Dazed and confused
I have been trying to follow the story of FTX, the third largest crypto exchange, and I have to say I am still convinced that it is all a big legal scam.
The failure of FTX has supposedly robbed millions of creditors and is said to be the third largest corporate bankruptcy of all time.
Yet, the founder of the company, Sam Bankman-Fried, has not yet been charged with anything but has agreed to testify before congress without being subpoenaed.
It is still not known if Bankman-Fried will show up in Washington in person or testify remotely from the Bahamas where he been since declaring bankruptcy. A new report is out that says Bankman-Fried will testify from his home in the Bahamas — surprise, surprise.
According to a story from CNBC, their contributor Kevin O’Leary lost $15 million dollars.
I can’t say as I feel sorry for these people because crypto currency for people like me who are not financially savvy was always a lot of hooey. Who buys money online, which most of us unsavvy finance people would not allow our children to do and then sit back waiting for the millions to roll in?
According to the dictionary crypto means hidden or secret. That makes sense because the money that investors sent to FTX is now hidden and secret.
As you know, I don’t usually support government involvement in business but in this case maybe a little oversight would have been appropriate.
But then Bankman-Fried moved his headquarters to the Bahamas where there is even less oversight than in the U.S.
In an email that quotes Josh Peck, a wealth manager and founder of TrueCode Capital, this is what why FTX collapsed: “First, the crypto exchange FTX suspended withdrawals on November 8, which sent ripples through the market as investors were reasonably concerned about whether the third-largest crypto exchange was going to survive the day. Their corporate token, FTT, which investors use for trading on the FTX exchange to receive lower fees, dropped by 75% as investors sought to move their money off the platform and the small fee discount for trading using FTT was outweighed by the declining value of the token and the increased likelihood of total loss by continuing to hold it. Much like the Terra/LUNA tokens earlier this year, it is possible for FTT to become valueless in days.
“Second, the crypto derivatives exchange, Deribit, also suspended withdrawals after they fell victim to a hack of their crypto bridge. The bridge is a workaround some firms use in an attempt at interoperability between tokens in different markets, but this bridge is not as secure as the actual blockchains. Virtually all crypto derivatives, many DeFi projects and a large percentage of Web3 projects are exposed to this crypto bridge problem, so there is little reason to expect these attacks to cease. They are too profitable for cybercriminals to ignore.”
That’s clear as mud. Although I’m sure those involved in cryptocurrency get it. Or do they?
In the end, you must admire the moxie of Beckman-Fried and other crypto currency companiess who have made fortunes selling money that only exists digitally or virtually to millions of people.
Bernie Madoff is probably sitting bolt upright in his grave saying, “Why didn’t I think of that?”