Playing in the gray

Playing in the gray

By Kimberly Kay Hoang

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How do global elites capitalize on risky frontier markets? They master the art of playing in the gray.

Playing in the gray is a meticulous endeavor. It means finessing the gray areas between legal and illegal activity, front-running or exploiting weak states’ regulatory systems, and creating complex—but highly opaque—webs of financial professionals. I dub the result, in which the world’s ultra-wealthy mitigate the criminal and reputational risks of playing in the gray through lavishly compensated intermediaries, spiderweb capitalism.

Will, a 42-year-old Vietnamese German, runs a “family office” based in Singapore. With more than $100 million in assets under management, his financial firm makes strategic investments in the frontier markets of Southeast Asia. Their portfolios are expansive—their money backs projects in economic sectors from banking and consumer products to education, healthcare, infrastructure, technology, and telecommunications.

Frankly, Will told me in an interview, the whole operation was a maze, even to him. He’d lost count of the number of offshore structures the firm has set up for each of its investments. The family’s main fund is domiciled in Guernsey, but the majority of its subsidiaries are housed in the Cayman Islands to secure tax-exempt status. Others are set up in Singapore, with onshore operations in Vietnam, Cambodia, and Myanmar. Those taxes remain low because the money distributed from the offshore vehicles to Vietnam mainly covers operational expenses, and therefore does not return a profit. The profit is instead booked in Singapore when the firm sells shares based on a local valuation (separate from the “paper company” that owns the onshore operations in Vietnam). All this was legal, Will insisted.

Still, none of these structures appeared anywhere in the Panama Papers, a massive leak of 11.5 million documents that exposed financial information of many global elites, published by the International Consortium of Investigative Journalists (ICIJ) in 2016. Will had checked personally. I, too, scoured the documents and found nothing. Instead, his operation appeared in the form of a “foundation” created by Will’s local partners in Vietnam in order to pay small bribes to local government officials. Alongside veiled “donations” to foundations tied to the “social impact issues” important to incoming political leaders, the foundation paid “consultancy” fees to remain close to fixers and government officials. It was the expedient way to ensure that the funds’ managers could avoid being pushed out of their businesses through what they characterized as unsubstantiated charges of money laundering.

The whole thing was “gray,” Will said, because while they were making investments in firms said to promote education, women’s empowerment, and human capital development, unspecified amounts were regularly siphoned off the top. As long as the firm could demonstrate impact, and government officials didn’t get too greedy, he saw it as a win-win for all parties involved.

Importantly, neither Will’s name nor that of his family office in Singapore was listed anywhere in the official documentation. They were not listed as the fund’s directors or shareholders. Those names belonged to Vietnam-based “relationship managers,” the generously paid “fixers” who effectively assumed the considerable risks associated with carrying out bribes.

I was astounded that Will was so forthcoming. He knew full well that anything he revealed was likely to end up in my book; still, he was utterly confident that his tracks would be covered. His involvement was well-hidden within the broad webs of stealth capital.

Spiderweb capitalism tells a story about massive financial webs built by a group of social spiders—namely, the ultra-wealthy and their financial intermediaries, the highly connected and compensated professionals who set up the complex structures that enable wealthy individuals to move money across borders, shift legal geographies through offshore vehicles, build relationships with political elites, and make money by playing in the world’s legal, financial, and political gray zones.

Make no mistake, spiderweb capitalism isn’t only happening “over there,” in small countries and economies like Vietnam and Myanmar. As I pressed interviewees on their offshore structures, they commonly took pains to impress one fact: “The biggest gangsters on the block are in the United States.” Indeed, as my colleague, business school professor Hal Weitzman, finds, the United States espouses transparency, clear rule of law, and anti-corruption stances, all the while serving as one of the world’s largest “domestic tax havens” for US companies and wealthy individuals as well as an “offshore jurisdiction” for those beyond its borders.[1] Playing in the gray goes all the way to the top in the US, where we find former President Donald J. Trump’s personal attorney Michael Cohen using a shell company registered in Delaware to receive payments from a firm linked to a Russian oligarch.[2] He chose well, as Delaware is an exemplary case of blurring the boundaries between legal and licit and illegal and illicit.

Exposing and unraveling spiderweb capitalism is the first, crucial step to begin thinking about how we might disrupt the fiscal predators so heavily invested in ensnaring and draining resources from governments, corporations, and individuals alike. For the prey to fight back, we must become able to spot predatory traps.

Kimberly Kay Hoang is an Associate Professor of Sociology and the College at the University of Chicago. Her most recent book is Spiderweb Capitalism: How Global Elites Exploit Frontier Markets.


[1] Weitzman, Hal. (2022). What’s the Matter with Delaware. Princeton, New Jersey, Princeton University Press.

[2] Woodman, S. (2018). Michael Cohen scandal a reminder that the U.S. is a tax secrecy paradise. International Consortium of Investigative Journalists. Washington, DC.