Crypto and Web3 have untapped potential, but the lack of regulation over the years has led to speculative bubbles and Ponzi schemes, says Joe Lonsdale.
After the collapse of FTX, the cryptocurrency exchange that was once valued at $32 billion, much of the attention focused on the now-bankrupt company’s most prominent investors and prominent supporters.
But with more than 1 million creditors, many young people and large investors will hold the bag in their hands.
A bankruptcy court hearing scheduled for Friday at 10:00 a.m. EST could shed more light on the full spectrum of those who lost money as a result of FTX’s implosion. At the hearing, a request to release a full list of FTX’s creditors, including their names and email addresses, will be considered.
Former Federal Deposit Insurance Corporation (FDIC) Chairwoman Sheila Bair recently told Fox Business that the real tragedy of the FTX collapse is that there are “potentially a million much smaller investors, and proportionately they will be the ones who who really get hurt”.
FTX FRAUD MAKES ‘ENRON LOOK LIKE PEANUTS’: FORMER US ATTORNEY
The FTX logo is seen at the entrance to FTX Arena in Miami on November 12, 2022. (Portal/Marco Bello/File Photo / Portal Photos)
Noting that FTX and the crypto industry in general have marketed heavily to young people, Bair said it makes them “sad” that so many who have taken the fascination of the company are unlikely to recoup their investments.
She suggested that to prevent a similar future collapse, crypto exchanges should be required to provide proof of reserves and that some regulatory enforcement should be put in place.
SAM BANKMAN-FRIED REFUSED BAIL IN BAHAMAS POSTED TO FEB. 8 IN THE ALLEGED CRYPTO FRAUD SYSTEM
Current FTX CEO John J. Ray III, a corporate restructuring expert who handled the bankruptcy of energy trader Enron, testified before the House Financial Services Committee on Tuesday, noting that customers who have their money in FTX and its subsidiaries invest, should have no hope of fully repaying their investment.
“We’re never going to get all of those assets back,” Ray said bluntly.
Samuel Bankman-Fried leaves court in Nassau, Bahamas, on Tuesday. (Mega for Fox News Digital / Fox News)
In its initial filings in the early stages of its bankruptcy proceedings, FTX indicated that it owed over $3 billion to its top 50 unsecured creditors. At this point, the company was able to identify 100,000 known creditors, most of whom were customers of FTX.
However, as the bankruptcy of FTX and its more than 130 affiliates can also affect former customers and others, the total number of creditors may eventually exceed 1 million.
WHERE DID THE MONEY GO ON FTX CRYPTO COLLAPSE?
Sam Bankman-Fried, founder and former CEO of FTX Cryptocurrency Derivatives Exchange, speaks during an interview on an episode of Bloomberg Wealth with David Rubenstein in New York on August 17, 2022. (Jeenah Moon/Bloomberg via Getty Images/Getty Images)
FTX founder and former CEO Sam Bankman-Fried was arrested by authorities in the Bahamas on Monday and is set to be extradited at a later date.
Federal prosecutors said Tuesday that Bankman-Fried has been indicted in the US on eight counts, which carry a combined maximum sentence of 115 years in prison. Charges against him include wire fraud at customers and a related conspiracy charge; lender wire fraud and a conspiracy charge; Conspiracies to commit commodity fraud, securities fraud, money laundering and violations of campaign finance laws.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
US Attorney for the Southern District of New York Damian Williams said the Bankman Fried case, which drew comparisons to Bernie Madoff’s Ponzi scheme and the Enron scandal, is being described as “one of the greatest fraud cases in American history.” go down in history.
Fox Business’ Breck Dumas contributed to this story.