Former US Regulator Likens FTX and Sam Bankman-Fried to Bernie Madoff and His Ponzi Scheme

Former Federal Deposit Insurance Corporation (FDIC) Chair Sheila Bair likens the autumn of crypto speech FTX and its erstwhile CEO Sam Bankman-Fried to the infamous Ponzi Scheme of Bernie Madoff. “It felt precise Bernie Madoff-like successful that way,” she said.

Former FDIC Chair Compares FTX and Sam Bankman-Fried to Bernie Madoff’s Ponzi Scheme

Sheila Bair, a apical U.S. regulator during the 2008 fiscal crisis, explained successful an interrogation with CNN Monday that determination are eerie similarities betwixt the emergence and autumn of FTX and erstwhile CEO Sam Bankman-Fried and that of Bernie Madoff.

Bair chaired the Federal Deposit Insurance Corporation (FDIC) from 2006 to 2011. She present sits connected the committee of directors astatine blockchain infrastructure steadfast Paxos.

She explained that some Bankman-Fried and Madoff proved adept astatine seducing blase investors and regulators into ignoring reddish flags hiding successful plain sight. FTX filed for Chapter 11 bankruptcy past week and Bankman-Fried stepped down arsenic the CEO.

“Charming regulators and investors tin distract [them] from digging successful and seeing what’s truly going on,” Bair described, elaborating:

It felt precise Bernie Madoff-like successful that way.

Madoff ran the largest Ponzi strategy successful history, worthy astir $64.8 billion. He promised investors precocious returns but alternatively than investing, helium deposited their wealth into a slope relationship and paid, upon request, from existing and caller investors’ funds. Convicted of fraud, wealth laundering, and different related crimes, helium was sentenced to 150 years successful national prison. Madoff died successful situation connected April 14, past year, astatine the property of 82.

Bankman-Fried secretly transferred astir $10 cardinal of lawsuit funds from FTX to his different trading steadfast Alameda Research and reportedly utilized a “backdoor” to debar triggering accounting reddish flags.

FTX garnered its $32 cardinal valuation with investments from large companies and task superior firms, including Blackrock, Softbank, and Sequoia. Bair commented:

You get this herd mentality wherever if each your peers and marquee names successful task superior are investing, you’ve got to, too. And that adds credibility with Washington policymakers. It each feeds connected itself.

The erstwhile FDIC seat is not disquieted astir the FTX implosion threatening the full fiscal strategy the mode Lehman Brothers did successful 2008, noting that crypto is inactive a comparatively tiny portion of the broader system and fiscal market.

However, the crypto marketplace remains mostly unregulated, leaving investors susceptible if thing breaks. Bair stressed:

It’s clip to settee connected a regulatory authorities for crypto and benignant retired who is regulating what due to the fact that radical are getting hurt.

The erstwhile regulator further urged investors to usage caution and beryllium skeptical. “If it sounds excessively bully to beryllium true, it astir apt is,” she said.

Do you hold with the erstwhile FDIC seat astir the similarities betwixt the autumn of FTX and Sam Bankman-Fried and the Ponzi Scheme tally by Bernie Madoff? Let america cognize successful the comments conception below.

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