Cryptocurrency Scam Exposed by LA Times’ Hiltzik


After a federal court jury found crypto scam artist Sam Bankman-Fried guilty of seven counts of fraud and conspiracy, it became clear that his own greed and arrogance, as well as the deceit inherent in the cryptocurrency market, had brought him down. The prosecutors had laid out a clear case, emphasizing Bankman-Fried’s similarities with fraudsters of the past, and U.S. Attorney Damian Williams made it clear: “The cryptocurrency industry might be new; the players like Sam Bankman-Fried might be new, but this kind of fraud, this kind of corruption, is as old as time.”

Assistant U.S. Attorney Nicholas Roos also pointed out that the case was not about complicated issues of cryptocurrency but “about deception. It’s about lies. It’s about stealing. It’s about greed.” Despite this, crypto promoters may still try to paint Bankman-Fried as an isolated case, but this won’t work since the market is itself fraudulent. The value of cryptocurrencies can be placed anywhere and they don’t produce income like bonds, nor can their prices be pegged to liquid markets like those of public company securities. To this day, no one has ever explained what cryptocurrencies are useful for, other than paying ransom to crooks.

Bankman-Fried exploited the vacuity of crypto as an asset by slathering it over with what sounded like profundities but were vacuous at their core. He even acknowledged that claims for the usefulness of crypto involved “a lot of hand-waving.” His marks had to take him at his word; as a result, they’ve lost as much as $10 billion, and Bankman-Fried is facing a prison term as long as 110 years.

Leading investment firms such as Sequoia Capital were also taken in, putting $150 million into Bankman-Fried’s company, FTX, and following that up by posting an adoring article about him on their website. Politicians, too, were misled, thinking that all the crypto field needed to complete its quest for legitimacy were a few judicious financial regulations. Bankman-Fried testified to Congress in February 2022 about what those might be; however, all of this was a lie.

John J. Ray III, the corporate restructuring expert installed as FTX’s CEO after it filed for bankruptcy, said that he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information.” He was the same guy who managed the Enron bankruptcy.

Author Michael Lewis, and his credulous book about Bankman-Fried, “Going Infinite,” also had their reputations damaged, as he had spent 100 hours with Bankman-Fried and still didn’t see what 12 jurors came to understand after four weeks of testimony.

No one has found blockchain technology, the foundation on which crypto is built, necessary or even useful for “solving real problems”. Even Bankman-Fried’s conviction won’t stop sophisticated investors from pouring money into the next big fraud. The quest for easy pickings is too powerful a magnet for capital. Investors should keep their eyes open for the Next Big Thing, because the reckoning won’t be made until billions of dollars are lost and the next swindler with a clever story goes to jail.

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