The FTX Scandal: The future of Crypto
Embezzling money is not a new phenomenon in modern human history, through this trend our economic system has experienced scandals by wealthy wall street influencers left and right. But when a 20 something year old billionaire does the fraud it demands a more in depth look. FTX was a crypto exchange company dealing with trading people’s crypto and also working as an investment company for people to evaluate and store their crypto. The world is still adapting to how these digital currencies are traded and regulated. Being young, SBF fully known as Sam Backman-Fried came up with the idea of becoming the second largest crypto exchange company in the world which is commendable and was known as an effective altruist promising to donate most of his money to charity and political causes he deemed as altruistic. He was the second largest contributor to the Democratic National Committee right behind Bloomburg in the 2020 elections. One of the youngest billionaires ever, he with his nine friends lived in the Bahamas and would reportedly be involved in psychedelic experiences.
All of this seems like a movie script but it is important to keep a serious note while talking about the intricacies of what he has done. Sam still claims that the misplacement of the funds are due to “bad bookkeeping practices” and refuses to acknowledge any wrong doings. Another company Alameda Research Co-founded by his girlfriend was responsible for diverting funds without the client’s knowledge. His co-founder and former girlfriend have decided to cooperate with the police as they investigate the fraud case.
For people who might be misinformed this may seem like the problem that crypto is responsible for. But they need to understand that the basic investigation that led to the findings of the liquidity crisis shows that the scheme had nothing to do with the recent downfall of crypto rather exposing the company as people exchanged less and less with crypto because of the downfalls. Also the fact that SBF was illegally switching the funds between his two companies which is illegal regardless of the modes of asset or bonds. This is a basic case of financial fraud, the unregulated market of crypto is the main factor for this to keep happening.
Crypto, unlike the traditional currency, is safer by marked trading and exchanges. The blockchain technology enables its security and makes it near impossible for people to steal the currency outright, but there are a considerable amount of loopholes, mainly stemming from the public’s distrust in the financial institutions and the government. As these digital currencies were a form of people getting away from traditional trading and the government regulations because in 2008 it was clear that the big banks didn’t have the best interests at heart for the general population.
The US Treasury has emphasized an urgent need for crypto regulations to combat global and domestic criminal activities. In December 2020, FINCEN proposed a new cryptocurrency regulation to impose data collection requirements on cryptocurrency exchanges and wallets. The rule is expected to be implemented by Fall 2022, and would require exchanges to submit suspicious activity reports (SAR) for transactions over $10,000 and require wallet owners to identify themselves when sending more than $3,000 in a single transaction. This occurrence may open the door for government influences becoming more prevalent to cryptocurrency wallets and exchanges.
