Felix Salmon

Conspiracy theory of the day, Foundation X edition

Felix Salmon
Nov 3, 2010 17:44 UTC

Don’t believe for a minute that the likes of Rand Paul are bringing a whole new level of nutty to upper-house politics, in contrast to staid and boring countries like the UK. Via Joseph Cotterill and Charlie Stross, here’s an astonishing speech made in the Mother of Parliaments by David James, a/k/a Baron James of Blackheath.

After opening with reminiscences of seeing “Brigadoon” in the West End, James explains that:

  • Britain needs “investment in industry”, to the tune of about £5 billion.
  • He’s going to “raise a subject that I should not raise and which is going to be one which I think is now time to put on a higher awareness”.
  • There is “a strange organisation which wishes to make a great deal of money available to assist the recovery of the economy in this country”, which he refers to as Foundation X.
  • Foundation X has “megabucks”.
  • He, Lord James, has “handled billions of pounds of terrorist money”; his “biggest terrorist client was the IRA”, who weren’t as nasty as the north African terrorists.
  • As a result, he has “an interesting set of phone numbers”, which he used to “get a reference and a clearance on foundation X”.
  • He has “come to the absolute conclusion that foundation X is completely genuine and sincere and that it directly wishes to make the United Kingdom one of the principal points that it will use to disseminate its extraordinarily great wealth into the world at this present moment, as part of an attempt to seek the recovery of the global economy.”
  • The government — in the form of both the Bank of England and the Treasury — thinks that the whole thing is “rubbish”.
  • Foundation X’s people “expect to be contacted only by someone equal to head of state status or someone with an international security rating equal to the top six people in the world”.
  • They claim to have already deposited £5 billion in British banks — a claim Treasury says cannot be true.
  • They claim to have more than $7 trillion in gold bullion — more than the standard figure of 5.3 billion troy ounces of gold which has been mined in human history.
  • They would be happy to put up £5 billion for the UK government to invest in industry, they don’t want to control the funds, and they won’t charge interest.
  • They’d also be happy to transfer £17 billion to the UK government for the Crossrail plan — before Christmas.
  • Oh, and they’ll happily fund the building of hospitals and schools, too.

Lord James always struck me as a perfectly sensible person, but he does seem to have gone completely bonkers here. But hey, at least he’s provided years’ worth of grist for conspiracy theorists around the world. Who could this Foundation X be? Might they be related to the Rosicrucians? The Knights Templar? The Illuminati Elite? The Vatican? And what terrible fate might befall James, now that he has hinted at their shadowy existence?

Update: Jon Hendry reckons — and I’m inclined to agree — that Foundation X is the Office of International Treasury Control. Certainly this sounds very similar:

Though not generally or publicly known, OITC is the largest International Institution of its kind. It is the largest single owner of gold and platinum bullion in the World, in addition to being a major owner of Bank Debenture Securities, International Treasuries, Cash and other forms of securities…

Original assets in the form of gold have been wisely and well utilized to create wealth that creates further wealth…

It should be noted that only a few persons in each country of the world are eligible to be able to verify, or undertake a verification, re: the position of Dr. Ray C. Dam (International Treasury Controller) and the Office of International Treasury Control. Such persons are limited to Kings, Queens, Presidents, Prime Ministers, with Ministers of Finance and Ministers of Foreign Affairs subject to security status and special conditions / dispensation.

Any sensible person would recognize OITC as a scam after spending about two seconds on its website. Which says to me that David James is, sadly, no longer a sensible person. He’s had a long and noble and storied career; someone should let him retire with dignity at this point.

Update 2: Someone should show James the OITC’s extremely comprehensive Wikipedia page, which details, among other things, how the OITC swindled $20,000 out of an Ecuadorean mayor. There’s also this:

Speaking at a press conference in Fiji, OITC representative Masi Kaumaitotoya told the local media: “Don’t you ever, ever, ever again report negatively on OITC or we’ll sue you for defamation.”

Update 3: James tells Tom Espiner that he has not been approached by the UNOITC, and that there were no links between Foundation X and UNOITC.


