling.

'Win for truth'

"This decision is a win for developers, for the entire open-source community, and for the truth," a COPA spokesperson said in a statement.

"For over eight years, Dr Wright and his financial backers have lied about his identity as Satoshi Nakamoto and used that lie to bully and intimidate developers in the bitcoin community.

"That ends today with the court's ruling that Craig Wright is not Satoshi Nakamoto," it added.

The ruling could impact another lawsuit pitting Wright against 26 developers -- including Coinbase -- for allegedly infringing upon his intellectual property rights.

Earlier in the day, bitcoin struck a new record high at $73,797.

It later traded at $70,646, highlighting the volatile nature of cryptocurrency that has triggered warnings from regulators and central banks aimed at small investors.

Bitcoin has soared this year on several factors, notably being made more accessible for trading.

The launch of a new investment vehicle -- bitcoin-indexed exchange traded funds (ETFs) in the United States -- has opened up the sector to a wider public by allowing investors to bet on bitcoin's price without owning it directly.

Specialized companies such as Grayscale and Wall Street giants such as asset manager BlackRock are among those now investing in the digital token.

Haven investment?

The soaring price is also due to an impending technical four-yearly phenomenon known as halving -- the next round of which is due for next month.

This involves cutting in half the reward for "mining" bitcoin, slowing the rate at which units are created and restricting their supply.

Bitcoin is often viewed as a haven investment, helping it benefit in times of dollar weakness, such as in recent weeks with traders expecting the Federal Reserve to soon start cutting US interest rates as inflation cools.

The bitcoin rally comes at a time when cryptocurrency is struggling to restore its image after the collapse of several leading players in the sector, not least the bankruptcy of the FTX exchange platform in November 2022.

FTX founder Sam Bankman-Fried was found guilty of embezzling billions of dollars in customer deposits without their permission and bitcoin's price collapsed in the aftermath of the case, reminiscent of previous cycles of the cybercurrencies' booms and busts.

Some commentators argue that bitcoin is the work of such scope and complexity that its creation must be the result of a group of people, rather than a single developer.

80% of Australians think AI risk is a global priority. The government needs to step up

THE CONVERSATION
Published: March 8, 2024

A new nationally representative survey has revealed Australians are deeply concerned about the risks posed by artificial intelligence (AI). They want the government to take stronger action to ensure its safe development and use.

We conducted the survey in early 2024 and found 80% of Australians believe preventing catastrophic risks from advanced AI systems should be a global priority on par with pandemics and nuclear war.

As AI systems become more capable, decisions about how we develop, deploy and use AI are now critical. The promise of powerful technology may tempt companies – and countries – to race ahead without heeding the risks.

Our findings also reveal a gap between the AI risks that media and government tend to focus on, and the risks Australians think are most important.


Read more: Demand for computer chips fuelled by AI could reshape global politics and security

Public concern about AI risks is growing

The development and use of increasingly powerful AI is still on the rise. Recent releases such as Google’s Gemini and Anthropic’s Claude 3 have seemingly near-human level capabilities in professional, medical and legal domains.

But the hype has been tempered by rising levels of public and expert concern. Last year, more than 500 people and organisations made submissions to the Australian government’s Safe and Responsible AI discussion paper.

They described AI-related risks such as biased decision making, erosion of trust in democratic institutions through misinformation, and increasing inequality from AI-caused unemployment.

Some are even worried about a particularly powerful AI causing a global catastrophe or human extinction. While this idea is heavily contested, across a series of three large surveys, most AI researchers judged there to be at least a 5% chance of superhuman AI being “extremely bad (e.g., human extinction)”.

The potential benefits of AI are considerable. AI is already leading to breakthroughs in biology and medicine, and it’s used to control fusion reactors, which could one day provide zero-carbon energy. Generative AI improves productivity, particularly for learners and students.

However, the speed of progress is raising alarm bells. People worry we aren’t prepared to handle powerful AI systems that could be misused or behave in unintended and harmful ways.

In response to such concerns, the world’s governments are attempting regulation. The European Union has approved a draft AI law, the United Kingdom has established an AI safety institute, while US President Joe Biden recently signed an executive order to promote safer development and governance of advanced AI.

Read more: Who will write the rules for AI? How nations are racing to regulate artificial intelligence

Australians want action to prevent dangerous outcomes from AI

To understand how Australians feel about AI risks and ways to address them, we surveyed a nationally representative sample of 1,141 Australians in January and February 2024.

We found Australians ranked the prevention of “dangerous and catastrophic outcomes from AI” as the number one priority for government action.

Australians are most concerned about AI systems that are unsafe, untrustworthy and misaligned with human values.

Other top worries include AI being used in cyber attacks and autonomous weapons, AI-related unemployment and AI failures causing damage to critical infrastructure.

Strong public support for a new AI regulatory body

Australians expect the government to take decisive action on their behalf. An overwhelming majority (86%) want a new government body dedicated to AI regulation and governance, akin to the Therapeutic Goods Administration for medicines.

Nine in ten Australians also believe the country should play a leading role in international efforts to regulate AI development.

Perhaps most strikingly, two-thirds of Australians would support hitting pause on AI development for six months to allow regulators to catch up.

