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Is FTX’s Sam Bankman-Fried the Next Bernie Madoff?

  • Former FTX CEO Sam Bankman-Fried is now being compared to fraudster Bernie Madoff.
  • Calls for regulation of crypto are growing in the wake of FTX’s collapse.
  • Crypto may not be totally dead, however; Bitcoin (BTC-USD) still trades near $17,000.
The website for the FTX exchange is displayed on an iPhone screen.
Source: Koshiro K / Shutterstock.com

Just a week ago, former FTX CEO Sam Bankman-Fried was being compared to Tesla (NASDAQ:TSLA) CEO Elon Musk. Now, though, the crypto exchange’s ex-leader is being compared to Bernie Madoff.

Madoff died in prison last year and once ran a Ponzi scheme worth an estimated $64.8 billion. He was also briefly chairman of the Nasdaq. Meanwhile, Bankman-Fried — reportedly worth $16 billion not long ago — ran a company with fewer than $1 billion in liquid assets supporting $9 billion in liabilities. The fall of FTX wiped out about $32 billion of market value in a matter of days.

Here’s what investors should know as crypto picks itself up after the collapse of FTX.

FTX: Government Here to Help?

Now that the end is clear, hackers are busy draining FTX account holders’ wallets. Meanwhile, hedge fund managers are apologizing for ever trusting it. The FTX bankruptcy filing shows more than 1 million creditors, most of whom are unlikely to see a penny.

In light of the collapse, regulators around the world are also swarming over crypto, which is part of the problem. FTX was a global enterprise, based in the Bahamas and arbitraging holes in regulations to disrupt the global currency market.

Vultures are making political hay of FTX on a global scale. China is reportedly circling El Salvador — whose President bet the country on crypto — by purchasing its debt. At the same time, U.S. politicians are pointing fingers at each other over FTX and Sam Bankman-Fried’s political contributions, which went to both sides.

Back in October, the U.S. Securities and Exchange Commission (SEC) fought an uphill battle to establish weak regulation. But even that seems to have happened in a different universe. Now that the damage is done, Federal Reserve governors, members of Congress and even FTX rival Binance (BNB-USD) are calling for regulation.

So, what happens next?

Tokens like FTX Token (FTT-USD) — backed by opaque balance sheets — may disappear. However, Bitcoin (BTC-USD) is still worth almost $17,000 as of this writing.

Reports of the death of crypto may be somewhat exaggerated.

On Low-Capitalization and Low-Volume Cryptocurrencies: InvestorPlace does not regularly publish commentary about cryptocurrencies that have a market capitalization less than $100 million or trade with volume less than $100,000 each day. That’s because these “penny cryptos” are frequently the playground for scam artists and market manipulators. When we do publish commentary on a low-volume crypto that may be affected by our commentary, we ask that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.

Read More: How to Avoid Popular Cryptocurrency Scams

On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack.

Article printed from InvestorPlace Media, https://investorplace.com/2022/11/is-ftxs-sam-bankman-fried-the-next-bernie-madoff/.

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