Cryptocurrency exchange FTX imploded in November. The company and its founder Sam Bankman-Fried (SBF) attained incredible notoriety in a short time and a $32 billion valuation before the bankruptcy.
Does the collapse demonstrate problems with markets or government regulation of markets?
Details continue to emerge. I will assume that FTX was basically a scam, based on a statement by the court appointed supervisor, John Ray, who has supervised numerous bankruptcies including Enron: “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy information.”
How did the fraud occur? Reportedly two main channels. First, investors’ deposits with FTX were lent to Alameda Research, another SBF company, without customer knowledge or approval. Second, FTX also issued its own cryptocurrency, called FTT, which they mostly held but purchased a small quantity at a very high price. Based on these purchases, FTX claimed the FTT were worth billions and then borrowed against them.
Is this just the most recent incarnation of the evils of greedy capitalism? Greed appears an inaccurate culprit here, given SBF’s advocacy of “Effective Altruism” and hundreds of millions of dollars of donations to charitable causes favored by the political left and Democratic campaigns and PACS. Perhaps then FTX represents the evils of “woke” capitalism.
This appears like another example of a person exploiting…
