Slate Money – The "We’re Not Drunk, We’re Multi-Billionaires" Edition

Release Date: September 22, 2018
Host: Felix Salmon (Axios)
Co-hosts: Anna Szymanski, Emily Peck (Huffington Post)
Guest: Tom Wright (Wall Street Journal, co-author of Billion Dollar Whale)

Episode Overview

This episode dives into the high-profile, almost unbelievable saga of Jho Low—a Malaysian financier at the center of the 1MDB scandal—as chronicled in Tom Wright's book, Billion Dollar Whale. The panel explores the intricate world of sovereign wealth funds, the mechanics of modern financial fraud, the role of Western financial institutions in enabling global corruption, and the personal excesses and celebrity connections that color Low’s story. The episode closes out with a discussion of the China-US trade war and a rapid-fire "Numbers Round" highlighting underreported stories and statistics from global business and politics.

Key Discussion Points & Insights

1. Jho Low and the 1MDB Scandal

• Jho Low’s Rise:
  • Noted as a "master networker", Jho Low leveraged connections from Wharton to insert himself between powerful investors, especially linking affluent Malaysians and Middle Eastern sovereign wealth funds.
  • “He could go into a room and he could figure out...what the person sitting opposite him could do for him and what he could do for them.” (Tom Wright, 02:27)
• Was Jho Low a Real Billionaire?
  • Raised philosophical/convenient point—if you steal a billion, are you a billionaire?
  • Low’s family was wealthy (tens of millions) but “he certainly didn’t have billions of dollars” until he orchestrated financial thefts. (Tom Wright, 03:55)
• The “Heists”:
  • The panel describes Low’s actions as outright heists, notably the 2009 theft of $700 million overnight and subsequent multi-billion-dollar frauds using Malaysian sovereign fund 1MDB.
  • Main mechanism: creating fake sovereign funds (with just a slight name variation), opening offshore bank accounts in the British Virgin Islands, and funneling cash.
  • “We break it into the three heists...the first one was in 2009, he took $700 million overnight.” (Tom Wright, 05:26)
• Western Financial Institutions’ Role:
  • Institutions like Goldman Sachs facilitated questionable bond placements for 1MDB, ignoring internal red flags due to enormous profits (~$600MM in fees).
  • "The reason that they didn’t do anything...was because they made $600 million or 10% on these deals which also made no sense...one of the biggest paydays in the world." (Tom Wright, 07:19)
  • The damage extended beyond the main banks, implicating auditors, law firms, and auction houses in enabling money laundering.

2. Sovereign Wealth Funds – From Growth Engine to Kleptocratic Piggybank

• Definition Confusion:

  • Traditional sovereign wealth funds (e.g., Norway, Singapore) use surplus national wealth to invest globally.
  • 1MDB and copycats issued debt to raise capital, then used it for speculative or outright corrupt investments, questionable as public policy.
  • "There are sovereign wealth funds and there are sovereign wealth funds...Then there’s these funds that are just sort of set up to be huge pots of money that can be misused." (Tom Wright, 10:58)

• Systemic Enablement:

  • Weak governance and lack of business oversight permitted these funds to morph into political slush funds, notably in emerging markets.
  • Western advisers, seeking profit, played a pivotal role in mainstreaming this practice, despite obvious risks and signs of malfeasance.

3. The Culture of Global Capitalism & Enablers of Corruption

• Opaque Flows, Lack of Scrutiny:

  • While ordinary people face scrutiny for moving small amounts of money, elites like Jho Low transferred hundreds of millions with almost no resistance.
    • “If you or I tried to move $10,000 across international borders, we’re going to get asked a lot of questions. Right?” (Tom Wright, 22:03)
  • The art world, luxury real estate, and Hollywood (e.g., financing for The Wolf of Wall Street) became effective vehicles for washing illicit funds.

• Celebrity Connections & Absurd Excess:

  • Low's social circle included Paris Hilton, Kanye West, Leonardo DiCaprio, and Miranda Kerr. Lavish spending and extravagant gifts were routine.
    • Miranda Kerr, for example, received "$8 million worth of diamonds, which she then has to, like, give up to the department...voluntarily gave up." (33:24)
  • DiCaprio’s Wolf of Wall Street was funded using stolen 1MDB money. "He goes on to finance that with the money from this, from this heist." (Tom Wright, 20:53)
  • Low’s assets included a $50MM yacht, high-end art, and ambitions to buy massive LA mansions.

