Experts React to FTX’s Epic Fall NerdWallet

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Crypto exchange FTX and FTX.US, its US branch, filed for Chapter 11 bankruptcy on November 11. Shortly after, over $600 million was withdrawn from an FTX wallet in an apparent hack. The next day, the Financial Times published FTX’s balance sheet, which showed $9 billion in liabilities and $900 million in liquid assets. The balance sheet also showed careless and risky management of client funds.

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Prominent investors, business leaders and government officials have since commented on the unfolding fallout.

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what traditional finance leaders say

Charlie Munger, longtime partner of Warren Buffett and vice chairman of conglomerate Berkshire Hathaway. Munger was interviewed on CNBC on 15 November.

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“It pains me that in my own country, I see people who were once considered very dignified, who help bring these things into existence, promote their use, and so forth,” he said referring to cryptocurrency. In 2021, Berkshire Hathaway invested in Nubank, a Brazilian digital bank that holds crypto, but otherwise, it has been bearish on digital assets.

When asked if investors in FTX had done their due diligence, he said, “I think they mean really well, but you’re seeing a lot of confusion. It’s partly fraud and it’s partly confusion.” It’s a bad combination.”

Ken Griffin, billionaire and CEO of hedge fund Citadel. Griffin was interviewed on November 14 at an event at the Bloomberg New Economy Forum. When asked about the explosion of FTX, he laid part of the blame on what he said were inadequate crypto regulations:

“The turf war by US regulators is over. It is absurd that without naming the agencies, they all dance around who has what. And the bottom line is that US investors are really hurt here When you see a fraud of this magnitude being played out, and you find that there was no regulator to stop it, it’s a really tough story to tell.

Citadel Securities is currently working with other financial firms to launch their own cryptocurrency exchange.

Billionaire investor Carl Icahn. On CNBC on November 10, Icahn raised concerns about accountability and transparency following initial reports of FTX’s troubles, saying: “As far as I was concerned, this is a lawless area. … There was no accountability as such.” What I could see, and I still can’t see it.”

Icahn said he never bought the cryptocurrency, but “maybe he’s shorted it once or twice.”

what crypto leaders say

Changpeng Zhao, CEO of crypto exchange Binance. Zhao was among the first to publicly raise doubts about the financial health of FTX. He tweeted throughout the day leading up to FTX’s bankruptcy filing, including on November 11, when he outlined red flags investors can watch for:

“FTX aside, avoid businesses/exchanges/projects that:

– are not profitable (musical chairs)

– Survive by selling your own tokens

– Give high incentive to lock your tokens

– There is a large total supply, but only a small circulating supply

Brian Armstrong, CEO of crypto exchange Coinbase. Armstrong took to Twitter to share his thoughts on FTX. Armstrong had called for more clear regulation before the FTX issues came to the fore. However, he reiterated his concerns in a November 9 tweet:

“ was an offshore exchange that was not regulated by the SEC [Securities and Exchange Commission],

The problem is that the SEC failed to create regulatory clarity here in the US, so many US investors (and 95% of trading activity) went offshore.

There is no point in punishing American companies for this.”

The day before, he tweeted that there was no material risk to Coinbase’s FTX, its parent coin FTT, or Alameda Research.

What do government officials say

Gary Gensler, chairman of the US Securities and Exchange Commission. Gensler attended a November 9 event organized by the Healthy Markets Association, an organization that oversees financial regulation.

In reference to FTX, which had not yet filed for bankruptcy at the time of the interview, Gensler said, “Good people are getting hurt. Lack of disclosure, too much leverage, too much interconnection: It’s like Jenga blocks that All are built in, and as each block is taken out it collapses a bit.

Crypto leaders have since criticized Gensler for not providing enough regulatory clarity to the companies.

Sen. Pat Toomey, R-PA, ranking member of the Senate Committee on Banking, Housing and Urban Affairs. Tommy summed up the comments made in a Congressional hearing on November 15th when he tweeted: “It certainly appears that FTX has made a colossal failure in not treating client assets as separate assets. ” He indicated the focus of possible future regulatory efforts: “If people had access to regulated crypto custody services, they could sleep more comfortably knowing that those assets are more likely to be used for improper purposes.” Wasn’t.”

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