Drew Angler
Never trust a fat banker or a skinny chef.
——French proverb.
This week, New York federal court Sentenced Cryptocurrency tycoon Sam Bankman-Fried One of the biggest frauds In American Financial History.Co-founded by Bankman-Fried Fortis (FTT-USD), a now-defunct cryptocurrency exchange and hedge fund.He runs his empire out of a $30 million penthouse in the Bahamas he shared With friend and ex-girlfriend Carolyn Allison. Ellison testified against Bankman-Fried, also known as SBF, and helped prosecutors prosecute him.The United States has stated All losses caused by SBF fraud About $10 billion.
Despite this, Bitcoin (BTC-USD) remains as strong as ever. Bitcoin hit an all-time high earlier this month and has since hovered around the $70,000 level.At this point, Bankman-Fried and His lawyer argued since The Bitcoins seized by the government have increased in value, reducing investors’ losses, and he should be sentenced to a longer sentence, 5-6 years. That argument, while less effective, might have saved him from a life sentence.
Bitcoin hits all-time high this month as Bankman-Fried awaits sentencing
At first glance, it may seem like a contradiction that Bitcoin hit a new all-time high as Sam Bankman-Fried awaited sentencing earlier this month. But not really if you have a deeper understanding of Bitcoin and its history.Many early Bitcoin enthusiasts eccentric libertarian based in california. If they are not already self-employed, they are idealists working in fields such as academia. Bitcoin offers the advantages of privacy, lack of government regulation, and monetary independence. This has led to an explosion in Bitcoin’s popularity. But as Bitcoin grew in popularity, the same characteristics that made it valuable to eccentric academics soon also created a gold rush for all kinds of shady people.
Just as the discovery of gold in California in the 1800s attracted scammers from around the world, the rapid popularity of Bitcoin has resulted in communities quickly being invaded by scammers and criminals.For those who didn’t want the inconvenience of tracking down their digital currency keys, exchanges quickly emerged, and almost as many of them Hacked and robbed– If they themselves are not the ones stealing customers’ money. If you look deeper – it’s not a contradiction. I think Bitcoin is a brilliant invention. But whenever something or someone becomes a huge success, someone is bound to step in and profit from it. This happens especially in the crypto space.
I first heard about Bitcoin in high school, around 2012-2013. I didn’t really get Bitcoin at the time.The early Bitcoin enthusiasts I knew more or less reflected the early Bitcoin community – the weird people who read Aldous Huxley and george orwell and lean toward liberalism. There were 80 kids in my high school graduating class. We had parties and no one stole anything and no one got into fights. After that, I went to college in South Florida. There, you learn quickly that you can’t trust everyone and that rules are there for a reason.
While early Bitcoin enthusiasts may have used it as a lever for freedom and privacy, these libertarian ideas quickly failed when generalized to the wider world.In hindsight, some early Bitcoin enthusiasts might want to read Kurt Vonnegut, whose cat’s cradle The “ice nine“A military weapon designed to freeze large amounts of dirt, but instead accidentally froze the entire world. Far removed from its libertarian roots, Bitcoin was soon used by third world politicians steal public funds, arms dealer, fentanyl traffickers, as well as a large number of alleged fraudsters/Ponzi schemes.while committing criminal activities Never Most Use of BitcoinThe appeal of cryptocurrencies to criminals has been an enduring problem for regulators since the invention of BTC.
Sunny places are for shady people
Once Bitcoin started to gain popularity, people quickly realized that governments needed to step in and heavily regulate its use to protect the public. The proliferation of exchanges aims to solve this problem, with popular exchanges like Coinbase (COIN) becoming cryptocurrency gatekeepers for millions of investors. However, many original Bitcoin enthusiasts hate the idea of exchanges, believing that they are vulnerable to fraud and theft. Their mantra is “Not your keys, not your coins.” A new wave of exchanges has emerged during the pandemic that function similarly to traditional banks and brokerages, offering investing, crypto lending products, staking and a host of “innovations” that coincide with an influx of stimulus money to consumers and businesses. The crypto world has also attracted some minor league scammers. You can’t make something like this up. My acquaintances would post luxury cars (most likely rentals), along with invitations to invest in crypto products. Twenty-somethings with no obvious skills or source of income began posting on Instagram in Miami, Las Vegas, and Dubai extolling the virtues of altcoins and liquidity mining schemes. One cryptocurrency hedge fund even hired a former adult film star for its risk management department.
On the mainstream side, cryptocurrency brokerages have quickly emerged, advertising on financial news sites offering 6% or more interest on Bitcoin deposits. Bitcoin + interest is an irresistible combination. My friends collectively invested hundreds of thousands of dollars in these exchanges, and I followed them. This seemed like a big deal at the time. Of course, there’s a three-letter catch—SBF. Some of us got out of the woods in time (me included, thankfully), while others are still stuck in the bankruptcy proceedings of BlockFi, Celsius, and other exchanges. We later discovered that most of the missing funds were related to FTX.
Suddenly, Sam Bankman-Freed was everywhere. With his signature hairstyle and hoodie, news articles about SBF appear almost weekly in various financial news outlets. He traveled frequently from his home in the Bahamas to New York and Washington, D.C., and spent millions on lobbying and donations. The biggest irony in this story is that SBF was probably largely ruined by his ex-girlfriend. SBF paid hundreds of millions of dollars to other key executives, But only paid Carolyn Allison $6 million. He also allegedly leaked her private diary to police. New York Timeswhich undoubtedly prompted her to use her testimony to help the government convict him.
United States vs. Bankman-Fried (via Bloomberg)
Lessons from FTX and Sam Bankman-Fried
- SBF is not the first large-scale fraud in financial markets, and it certainly won’t be the last. We are in an extremely strong bull market right now in cryptocurrencies and elsewhere, and I expect the next downturn will expose others involved in the scam. The bigger the bull market, the more likely it is that potential misconduct will occur.
- If it seems too good to be true, it often is. While this doesn’t mean that every investment that looks good is actually a bad one, the combination of heavy media coverage, political involvement, flashy spending, and celebrity endorsements has repeatedly proven to be toxic for investors The combination. Especially companies that sponsor sports venues seem questionable!
- The best investment opportunities are often very close to the worst investment opportunities. Themes such as artificial intelligence, cryptocurrencies and diet pills are believed to offer investors significant upside potential. If I had to bet on which industry would spawn the next big fraud, my guess would be that you would find it in one of these industries.
- Reputation and reputation are poor substitutes for due diligence. We take comfort in the fact that some of the founders of these cryptocurrency companies are billionaires and well-known people. Regardless of our results, me and my friends who have money in cryptocurrency exchanges should not be so dependent on reputation. Thankfully, the recovery in Bitcoin prices is helping investors recover their principal, especially with the BlockFi bankruptcy case ongoing.
bottom line
For those who want to invest in Bitcoin now, the past decade of cryptocurrency chaos has cleared the way for you. As a result of the SEC’s decision on spot Bitcoin ETFs in January, there are now more than 10 Bitcoin ETFs with fees as low as 1%. The largest is the iShares Bitcoin Trust (IBIT), which has annual fees between 0.12% and 0.25%, depending on fee waivers from parent company BlackRock. While Bitcoin will continue to be subject to volatility and price risk, new ETFs now offer a safe and regulated alternative to placing Bitcoin on exchanges. If BTC’s history is any guide, investing in ETFs is much safer than investing in cryptocurrency exchanges.
