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A Ripple executive says there is an important lesson from the collapse of crypto exchange FTX that he “can confidently say will not be learned.” The executive added: “Regulation that punishes after the fact will not catch it. Neither will investor due diligence.

A Lesson From FTX’s Collapse That Won’t Be Learned

Ripple Labs CTO David Schwartz shared his thoughts on the collapse of cryptocurrency exchange FTX in a series of tweets on Monday. FTX filed for Chapter 11 bankruptcy the 11th of November.

While noting that several lessons should be learned from the FTX fiasco, the Ripple exec said:

There is one important lesson that is really quite obvious in retrospect that I can confidently say will not be learned.

He explained, “If you hold billions of dollars of other people’s money for indefinite periods of time, the temptation to speculate with those funds is irresistible if there are no verifiable controls that make such holding virtually impossible risk, nothing else will suffice. ”

Schwartz pointed out:

A regulation that punishes after the fact will not catch it. Neither did investor due diligence. Of course, many people will say it could happen, and probably will happen, but they will be reprimanded with accusations of sowing FUD or disrupting a system that makes people money.

“Things like this will always happen unless it can’t happen,” he stressed. “The temptation is irresistible. This is one of the most important lessons of FTX. But most people will actively choose not to learn this lesson because of, among other things, the elephant in the room.

FTX is currently under investigation by a number of authorities around the world. In the United States, the Department of Justice (DOJ), the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are investigating exchange for alleged mismanagement of client funds, among other charges. TurkeyFinancial Intelligence Unit has also launched an investigation into FTX and the Bahamian The securities regulator attempted to seize cryptocurrencies from FTX.

Ripple Labs is currently engaged in a lengthy lawsuit with the SEC. The securities regulator sued the company, its CEO Brad Garlinghouse and co-founder Chris Larsen over the sale of XRP, claiming that the encryption token is a security. Garlinghouse awaits a response within the first semester 2023. Ripple’s CEO recently said that the crypto industry will be stronger after the FTX fiasco if we continue to focus on transparency and trust.

What do you think of Ripple’s CTO comments? Let us know in the comments section below.

Kevin Helms

An economics student from Austria, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests include Bitcoin security, open source systems, network effects, and the intersection between economics and cryptography.

Image credits: Shutterstock, Pixabay, Wiki Commons

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