The FTX “debacle” continues to be inexplicable in its surface developments. Most recently, FTX chief fraudster Sam Bankman-Fried was featured Nov. 30 in the New York Times’ annual Dealbook Summit, a major “financial analytical” event, along with Volodymyr Zelenskyy, Mark Zuckerberg, Treasury Secretary Janet Yellen and BlackRock CEO Larry Fink; Bankman-Fried was given a “tough” interview there by Andrew Ross-Sorkin of the Times. This is somewhat as though Bernie Madoff, after confessing to his Ponzi scheme, had chaired another meeting of the board of the NASDAQ; or, as Dennis Speed suggested, as though Elizabeth Holmes were to keynote a medical technology conference on her way to federal prison for the Theranos fraud.
Larry Fink, at the same Dealbook Summit, announced that BlackRock, Inc. lost $24 million in FTX (a small loss for BlackRock these days). One of the biggest venture capital firms, Sequoia Capital, has acknowledged a $210 million loss. Other known and announced big losers in FTX and not known as crypto players include Ontario Teachers’ Pension Plan Board, Tiger Global, Sea Capital, ICONIQ Growth, and Lightspeed Venture Partners, according to The Street. We learn that FTX was moving to acquire a small Washington State bank, Farmington State Bank, having made an investment in that bank larger than its total deposit base, to expand it and to become co-owner with so-called Deltec Bank which hosts the cryptocurrency “stablecoin” operation Tether. This echoes AIG Financial Products’ 2004 acquisition of a small U.S. bank in order for that giant London hedge fund to be “regulated” by the weak U.S. Office of Thrift Supervision.
Moreover, there is a renewed push in the lame-duck session of Congress for cryptocurrency regulation legislation lobbied for, and originally designed by, Bankman-Fried, who gave $23,000 contributions to each of its prime sponsors Sen. Debbie Stabenow (D-MI) and Sen. John Boozman (R-AZ); the bill has been recommended publicly by SEC chair Gary Gensler, and by the Financial Stability Oversight Council (FSOC) of the top five U.S. financial regulators. It would give powers to regulate cryptocurrency operations to the CFTC and not Gensler’s SEC; the main point, however, is that cryptocurrency would then be embraced and “regulated” under the FSOC with the Federal Reserve at the top. (Jerome Powell paraphrase from April at Economic Club of Washington: If there’s to be private money creation in this country, the Federal Reserve should play a role.)