Read more: I used to work at Google and now I'm an AI researcher. Here's why slowing down AI development is wise

Government plans should meet public expectations

In January 2024, the Australian government published an interim plan for addressing AI risks. It includes strengthening existing laws on privacy, online safety and disinformation. It also acknowledges our currently regulatory frameworks aren’t sufficient.

The interim plan outlines the development of voluntary AI safety standards, voluntary labels on AI materials, and the establishment of an advisory body.

Our survey shows Australians support a more safety-focused, regulation-first approach. This contrasts with the targeted and voluntary approach outlined in the interim plan.

It is challenging to encourage innovation while preventing accidents or misuse. But Australians would prefer the government prioritise preventing dangerous and catastrophic outcomes over “bringing the benefits of AI to everyone”.

Some ways to do this include:

establishing an AI safety lab with the technical capacity to audit and/or monitor the most advanced AI systems


establishing a dedicated AI regulator


defining robust standards and guidelines for responsible AI development


requiring independent auditing of high-risk AI systems


ensuring corporate liability and redress for AI harms


increasing public investment in AI safety research


actively engaging the public in shaping the future of AI governance.

Figuring out how to effectively govern AI is one of humanity’s great challenges. Australians are keenly aware of the risks of failure, and want our government to address this challenge without delay.

Authors

Michael Noetel

Senior Lecturer in Psychology, The University of Queensland

Alexander Saeri

Research Project Manager, The University of Queensland

Jess Graham

Research officer, The University of Queensland
Disclosure statement

Michael Noetel has received funding from the Australian Research Council, the Medical Research Future Fund, Sport Australia, Open Philanthropy, and the National Health and Medical Research Council. He is a director of Effective Altruism Australia.

Alexander Saeri has received funding from the Effective Altruism Infrastructure Fund and the FTX Future Fund. He is affiliated with Good Ancestors Policy.

Jess Graham does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Regulatory tech costs can have benefits, too

Billions spent on technology to comply with regulations can pay unexpected dividends

Peer-Reviewed Publication

UNIVERSITY OF TEXAS AT AUSTIN

RegTech might be one of the biggest new industries you’ve never heard of.

The term most often refers to technology that helps companies comply with government regulations. In 2028, businesses are projected to spend $208 billion on RegTech, according to Juniper Research. That’s up from $30 billion in 2020.

While they may view these costs as highly burdensome, new research from Zachary Kowaleski, assistant professor of accounting at Texas McCombs, finds that such investments can have significant operational benefits. Examining their impact on broker-dealers, who trade securities for themselves as well as for clients, Kowaleski says, RegTech is “not just a drain on the economy.”

That’s because the investments created new potential for company data, which they could use to improve customer relations and monitor employee behavior. Although they spent 24% more on information technology, they saw 4% declines in:

• Overall customer complaints.
• Employee misconduct complaints.
• Incidents causing at least $5,000 in damages.

Having the technology in place paid off even more after the COVID-19 pandemic struck, and many employees worked from home. “Companies were better positioned to protect customers, even though supervisors couldn’t monitor employees in person,” Kowaleski says.

But RegTech didn’t help everyone, the study found. Its benefits accrued mostly to large broker-dealers who compete on scale. Its costs weighed more heavily on small companies where profits dropped the most. On average, budget increases were more than 10 times the apparent savings, Kowaleski says.

His study focused on a 2014 Securities and Exchange Commission regulation, enacted after a rash of Ponzi schemes, such as Bernard Madoff’s swindling of $50 billion from his investors.

The new rule imposed stringent reporting and audit requirements on carrying broker-dealers — those, like Madoff, who hold assets for their customers. They had to demonstrate, moment by moment, that they had adequate net capital and weren’t commingling company assets with customer assets.

The new requirements were stricter than those for non-carrying broker-dealers, who don’t hold their clients’ money or securities.

With Ben Charoenwong of the National University of Singapore, Alan Kwan of Hong Kong University, and Andrew G. Sutherland of the Massachusetts Institute of Technology, Kowaleski looked at data reported to the SEC by 3,317 broker-dealers for three years before and after the rule. The companies were both carrying and non-carrying, allowing comparisons of the rule’s effects.

Carrying broker-dealers, the study found, spent much more on RegTech than their counterparts.

• They were 16% more likely to invest in compliance software.
• Their IT-based compliance jobs grew by 10%.
• Smaller companies were hit the hardest, with budgets increasing 30% while profits fell 24%.

Although the paper doesn’t look at the rule’s central purpose of protecting customers, Kowaleski notes that it’s important. SEC rules on capitalization and segregating customer assets could have saved investors by restraining the rampant fraud at FTX Trading, the now-bankrupt cryptocurrency exchange co-founded by Sam Bankman-Fried. But because cryptocurrencies weren’t considered securities, FTX was not subject to SEC oversight.

That’s another reason that RegTech costs may appear massive and be costly to companies, Kowaleski says, “but they’re not just waste.”

“RegTech: Technology-Driven Compliance and Its Effects on Profitability, Operations, and Market Structure” is published in the Journal of Financial Economics.

 

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JOURNAL

Journal of Financial Economics

DOI

10.1016/j.jfineco.2024.103792 

METHOD OF RESEARCH

Observational study

SUBJECT OF RESEARCH

People

ARTICLE TITLE

RegTech: Technology-Driven Compliance and Its Effects on Profitability, Operations, and Market Structure