The FTX cryptocurrency exchange and its affiliated Alameda investment fund were, only two months ago, the saviors of imploding cryptocurrencies. They were called “the J.P. Morgan of the cryptocurrency crisis” by CNBC stock celebrity Jim Cramer, while a CNN TV profile referred to Sam Bankman-Fried as “the new Warren Buffett.” (Similarly, the outlaw Billy the Kid was sheriff of Lincoln County, New Mexico, in 1880.) Most astonishing was Fed Chair Jerome Powell’s comment—not about FTX as such, but about welcoming cryptocurrency tokens, created de novo by “funds,” in this way—"If private money is going to be created in the United States, the federal government should play a role; and the Federal Reserve should have that role.”
Who had a role in FTX, and for what purpose, is a matter of interest now. Corruption oozes from it, and it was a huge funding source for both major parties (more than $70 million) throughout the 2021-22 election cycle. FTX was founded in early May, 2019, just 10 days after Joe Biden’s April 25 announcement of his Presidential campaign, and became the second-largest funder (behind Sir Michael Bloomberg) of that campaign in the 2019-20 election cycle. It became a source of tens of millions of dollars in aid to Ukraine in developing “digital currency capacities.” It claimed $32 billion equivalent in assets for the Alameda fund, all originating from its creation of its own “token,” which was in legal terms its issuance of an unregistered security (Powell’s “private money creation").
In short, FTX was a political slush fund, while being widely celebrated in financial media for a cover identity as an “honest broker” exchange, restoring order in the “cryptocurrency space” in which funds and exchanges were imploding, and investors’ money being stolen.
It appears from revelations coming hot and heavy now, that the FTX combination came by these assets unlawfully. The new CEO and receiver in bankruptcy of FTX, John Ray III, was once in charge of winding up Enron; but his “first affidavit” in the case states that he has “never seen such a complete failure of corporate controls” in 35 years in his profession. There were no board of directors, no corporate statements, no auditing, no risk manager, no record-keeping on spending authorizations by the “executives"—in fact, no corporation there, but rather a gang, conning money from people and throwing it around for political ends. FTX has now been described as a “gang of kids in the Bahamas who were dating each other.” And in the aftermath of the declaration of bankruptcy, there are wild reports of investors’ cryptocurrency assets—purchased by the investors with legal currencies—being stolen and hidden before, during, and even after the declaration.
