Washington’s $32 Billion Crypto Scam

Sam Bankman-Fried threw around millions as he sought aggressive pro-crypto regulatory changes — now his firm is bust.

By Andrew Perez, Rebecca Burns & Matthew Cunningham-Cook, The Lever

In April, when cryptocurrency guru and Democratic mega-donor Sam Bankman-Fried described how crypto tokens work on a Bloomberg podcast, the host remarked that it sounded a lot like being “in the Ponzi business.” Bankman-Fried, founder of the FTX cryptocurrency exchange, replied that this was “a pretty reasonable response” with a “depressing amount of validity.”

The conversation — which occurred days after one of the industry’s top regulators in Washington tweeted a picture with Bankman-Fried — probably should have set off blaring alarm bells throughout Washington, D.C., and the financial industry. It didn’t.

On Friday, FTX, which previously had $16 billion in customer assets, and was valued at $32 billion in its most recent investor funding round in September, filed for bankruptcy in Delaware. Bankman-Fried, 30, resigned as its CEO.

The collapse underscores how the $849-billion crypto industry — down by one fifth in the last week and from a high of $3 trillion a year ago — has been protected by regulators who are asleep at the wheel, while hapless ordinary investors, suckered in with slick ads from prominent celebrities and athletes, lose their savings.