FTX Crash ‘Worse Than Theranos, Worse Than Madoff’: Former SEC Official
- Many people have drawn parallels between the collapse of Lehman Brothers and the fall of cryptocurrency exchange FTX.
- A former official of the Securities and Exchange Commission compared FTX to the Bernie Madoff and Theranos debacles.
- John Reed Stark stated to Yahoo Finance, “This is worse that Theranos, and this is worse still than Madoff.”
Numerous people have been affected by the collapse of cryptocurrency exchange FTX. comparisons to the collapse of Lehman BrothersThis is what sparked 2008’s financial crisis.
A former official of the Securities and Exchange Commission compared FTX to the Bernie Madoff and Theranos debacles.
John Reed Stark, the founder and former chief of the SEC’s Office of Internet Enforcement, pointed to reports that FTX transferred client funds to trading house AlamedaThis was earlier in the year.
“This is worse then Theranos, Madoff, if my reading is correct,” he said. told Yahoo FinanceThursday, the day prior FTX and its affiliates filed for Chapter 11 bankruptcy.
FTX did not respond to a request to comment.
Elizabeth Holmes, founder of Theranos, was found guilty by a jury of defrauding investors of hundreds of millions of dollar. Madoff pleaded guilty to a Ponzi scheme involving tens of thousands investors that defrauded them of as much as $65 Billion.
Stark noted that “sophisticated FTX investors” have had to sell their holdings despite performing due diligence on the financials.
Venture capital firm Sequoia Capital informed partners on Thursday that it had written off its entire $213.5 Million investment in FTX.
He also pointed out reports that the Justice Department is investigating FTX, which both the SEC & Commodity Futures Trading Commission are investigating.
Stark stated that the SEC enforcement division will likely be stopped while the DoJ investigates. This investigation could involve informants and search warrants as well as arrests. The DoJ prosecutes criminal charges, while the SEC enforces civil law.
He added that FTX exemplifies the issues in the wider crypto space.
“Some of these companies, it’s not even clear where they are headquartered. It is not possible to know who works there. Stark stated that there is no transparency. “The contagion rapidly spreads among all of the different crypto ecosystems, and that’s very serious for anyone who does anything with crypto.”
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