The downfall of Sam Bankman-Fried (SBF) continued on Monday after he was arrested in the Bahamas after a request by American authorities. The arrest capped what has been a major fall from grace for the 30-year former billionaire.
FTX collapse was good for crypto
While many good people have seen their investments disappear, the reality is that the collapse of FTX and Alameda Research is good for cryptocurrencies.
First, listening to several interviews by SBF, it has increasingly become clear that the young mogul was actively running a ponzi as we wrote here. The logic behind this scam was relatively easy. He took FTX customer deposits and channeled them to Alameda Research, a firm that he owned 90%.
That was wrong and went against his terms and conditions. There are also signs that he stole customer and investor funds and channeled the funds to his political courses and other marketing initiatives.
Therefore, the earlier FTX collapse the better it is for cryptocurrencies. The longer it existed, the more people would have lost money.
Decentralisation is the future
Second, FTX collapse will likely bring cryptocurrencies away from private hands. When Satoshi Nakamoto created Bitcoin, his intention was to decentralise the financial industry. Today, the industry has gotten extremely concentrated to just a few individuals. In a statement, the new FTX CEO wrote that the collapse:
“appears to stem from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals.”
Therefore, there is a likelihood that more users will start moving their funds from centralised exchanges to DEXs. There are some signs that this is happening as the total value locked (TVL) in GMX has surged to an all-time high.
Don’t be sorry for Sam Bankman-Fried
Listening to SBF’s interviews, it is easy to feel sorry for him. Besides, he is a human being who is going through the worst phase of his life. Also, SBF did not create FTX and Alameda to have them collapse. He wanted them to become successful financial companies.
However, in reality, SBF got what he deserved by putting the broader crypto industry at risk. SBF is not a fool. He went to MIT and worked for Jane Street. He knew what he was doing was wrong. Worse, he ignored his lawyer’s advice to keep quiet during this debate.
Instead, we should feel sorry for innocent people who have lost their life savings in FTX’s collapse. Would you feel sorry for Bernie Madoff? Also, we should not feel sad for venture capital firms like Sequoia and Softbank and even Blackrock for losing millions. They played a role in FTX’s collapse by not doing their due diligence.
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