Op-ed: Why Sam Bankman-Fried did us all a favor
The Wild West of crypto has had no shortage of scandals in its short history, but the recent collapse of FTX ranks highly among the worst to have afflicted the industry.
For some, the FTX collapse was a disaster from which they will not financially recover. Those who fall into this camp may find it difficult to accept it as an experience to learn from. Nonetheless, for the industry to move forward, we still have to consider the advantages gained from this unmitigated disaster.
This calls for the pain to be absorbed with the resolve never to repeat what happened. From now on, we should all strive to carry out appropriate due diligence, avoid centralized platforms wherever possible, and sharpen our bullsh*t detectors. From this adversity, a more astute crypto investor will emerge.
WTF FTX
As the scandal broke, social media was flooded with numerous reports on the inner workings of the business. This included details on the bizarre sexual, drug-fueled company culture and the inexperience of key personnel who were unqualified to handle the vast sums that flowed into the exchange.
Even stranger was the post-resignation period when mainstream media (MSM) rallied behind SBF in a vain attempt to convince their readership that 2 + 2 = 5.
Within a short period, SBF’s character arc had flipped from quirky billionaire philanthropist to the devil sporting an afro. That fall from grace had associates, including celebrities and crypto influencers, scrambling hard to put distance between themselves and the brand.
However, what stings more is the reputational damage against an industry that was already viewed with deep suspicion by outsiders. The good work done to propel crypto forward as a viable and credible TradFi alternative has been set back temporarily.
Blockchain and cryptocurrency were supposed to be the great equalizer, solving financial inequality and corruption. Yet, ironically, with SBF at the helm, this technology became the vehicle with which to carry out fraud and manipulation.
Authorities swarming
Making matters worse, authorities now have the excuse needed to justify heavy-handed policies and far-reaching regulations.
Speculation that this was always the end goal is rampant. While this claim is unverified, it is difficult to dismiss the link entirely, considering SBF’s political pull and MSM support.
For the sake of credible stewardship, the World Economic Forum said JPMorgan and other such “responsible actors” should be handed control of cryptocurrency. Similarly, Senator Elizabeth Warren recently called on regulators to get tough with the industry to protect consumers.
On Feb. 9, the SEC said it had reached a settlement with Kraken over its staking program. The outcome would see the exchange end its staking service to U.S. customers and pay a $30 million fine.
This action did not specifically target areas such as exchange tokens or financial reporting/auditing, which were “weaknesses” that enabled SBF to carry out his alleged crimes.
Crypto Investor Adam Cochran pointed out the unusual “buddy-buddy” relationship between the SEC and FTX is all the more suspicious following the Kraken action. Cochran asserts that the SEC, under Chair Gensler, has ulterior motives to crush the industry.
“Gensler is not a regulator. He is an agent of an anti-crypto agenda, who only aims to wield his power as cudgel for those he doesn’t agree with.
So the big question then, is why didn’t FTX get this treatment?
Whose pocket is he in?”
SBF’s belated extradition to the U.S. to face charges of wire fraud, securities fraud, and money laundering does give a degree of closure. However, it seems the SEC will continue milking the “consumer protection” line until their agenda is complete.
Societal sickness
Discussing the collapse on the Bankless Podcast recently, ShapeShift CEO Erik Voorhees called people’s dependency on the system to protect them a “sickness in society.” He said no one is happy with the slimy politicians or their actions, yet many continue hoping the political process will bring change for the better.
“For many, many years, I’ve lamented that people seek protection from the state in principle. I think this is a sickness in society. It’s like a new form of religion in which people see problems that are real, and they have this appeal to this thing called democracy or government.”
Voorhees said SBF is “an advocate of that world” and often drew praise for engaging with the system. In contrast, Voorhees sees himself as a genuine capitalist who believes free markets solve problems better than coercive governments.
“Most people looking at this would have praised Sam, that he’s working within the system, that he’s the upstanding citizen here. And Erik is this radical extremist.”
The biggest favor SBF did was to shine a light on the fallacy that governments and “higher authorities,” including the SEC, know what’s best for us. As Voorhees said, “our salvation is in open source immutable code, period,” not in “any blessing or anointment from D.C.”
Recent events demonstrate “the system” does not stand for freedom, democracy, and personal sovereignty. Instead, these words have become bastardized to the point they are meaningless when uttered by agents of the system.
Ultimately, SBF demonstrated that only we know what is best for us — not slimy politicians or “effective altruists.” It’s a shame that billions of dollars had to be stolen to figure this out.
