In its brief history, it was Cryptocurrency The industry has had many booms and busts, but nothing quite like it. US securities regulator accused Sam Bankman-Fried, who is currently being held in the Bahamasto plot a multi-year plan to steal billions of dollars from clients of the offshore underground exchange FTX and turn them into a now bankrupt business empire.

It is understood that nearly 1 million creditors FTX outraged, and that investors are reluctant to withdraw funds from other cryptocurrency exchanges such as binance. Despite Bankman-Best Fried’s best efforts to portray himself as a naive 30-year-old who fell off his skates, new information about the complex insider strategies Alameda Trading uses to shore up its profits emerges every day.

Less comprehensible is the victim narrative coming from cryptocurrency-friendly companies dealing with FTX, an ostensibly reliable counterparty.

That includes companies that themselves failed months ago, such as cryptocurrency hedge fund Three Arrows Capital, whose co-founder recently alleged FTX plotted to bring him down, and cryptocurrency lender Voyager Digital, which expressed shock, indignation and dismay at FTX’s demise. (In September, Voyager agreed to buy its FTX out of bankruptcy.)

Three members of the US Senate are currently searching Silvergate Capital Corp., which provided banking services to FTX and Alameda. They want details about the money transfer between the two organisations. Silvergate claims she was a “victim” and is willing to cooperate fully.

Ironically, some of these claims are causal, with companies like Three Arrows Capital and Voyager explicitly stating when they initially failed that The collapse of the tera stablecoin It caused a general loss of confidence in cryptocurrencies. Large portions of the cryptocurrency market were collapsing before FTX’s ultimately meaningless promises of a bailout.

Greed and fear are the real causes

The biggest issue is that these institutions are highly developed financial institutions, and their responsibility is to manage counterparty risk. Even without knowing the horrific details of Fred’s deception by Bankman, it was clear that FTX was an offshore exchange in the Bahamas whose revenues came primarily from illegal trading instruments in the United States. This was true in a sector where exchanges often take on contradictory roles, such as broker and lender, issuing tokens with little regulation.

There was too much greed and not enough fear. According to Kyle Davis, co-founder of Three Arrows Capital, his fund initially had doubts about FTX but eventually decided to use it in part because of the tacit endorsement it received from venture capitalists like Sequoia. However, it is likely that these large cryptocurrency exchanges have become intractable due to their sheer scale and success in bringing in huge sums of money from customers with high-risk products. In addition, FTX helped Silvergate increase its customers’ cryptocurrency deposits from $1.2 billion to $14 billion in just over a year.

Well, that’s life

Was it really a “black swan” event that FTX turned into a “fraudulent bucket shop” trading against its customers, as Davies recently told hedge financier Hugh Hendry on a podcast, in an era when so-called “hedge” funds were pouring money into web3 and DeFi games rather than actual hedges? Perhaps not for an industry smaller than the iPhone and where a young billionaire could describe his company in terms more like a Ponzi scheme. “Well, that’s life,” Hendry said in a stalemate.

If the victim’s card needs to be questioned, it’s not because it will protect Bankman-Fried from all allegations of fraud, but because it is selfish to those who play it from a legal point of view. The co-founders of 3AC are clearly interested in the opportunity for redemption while the company goes through its liquidation process. The legal team representing the liquidators recently pointed out that Davis and a fellow co-founder only began blaming FTX after the stock market crash and warned that they had not helped settle creditors’ claims.

Without greater humility, transparency and stronger Anti-fraud With the mindset of both regulators and participants, the chances of cryptocurrency markets moving beyond speculative booms and busts would be slim to none. So all organizations in the sector that are currently marketing FTX as an unpredictable one-off in a healthy market must face the consequences of their actions. We still have a ways to go.

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