Sam Bankman-Fried’s conviction on fraud charges stemming from the blowup of the FTX exchange came at a conspicuous time for the cryptocurrency market – right when prices were flying high again following a rout last year that wiped out $2 trillion from the value of digital assets.
That rally has lost steam over the past two days, with Bitcoin dipping a much as 3.7% after previously more than doubling in 2023 and approaching a nearly 18-month high of almost $36,000. Solana’s SOL token, which counted Bankman-Fried’s FTX and Alameda Research as major backers and tumbled 94% last year, lost as much as 9.8% over Thursday and Friday after surging more than 300% this year.
While it’s difficult to suss out exactly how much the verdict is moving prices compared with the macroeconomic forces whipsawing traditional markets, there’s no doubt Bankman-Fried’s conviction is a high-profile reminder of the risks inherent in crypto investing. Still, professionals in the industry who are desperate to move on from the ugly episode say closure in the case offers them an opportunity to do just that, and is no reason to start dumping coins.
“I think the crypto industry is looking at the conviction with a sigh of relief,” said Leo Mizuhara, founder and CEO of decentralized-finance institutional asset manager Hashnote. “They see this as part of a cleansing of bad actors and purge of bad representation of the industry,” he said, adding that the recent selloff is likely more linked to fund flows rather than risk-aversion directly tied to SBF’s criminal conviction.
Still, others who are skeptical of the industry are taking a much tougher line, arguing that the verdict confirms crypto as a sector riven with weaknesses that attract criminals, hackers and rogue states.
“The guilty charges in the FTX case mark the end of an era,” said Brian Mosoff, chief executive officer of Ether Capital Corp., which invests in crypto and blockchain projects. “The days of wild west exchanges, scammy assets, fraud, and an industry living off in the corner of the Internet are over.”
“Success, fame, and money were the early-in-the-story words to describe Sam’s empire, but the final will be deception, fraud and justice,” Mosoff said.
Time to move on
“We have to learn and move on,” said Paul Veradittakit, managing partner at venture capital company Pantera Capital, adding “regulatory clarity is needed and helpful to prevent these situations.”
“Diligence in crypto continues to evolve in the space and I’m sure it has evolved with this current market,” Veradittakit added.
“It’s a watershed moment that reinforces again that crime does not pay in the digital-asset space and there is enforcement, which should reassure investors and traders that the industry is maturing,” said Angelina Kwan, chief executive officer of regulatory consultancy Stratford Finance Ltd. “We will look back at this moment and say this was the first step out of the crypto winter that the demise of FTX contributed to.”
“FTX and Sam Bankman-Fried are not one-offs in the crypto industry,” said Dennis Kelleher, co-founder of Better Markets. “In fact, today’s conviction is a condemnation of the entire crypto industry and its business model which is based on breaking the law for a financial product that has no socially useful purpose.”
“It is just the opposite: crypto’s use and value is in breaking the law, from ripping off customers, money laundering and tax evasion to ransomware, gambling, and funding terrorists and rogue states like Hamas, North Korea, and Iran,” he said.
“This is an important disruption in our financial system,” said Campbell Harvey, a finance professor at Duke University, referring to crypto and blockchain technology. “Part of the process includes learning from the failure. There are painful lessons. However, the system becomes stronger after these failures. We learn, often the hard way, but we learn. We need to always think about the big picture: improving our financial system, which leads to financial democracy and increased economic growth.”