The stunning collapse of cryptocurrency brokerage giant FTX is seen by many as a warning shot that the federal government must enter the digital currency arena with severe restrictions for the protection of consumers.
Just a glance at those leading the charge reveals that the same voices who want to hurl a mountain of new mandates onto the innovative industry are the ones who champion bigger government no matter the situation.
One of the ways the media tries to minimize the FTX fraud is to put it in the “crypto is sketchy” bucket. Actually the issue is the misappropriation of customer deposits on an exchange. If FTX had been trading pork bellies, orange juice or silver, the crime would be the same. https://t.co/D9roMdZ9SD
— David Sacks (@DavidSacks) November 24, 2022
Sen. Elizabeth Warren (D-MA), who never met a successful business she liked, declared her support for “stronger rules and enforcement.” Treasury Secretary Janet Yellen, who last year described inflation as “transitory,” called for “very careful regulation.”
And President Joe Biden’s White House chimed in with a demand for “prudent regulation of cryptocurrencies.”
Unfortunately, the weight of apparent fraud and greed that brought down FTX is hardly confined to digital currency. Given the same circumstances, there are few if any industries that could survive what was wrought on the firm by its inept leadership.
Corporate fraud is a destructive force. The exact business matters little if billions are being misappropriated and then tens of millions are donated to political leaders to curry favor.
Predictably and justifiably, investors are lining up to take their legal shots at now disgraced former FTX CEO Sam Bankman-Fried. And it’s not just Bankman-Fried they are targeting, but celebrity spokespersons such as NFL quarterback Tom Brady and the NBA’s Stephen Curry.
In the days before the public discovered the FTX liquidity crisis, the firm reportedly transferred $10 billion in customer credit to its sister firm Alameda Research. That’s on top of tens of millions that went into Democratic coffers.
Meanwhile, Bankman-Fried is accused of spending hundreds of millions in FTX funds on property and feeding a lifestyle for himself and his associates only known to the ultra-rich.
As for cryptocurrency, the industry operates under transparent rules that in many situations are far more open than those governing the financial industry and the halls of Congress.
Enough of those rules are already in place that would if properly enforced, bring to light the level of fraud now apparent in FTX’s shadowy dealings. What deserves attention is the mountain of cash used to buy influence and, presumably, heads turning the other way as its misdeeds grew.