What if the ‘X’ was a a SWASTIKA… by removing the arms of the swastika you have your ‘X’
www(dot)rantrave(dotcom)/Rant/Foundation -X.aspx

Posted by Truthbrary | Report as abusive


Felix Salmon
Sep 22, 2010 15:02 UTC

Mike Arrington loves nothing more than throwing bombs, so you could be forgiven for dismissing his latest exercise in conspiracy-theorizing as little more than self-promotion. But you’d be wrong. It’s an important story, and it’s one which Arrington almost uniquely is able to write. Henry Blodget makes some good points:

It’s this sort of work that makes this new form of journalism so valuable and fun. It’s also the type of work that would make the tech industry barely notice if the mainstream media just rolled over and died.

As Mike observes, many of the folks he calls out for this meeting are friends and sources, some of whom will undoubtedly be furious at him for exposing their little game.

It takes balls to lob a grenade at your friends like that. It also takes finesse and skill (and power) to do it and still have many of those folks rushing to call you after the meeting to preserve their relationships with you.

The only other person who pulls off stunts like this one is Nikki Finke: there’s something fundamentally bloggy about this type of journalism, and it’s very hard to see how bigger, older publications will ever be able to produce anything like it.

As for the substance of the story, nothing backs it up more than Dave McClure’s desperate attempt to knock it down. McClure was one of the investors at the meeting which Arrington crashed, and his description of a meeting where “the agenda was drinks, good food, & shooting the shit” is very telling:

at the dinner, there was a fair amount of kvetching about convertible notes, capped or not, hi/lo valuation, optimal structure of term sheets, where the industry was headed, who was innovating and who wasn’t, and 10 million other things of which 3 were kind of interesting and 9,999,997 weren’t unless you like arguing about 409a stock option pricing.

It seems to me that Arrington is right, and that this dinner was an attempt by some very powerful angel investors, led by Ron Conway, to collude with each other on a number of different fronts. Quite possibly including 409a stock option pricing. Arrington’s a lawyer by training, and if he says this is illegal, then it’s worth investigating the accusation seriously, rather than trying to dismiss it in a blog entry featuring lots of swearing along with multiple font colors and sizes.

Importantly, it doesn’t matter whether the collusion is working or not. Here’s Fred Wilson:

The angel/seed market is really competitive these days, particularly in silicon valley. Valuations have risen and terms are weakening, as I’ve blogged about here recently. This is not a market suffering from collusion. It is a market where the investors wish they could inject some collusion. But they can’t and they won’t. Market dynamics, at least as they exist today and for some time to come, will not allow it.

I daresay he’s right about all of this. But if investors “wish they could inject some collusion”, and meet at Bin38 with the intention of doing just that, then what they’re doing is probably illegal even if it doesn’t work.

Similarly, it’s no defense against accusations of collusion to say that you were “extremely uncomfortable with the direction the conversation was going,0″ in Arrington’s words. Yes, it can be uncomfortable to break the law. Discomfort is a sign you’re doing something wrong, but squirming a little isn’t the right response. Leaving the meeting, and speaking up about it, is the right response.

I think Ryan Tate has got it right here:

Oh, San Francisco. You do not wear dark, evil plots well.

There’s certainly something pretty amateur-hour about this whole meeting. But that doesn’t mean it’s not a genuine conspiracy.

As Arrington says, “I had a quick call with an attorney this morning, and he confirmed that these types of meetings are exactly what these laws were designed to prevent.” If these men worked for public companies, you can be sure the SEC would be setting up meetings with all of them right now. Since they’re private investors, it’s not so obvious whose bailiwick this falls into, and whether anybody really has any incentive to prosecute. Maybe Arrington himself is our best hope for keeping these people at least a little bit accountable.

*Update: Ron Conway denies being at the dinner or even knowing about it. Which now makes it seem less malign. If Conway wasn’t there, then it wasn’t quite the everybody-who’s-anybody meeting that Arrington was making out to be.



Under federal law, criminal investigations would be up to the Department of Justice Antitrust Division. Civil government investigations would be up the FTC’s alley.

