The collapse of one of the largest crypto companies in the world has caused repercussions throughout the cryptocurrency ecosystem.
If the sector ignites, the writing was likely on the wall, according to Dennis Kelleher, one of DC’s most influential voices in banking and finance.
Kelleher is the co-founder and CEO of Better Markets, an independent organization that over the past decade has sought to reform and improve America’s financial system. And Kelleher, who in 2012 was targeted by the New York Times as “one of the most powerful lobbyists on financial regulatory reform”, is not a fan of cryptocurrency.
“No one should be shocked by FTX’s demise,” Kelleher wrote in a scathing tone. statement released on Sunday. “The crypto fiction was visible to anyone who wanted to see.”
Kelleher is of course referring to the dramatic collapse of FTX, one of the biggest crypto exchanges which stated bankruptcy Last week. The company’s downfall has been compared to a The Lehman Brothers Moment for the sector, arouse fears of contagion across industry and sending the value of most cryptocurrencies falls over the past week.
Kelleher said FTX’s collapse was obvious “as long as you aren’t on the FTX/crypto payroll (directly or indirectly) and don’t let FOMO and greed cloud your judgment,” but that too of investors had been influenced. by the promise of the industry and the charm of its figureheads.
“As of today, there is no valid use case for crypto, and no cult of personality or hype will change that fact,” he wrote.
Many crypto watchers were shocked by the collapse of FTX, and especially how far the once shining star of company founder and former CEO Sam Bankman-Fried had fallen. Commonly referred to as SBF, his affable demeanor and discussion of philanthropic philosophy won him many admirers.
At the center of SBF’s sprawling crypto empire was FTX, which was worth earlier this year $32 billion. But the company turned out to be a tricky house of cards that collapsed last week after a tweet from Changpeng Zhao, CEO of rival exchange Binance, helped trigger a race on FTT, a native token of FTX, which caused the value of the exchange to plummet. A few days later, the the wall street journal reported that SBF had been tap into customer funds to invest in his other company Alameda Research. FTX declared bankruptcy on November 11 and announced the resignation of SBF.
Chaos annihilated billion dollars in value at FTX, and the fiasco is not over. Over the weekend, FTX shared that it was investigating a number of “unauthorized transactions” like over $600 million was siphoned from the wallets of FTX users. A pirate is considered responsible. And as for SBF, he would have “under surveillanceby authorities in the Bahamas, where FTX is based, and could face criminal charges in the United States.
But to skeptics like Kelleher, SBF, FTX, and the entire crypto industry, it was just an illusion that people were allowing themselves to be believed in exchange for a big payout.
“FTX/SBF/crypto spent huge sums of money to ensure that many people (including smart and influential people who should have known better) had gigantic financial incentives not to understand, see or hand over question the fiction and fraud that is crypto,” Kelleher wrote. .
Kelleher described a meeting between Better Markets and SBF and his team a year ago in which the FTX founder was unable to provide satisfactory answers to “difficult factual questions.” The watchdog went on to accuse investors of failing to perform proper due diligence when it comes to crypto companies, and added that the “vision” crypto investors are being sold on is little more than “ hope, smoke and the desire to make a quick buck”.
“An anarchic industry by choice”
But 2022 has been a tough year for crypto bulls. the said crypto winter has been raging for months, and the collapse of the FTX has only darkened the outlook for the sector.
Kelleher wrote that JPMorgan Chase CEO Jamie Dimon was one of the few to share his perspective on cryptocurrency’s shortcomings, but was “bullied into silence” by other banks who “wanted to get some of the money.” ‘crypto money for themselves before the crash’.
Earlier this year, Dimon said that he doesn’t think cryptocurrencies can be called real currencies, preferring to call them “crypto-tokens”. Last year, the banker called Bitcoin – one of the first cryptocurrencies to hit the market –without valueand in 2017 he referred to the same motto as “fraudwhich was bound to “explode”.
Binance’s Zhao said last week that the crypto market will eventually “To heal“, but only if regulators stepped in to direct the industry, a view share by several other industry leaders. But Kelleher wrote that even regulation wouldn’t be enough to save the sector, as it had become a “lawless industry by choice”.
“Rather than being a legitimate business that constructively engages with regulators and abides by laws and rules like other legitimate businesses do, crypto’s chosen strategy is to fight back against regulators and regulation. , while trying to get the simplest regulator and the most favorable legislation,” he said. wrote.
Sign up for the Makeshift Features mailing list so you don’t miss our biggest features, exclusive interviews and surveys.