Skip to content Skip to sidebar Skip to footer

The details of the alleged fraud were astounding, especially because Bankman-Fried was the poster boy for crypto “you can trust.” The billionaire was regularly seen in Washington squeezing flesh with regulators who bought his story. Many supported his efforts for greater regulation in the crypto world, although many others did not.

But it seems to have given Bankman-Fried a shield against proper oversight, a shield he apparently used to break every rule of corporate governance by allowing his investment firm to use money from ” depositors” to make risky and ultimately unsuccessful bets. The Securities and Exchange Commission and the United States Department of Justice are currently investigating.

Image problem

Already suffering from a “tech bro” image problem, FTX showed the industry in a negative light that even skeptics never imagined as the details of FTX’s shambolic administration grew even more incredible.

In a savage report released on Friday, FTX’s new CEO said, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial reporting as has produced here.”

John J Ray III, the administrator who oversaw the Enron fraud investigation, added: “From the integrity of the compromised systems and the flawed regulatory oversight board, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals. , this situation is unprecedented.

Ray found that many FTX entities had never held board meetings, and the FTX Group did not maintain centralized control of its cash. The report indicates that there are no precise lists of bank accounts and that little attention is paid to the creditworthiness of banking partners. Ray was unable to compile a list of those who actually worked for the FTX Group.

Meanwhile, the implications of FTX’s collapse for the industry are enormous. He has seen some centralized exchanges around the world open their books in a “proof of reserves” gesture and send emails to customers reassuring them of the safety of their assets.

Other exchanges are feeling the pain after several weeks of FTX-triggered turmoil. Either they held large swaths of the now worthless FTT token on their balance sheets. Or they used the FTX platform to hold cryptocurrency and watched their holdings evaporate.

Money rushed out of Gemini, OKX and; BlockFi and Voyager prepare for bankruptcy; and customers are unable to withdraw money from their frozen accounts.

Bubbling industry

The crypto industry itself is in turmoil. Traditionally, part of the culture has been that if you trade more than someone else, if you win the numbers game, then you deserve your prize.

But the extent of FTX’s likely deception and a seemingly deliberate strategy of using US regulators to help suck assets into the FTX platform have undermined confidence in an industry that has made it a point to s to call “a community”.

This damage was likely compounded by the main players in the FTX saga. There’s a video of Alameda CEO Caroline Ellison apparently telling an audience that she thinks “stop losses” are kinda dumb. “I just don’t think they’re an effective risk management tool,” the 28-year-old says into the microphone, before declining to describe some of her worst trades. “I don’t see the point of sharing this kind of information,” she laughs.

It also emerged that Bankman-Fried told a VOX reporter, “Yeah just PR. F— regulators,” he said in response to questions about whether his commitment to working with regulators to secure crypto was just public relations.

And asked about his commitment to philanthropy and “effective altruism”, a philosophy that encourages people to earn as much as they can to give to good causes, he replied: “I feel bad for those who get fucked by this.”

“But this stupid game we’ve woken up westerners are playing…we all say the right shibboleths and so everyone loves us.”

However, other industry players have expressed their contempt for FTX. “Even playing in cheat mode, they still lost money,” said a longtime Europe-based crypto investor. “I’ve had worse haircuts than this, but they couldn’t even win when they did the market.”

Meanwhile, governments and regulators are taking action. Australia pledged this week to introduce custody and exchange legislation that aims to prevent a repeat of the losses suffered by local customers during the collapse of the FTX cryptocurrency exchange. And he is cracking down hard on unlicensed crypto companies that offer products he considers financial products.

But, for now, that’s cold comfort to people like Blake. He’s pissed that he wasn’t fast enough to pull the cash like institutional investors who felt trouble a few weeks ago.

The fallout for him will last for years. “Losing that kind of money is pretty terrible for us,” he says of his family. “It went from a really good Christmas to a really, really, really bad one.”

Source link


Leave a comment