Assuming the collusion doesn’t work, the state of California and market participants probably wouldn’t sue under federal law – its not really worth it. There may be state antitrust laws involved as well.

Posted by AnonymousChef | Report as abusive

The NYT jumps the CDS shark

Felix Salmon
Mar 7, 2010 01:17 UTC

If Paul Krugman and others want the New York Times to be the paper of record, especially when it comes to matters economic, they’re going to have to do better than this:

Like the credit default swaps that hid Greece’s obligations, the instruments weighing on our municipalities were brought to us by the creative minds of Wall Street.

That’s Gretchen Morgenson, who ought to know better. The derivatives that hid Greece’s obligations were currency swaps, not credit default swaps.

But it gets worse. if you follow Morgenson’s hyperlink, you get to the Times Topics page on credit default swaps: the part of nytimes.com which is trying to compete with Wikipedia in terms of giving a clear overview of topics in the news. Columnists have some leeway to express opinions; the Times Topics pages should be assiduously accurate and impartial. Yet:

These instruments played a pivotal – and controversial – role in the financial crisis in the United States. Now, these swaps are emerging as one of the most powerful and mysterious forces in the crisis shaking Europe.

In essence, a credit default swap is a form of insurance. Its purpose is to make it easier for banks to issue complex debt securities by reducing the risk to purchasers, just like the way the insurance a movie producer takes out on a wayward star makes it easier to raise money for the star’s next picture.

I’m not even going to try to enumerate all the inaccuracies here. Were credit default swaps really pivotal in the U.S. crisis? They certainly brought down AIG, and a couple of smaller monolines. And they made synthetic CDOs possible — without them, the “unfunded super-seniors” which did so much damage to many huge banks could never have existed. But they weren’t pivotal in the sense that absent CDS, the crisis wouldn’t have happened.

But we’ll give the NYT the “pivotal role” bit just because it’s simply untrue that credit default swaps “are emerging as one of the most powerful and mysterious forces in the crisis shaking Europe”. (Even assuming there is a crisis shaking Europe.) In what way, exactly, are CDS emerging as particular powerful in the latest Eurocrisis? CDS volumes on Greek debt are a fraction of the total amount of debt outstanding, and certainly no sovereign has written huge amounts of credit protection, thereby racking up enormous contingent liabilities, in the way that AIG did. In fact, European sovereigns aren’t players in the CDS market at all.

In order to believe that CSD are “shaking Europe”, you have to believe that when one market player buys sovereign credit protection off another market player, in a transaction both sides think they’re going to make money on, finance ministries across the continent start to tremble. It’s silly. Sovereign credit spreads have moved up and down in sometimes-dramatic fashion for decades, long before CDS were even invented. And they will continue to do so even if CDS are banned. And there’s no indication whatsoever that volatility in European credit spreads is any higher now than it would have been absent the CDS market. Indeed, there’s a colorable case that the opposite is true, and that the ability to hedge one’s exposure in the CDS market has made the European sovereign bond market less volatile.

As for the NYT’s idea of the “purpose” of a CDS, all I can say is that I have no idea whatsoever where they got that one from. At least on the CDS/Greece connection, you can see how various European politicians love to be able to blame Goldman Sachs rather than themselves for their woes. But this just makes no sense at all. What “complex debt securities”, exactly, can banks issue more easily if CDS reduce the risk to purchasers? Presumably we’re not talking about simple bonds and loans here, since they’re not complex at all. Is the idea that banks somehow help companies issue debt bundled with CDS insurance? I’ve seen a few monoline wraps in my time, but nothing like that.

In any case, by putting all this garbage on its Times Topics pages, the NYT has pretty much given up any hope of having the tiniest bit of credibility in the debate over CDS. The WSJ might be sensationalist, but I haven’t ever seen it go this bad.

(A big hat-tip here to Anal_yst, who writes faster and meaner than I do, and to @taste_arbitrage.)


Yebbut, imagine how much better the NYT will be when they have a paywall…

Then imagine how much better CDS could be without regulation holding back the worst Yep, you’re getting warmer.

