When did the Investing Institutions finally catch on to the FTX Warning Signs?



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While crypto has the potential to revolutionize many industries, it became problematic when many savvy leaders at companies like Temasek, SoftBank Group Corp., and Tiger Global ignored warning signs. Due to FTX's bankruptcy and subsequent fall, the bull market no longer has the luxury of suspending disbelief.

Before diving into this piece, you may want to catch up on some relevant stories, like how the CFTC is pushing FTX whistleblowers to act and is advocating for cryptocurrency regulation and the launch of the USDA Cardano stablecoin in early 2023.

After the value of FTX's native FTT token fell and consumers withdrew their bitcoin, a number of issues arose. Nevertheless, it exposed a huge ecology of fiction and deceit.

Hedge funds, venture capital companies, and other professional investors, as well as the world's premier investment businesses, may be the right targets under Sam Bankman-leadership. 

These supposedly savvy investment companies overlooked a slew of red flags, including Fried's lack of professionalism during a Zoom interview with Sequoia Capital, during which he was surreptitiously playing a video game.

When FTX's former US president Brett Harrison tweeted that the company kept its clients' money in FDIC-insured accounts. After being called "false and misleading" by the regulator, Mr. Harrison quickly removed the tweets and issued an apology.

On the "Odd Lots" podcast, SBF pondered how venture capitalists choose investments but didn't bother to specify whether or not a significant portion of his firm was a Ponzi scheme.

“You get a bizarre f—ing process that does not look like the paragon of efficient markets that you might expect. [Venture capitalists] see what all their friends are chattering about, and their friends keep talking about this company… and they start FOMOing [feeling the fear of missing out] and then [they] find a way to get into that…. And all the while, you’re like, ‘How do we justify: Is this a good investment? Like, all the models are made up…. You’re valuing [companies] off a model built by a person who owns the thing that’s being sold. So, like, of course, the number’s going to go up between now and 2025, right? It’s going to go up an arbitrary amount. And you can justify anything.”

Isn't it strange that no one has figured out how the warning signs went unnoticed? The subsequent chain reaction has been the loss of billions of dollars in wealth and a growing distrust of cryptocurrencies at a time when the sector could use a boost in public support.

A recent statement by Minneapolis Fed President Neel Kashkari that crypto is "nonsense" casts doubt on some of the advantages typically highlighted by crypto proponents. Kashkari tweeted in response to an article about how investors fell for FTX, “This isn’t a case of 1 fraudulent company in a serious industry. Entire notion of crypto is nonsense. Not useful 4 payments. No inflation hedge. No scarcity. No taxing authority. Just a tool of speculation & greater fools.”

Billionaire investor Charlie Munger has called the cryptocurrency industry "demented," saying that it is full of "fraud and illusion" and that digital currencies are a "very, very dangerous thing" that may be used by criminals.

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