• Legal Pushback:

  • Enforcement actions are underway in the US, Singapore, Switzerland, and Malaysia, with asset seizures (e.g., yachts) and ongoing criminal investigations against both Asian and Western participants.
  • Chris Christie was named as part of Jho Low's sprawling legal team—much to the hosts' disbelief.
    • "Chris Christie is representing Jho Low in Jho Low's attempts to argue against the assets." (Tom Wright, 24:04)

4. Political Accountability and Hope for Reform

• Malaysian Fallout:
  • The 1MDB scandal led to the ouster of PM Najib Razak in 2018, and energized anti-corruption sentiment in Malaysia.
  • "People care. People are actually pushing, people are going to jail. People are having massive fines. People are getting pushed out of power. And I actually think in a way this is a good thing." (Anna Szymanski, 27:35)
• Global Context:
  • Compared to the US, the panel notes the importance of institutional checks and balances in limiting kleptocracy—acknowledging that the situation could be more precarious if not for American legal and political structures, despite signs of pressure and attempted influence.
    • "Reading about Malaysia and Najib just really drove home for me how lucky we have been in the United States in terms of not having a kleptocrat in charge..." (Emily Peck, 28:07)

5. The China-US Trade War: Underappreciated Risks

• Scope and Risks:

  • Half of China’s exports to the US (~$250B) subject to new tariffs, set to rise further in January.
  • Short-term effects are muted in the US thanks to robust growth and capital inflows, but there have already been impacts on Chinese equities and the yuan.
    • "Right now the US is like the only game in town." (Anna Szymanski, 35:15)
  • China’s response: cautious currency devaluation, easing domestic credit in response to slower growth, but little appetite for a full-blown currency or bond war.

• Policy Rationales & Confusion:

  • Trump’s fundamental misunderstanding of trade (“Trade is bad.”, reportedly scrawled on a policy document) and obsession with tariffs are pointed out as a dangerous oversimplification.
    • “Trump is reading some document about trade and he writes in all caps on the document, trade is bad.” (Emily Peck relaying, 39:13)
  • Panel notes the American public’s limited grasp of economic concepts, making it easier for such policies to persist despite economic evidence.

Notable Quotes & Memorable Moments

• On the scale of financial fraud:
  • “This is the most amazing robbery. Like, you know, we talk about, like, bank robbers stealing millions of dollars...these are robberies of billions. And he does more than one of them.” (Felix Salmon, 05:10)
• On institutional responsibility:
  • “Goldman didn’t ask...One MDB fund asked one $3 billion bond to be deposited in a Swiss bank account. Why would a sovereign wealth fund have a Swiss bank account? Makes no sense...But the reason that they didn’t do anything about it was because they made $600 million.” (Tom Wright, 07:32)
• On celebrity excess and money laundering:
  • “Paris Hilton...Kanye West...Leonardo DiCaprio, all manner of celebrities...” (Felix Salmon, 01:44)
  • “The Geneva Freeport has better art than the Prado.” (Tom Wright, 20:02)
• On checks and balances in the US:
  • “Americans should be proud of what’s going on here. Not only do you have...when the stories about Najib first came out and he was going to be arrested, he kicked out his attorney general because...ours is holding.” (Tom Wright, 28:38)
• On the art world as a bank for dirty money:
  • “Just the way people like Jho Low, and maybe not outright thieves, buy these pieces of art for ridiculously inflated prices. And then you describe this basic putting them in storage basically in Switzerland...just waiting for the day they need to be, you know, sold.” (Emily Peck, 20:02)
• On the China trade war:
  • “We are now in a fully fledged trade war. And I feel like no one is paying enough attention to this...the entire global supply chains, you know, are going to come across and I feel like, whoa.” (Felix Salmon, 34:42)
• On the impact of tariffs:
  • “If you have a Chinese currency which is 8 to 10% weaker on the year, and you slap a 10% tariff on Chinese goods...the amount the importers pay actually remains more or less constant.” (Felix Salmon, 36:36)
• On the nature of sovereign wealth funds:
  • “There are sovereign wealth funds and there are sovereign wealth funds. You mentioned earlier, the Norway oil fund...Then there’s these funds that are just set up to be huge pots of money that can be misused.” (Tom Wright, 10:58)

Timestamps for Key Segments

• Jho Low & Master Networking Explanation: 02:27–03:18
• The “Heists” and First $700M Theft: 05:05–07:04
• Goldman Sachs’ Role: 07:19–16:01
• The Art Market & Money Laundering: 18:34–20:35
• Leonardo DiCaprio and The Wolf of Wall Street: 20:53–21:33
• Legal Actions & Chris Christie: 23:46–24:47
• Malaysia’s Political Turnover: 26:01–27:35
• Global Context of Anti-Corruption Movements: 27:35–28:38
• Comparing US and Malaysian Corruption: 28:07–30:17
• China-US Trade War: 34:42–40:34
• Trump’s Attitude Toward Trade: 39:13–41:24
• Numbers Round (Sovereign wealth funds, Danske Bank scandal, Yale clerkships): 42:48–49:41

Conclusion

This energetic Slate Money episode not only unpacks the astonishing details of one of the century’s largest financial heists but also offers insight into the shifting structures of global capitalism, the vulnerabilities of institutional oversight, and the persistent hope for reform. The Jho Low saga serves as an epic case study in how systemic rot, elite complicity, and unchecked money flows shape both emerging and developed economies—while the episode’s detour into celebrity gossip and pop finance makes these lessons all the more memorable.

For more detailed stories, jaw-dropping anecdotes, and institutional critiques, listen to the full episode or check out Tom Wright's book, Billion Dollar Whale.