Posted by HBC | Report as abusive

The Sith Lord revealed!

Felix Salmon
Jan 13, 2010 14:29 UTC

Thousands of people have wondered over the years who on earth Overstock CEO Patrick Byrne was talking about when he started muttering darkly about a “Sith Lord” orchestrating a devious conspiracy of short-sellers. Well, Max Abelson has finally found out who it is, from Byrne’s lieutenant Judd Bagley:

The Sith Lord turns out to be Sith Lords. “It’s Steven Cohen and Mike Milken, though I’ve never said that to a reporter,” says Patrick Byrne, Overstock’s CEO.

So there you have it: one guy who makes most of his money from high-frequency algorithmic trading, and another guy who’s pretty much a full-time philanthropist at this point. But maybe those public profiles are just covers for their nefarious conspiracy!

A bit further down in the piece, Patrick Byrne flouts Regulation FD by telling Abelson that Overstock is about to report its first annual profit. I wonder which accounting firm will ratify them.



As an alleged member of Byrne’s delusional conspiracy fantasy, I have good information that REAL Sith Lord is a cute stripper named Molly.

http://www.businessinsider.com/meet-the- sith-lords-2009-12#sam-e-antar-new-york- ny-20

Sam E. Antar

Posted by SamAntar | Report as abusive

“Larry Bergman”, Overstock’s sock-puppet

Felix Salmon
Dec 12, 2009 18:35 UTC

Here’s the friend list of “Larry Bergman”, the Overstock-financed sock-puppet who helped to generate the notorious list of friends of those who are critical of crazy Overstock CEO Patrick Byrne. Gary Weiss has the details of exactly how that list was generated; although “Bergman” never asked me to be his friend, he friended a few friends of mine, and that’s all he needed to see my own friends list.

The funniest part is that “Bergman” claimed to work at Goldman Sachs, and to have the email address sellrshort@gmail.com. You really can’t make this stuff up, but the problem is that public ridicule has no effect on these people. I guess they’re a bit like David Zinczenko that way.

Update: “Larry Bergman” has now been removed from Facebook, but Judd Bagley, his puppetmaster, has popped up on TBI, saying that he was “a composite” and “a simple labor-saving device”.


It seems a lot of people in the mass media are blindly following the Gary Weiss version of the story without fully understanding what transpired. Gary Weiss just rants repeatedly about how Patrick Byrne “crazy” but everything that I’ve heard and read from the guy seems to make sense and there is a lot of evidence to support him. Gary Weiss on the other hand clearly has a history of trying to push his agenda in the media, on Wikipedia, and with industry insiders. Historically, the bulk of evidence I’ve been able to find on Mr Weiss is that he clearly lives in his own fantasy world where personal attacks instead of facts rule.

Posted by d_duder | Report as abusive

Strange bedfellows: Jon Stewart and Patrick Byrne

Felix Salmon
Nov 12, 2009 22:13 UTC

Remember the Jon Stewart interview of Jim Cramer where Stewart pulled out a secret weapon to unleash upon his unsuspecting guest?

Stewart repeatedly said Cramer wasn’t his target, but aired clip after clip of the CNBC pundit.

“Roll 210!” announced Stewart, like a prosecutor. “Roll 212!”

Most were from a 2006 interview not meant for TV in which Cramer spoke openly about the duplicity of the market.

No one’s entirely sure where Stewart gets his video clips. But the source for these ones has now outed himself, and it’s none other than crazy short-selling conspiracy theorist Patrick Byrne.

“I supplied a certain video of Jim Cramer to a certain comedy show, that was used in revealing and exposing Jim Cramer,” said Byrne to the WSJ’s Julia Angwin in an interview.

Which is all well and good when it’s used to take down a blowhard like Cramer. But let’s hope that Stewart and his researchers are using Byrne only as a useful source of video. It wouldn’t be good if they were talking to him about the markets more generally.

(Via Weiss)


Interesting…James Chanos used to(?) work for Deutsche Bankhttp://en.wikipedia.org/wiki/James_C hanosBut this isn’t a real Sith Lord is it? This is a billionaire scapegoat?