Sam Bankman-Fried and the Achilles’ Heel of Crypto
https://www.nytimes.com/2023/11/08/opinion/fraud-crypto-ftx-trial.html
Molly White:
What prosecutors never focused on in the trial is the practice that had helped generate that enormous loss, which is similar to the practice that propped up FTX and Alameda.
What I’m referring to is the practice of pumping up the price of a token with no real value behind it and using that inflated valuation to lay the foundation of a business’s balance sheet or to borrow dollars. As a longtime industry watcher, I believe that same practice is still propping up vast swaths of the cryptocurrency industry today. Not only are crypto firms operating with massive undisclosed credit risk, they’ve also often managed to sidestep the kind of outside scrutiny that might have been invited by more traditional funding models. And when a business funded in this way collapses — or, as in FTX’s case, explodes because of fraud — it is the people who’ve given up their money for a whole bunch of nothing who suffer.
https://www.nytimes.com/2023/11/08/opinion/fraud-crypto-ftx-trial.html
Molly White:
What prosecutors never focused on in the trial is the practice that had helped generate that enormous loss, which is similar to the practice that propped up FTX and Alameda.
What I’m referring to is the practice of pumping up the price of a token with no real value behind it and using that inflated valuation to lay the foundation of a business’s balance sheet or to borrow dollars. As a longtime industry watcher, I believe that same practice is still propping up vast swaths of the cryptocurrency industry today. Not only are crypto firms operating with massive undisclosed credit risk, they’ve also often managed to sidestep the kind of outside scrutiny that might have been invited by more traditional funding models. And when a business funded in this way collapses — or, as in FTX’s case, explodes because of fraud — it is the people who’ve given up their money for a whole bunch of nothing who suffer.