SBF facing charges while federal investigations rock crypto – what’s next?
Sam Bankman-Fried, the former CEO of FTX crypto exchange that recently collapsed, has been arrested in the Bahamas after the US government filed a criminal indictment.
He’s being held in custody pending extradition. Federal prosecutors plan to unseal the case against him on later today. Separately, the SEC – the US financial regulator – said it will file civil charges relating to SBF’s alleged violations of securities laws.
These fresh developments come just hours after Reuters reported that the US Justice Department is divided over whether to file charges against Binance, the world’s largest cryptocurrency exchange, in a criminal investigation launched nearly two years ago.
READ MORE: FTX founder Sam Bankman-Fried arrested in the Bahamas
According to reports, some officials say there is sufficient evidence to bring charges against Binance and its executives, including the CEO Changpeng ‘CZ’ Zhao, while others want to review more evidence.
All of this is again rocking an already jittery crypto market. The prices of leading tokens have taken yet another pounding.
Like all financial markets, crypto is built on trust, as well as fundamentals, and this year’s scandals – which include accusations of insider trading, fraud and money laundering – have severely dented the former.
These latest unfavourable headlines involving FTX and Binance, and their respective leaders, are rocking the cryptoverse.
The rumour mill is currently out of control.
Among other matters up for speculation across social media: why did it take so long – almost a month – for the authorities to detain SBF after it was alleged he used $8 billion of customers’ money to prop up his trading division? Is it because he handed over a reported $72 million to powerful politicians on both sides of the aisle in Washington? Why are there reports only now about Binance when the investigations started two years ago? Is there a reason for the timing? And so it goes on…
Of course, all this serious drama creates huge uncertainty which translates into more market volatility.
I think we can assume that after the catalogue of bad governance and possibly illegal activity from some industry participants that have come to light in recent months, there’s now a new level of deeper scrutiny that is taking place by various authorities of the wider sector.
Whilst this will continue to trigger volatility and price dips, the scrutiny will act as a shake-out of bad actors which are, sadly, present in all markets and industries.
Ultimately, what’s happened this year, I believe, will push fit and proper industry leaders and financial watchdogs to seize this moment as a point of inflection and to work together in order to further shore up the sector and instil trust and transparency by means of sensible, workable regulation.
But while it all creates short-term turbulence, it will also help mature what is still a relatively young market and shore-it up for the long-term – which is what is needed as digital is the future and crypto is here to stay.
It’s been quite a year. But I’m confident that what’s happening now – albeit disastrous for those clients who are caught up in it – will stand the industry in better stead moving forward.