Wednesday, May 29, 2024
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Sam Bankman-Fried Was Arrested in the Bahamas. Is Crypto Dead?


The arrest of former FTX CEO Sam Bankman-Fried has killed the public reputation of cryptocurrency.

But it did not put a stake in its heart.

According to Coinmarketcap, the value of all crypto rose 1.63% in the 24 hours ending at 8:30 AM on Dec. 13. Bitcoin (BTC-USD) rose 3.31% and was trading at $17,529.

Bankman-Fried’s arrest in the Bahamas came one month after FTX, the crypto market he launched in 2019, crashed. It also came just a day before he was due to testify to Congress about the collapse.

Is Crypto Bankman-Fried?

The Securities and Exchange Commission (SEC) said in a press release that Bankman-Fried wasn’t running a crypto exchange at all, but a Ponzi scheme much like that of Bernie Madoff. “Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” said SEC Chair Gary Gensler.

Crypto advocates now claim Bankman-Fried was just a “bad apple” while crypto itself remains legitimate. Rival exchange Binance (BNB-USD) is hiring lobbyists, claiming it is open to regulation and has an approved “know your customer” system to detect fraud.

The industry also still has friends in Washington. Incoming House Republican whip Tom Emmer supports the industry. Wyoming Senator Cynthia Lummis has urged Americans to put Bitcoin into their retirement accounts. Fidelity Investments is offering crypto investing in some 401(k)s.

Meanwhile, the crackdown has gone global, with China arresting 63 people for allegedly laundering cash worth $1.7 billion via crypto. European regulators are calling for a global regulatory regime, believing their own regulatory system can prevent scams.

What Happens Next?

Ripples from the FTX collapse are still spreading, and they won’t come back.

That doesn’t mean the industry won’t survive. It still has powerful friends in finance and politics. It’s likely whatever industry emerges will be heavily regulated and exist mainly within the current banking system.

Personally, I’d like to see one blockchain business model that functions more efficiently than current technology. Until then, color me skeptical.

On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article, or cryptocurrency assets.  The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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