“The idea that crypto is on trial, I find ludicrous. An individual is on trial,” says Sheila Warren, CEO of the Crypto Council for Innovation, a body advocating for regulation of the crypto industry. “There is an extrapolation happening here and I don’t think it’s appropriate. The vast majority of this was good, old-fashioned, old-timey fraud.”
Bankman-Fried has denied fraud, and pleaded not guilty to the charges he faces.
The focal point of the trial, says Warren, should instead be the harm done to customers of FTX. The group will have a voice in the courtroom: The prosecution opened its case with the testimony of an ex-FTX customer who lost $100,000 to the exchange. But the emphasis of the “media frenzy” on the character of Bankman-Fried, the salacious details of his relationships with peers, and on crypto-bashing, says Warren, detracts from that central concern. “I wish [what’s going on in bankruptcy court] were the priority over ‘bad guy apparently does bad things,’” she says. “The cult of celebrity around this is part of the problem.”
The end of the trial of Bankman-Fried, expected to conclude by mid-November, may draw a line under the latest chapter in the crypto drama. But whether the industry will learn the necessary lessons from the fall of FTX and its once-celebrated founder is a separate question.
Acheson is hopeful, but not convinced. She says crypto is uniquely vulnerable to the hero worship that helped to valorize and legitimize Bankman-Fried. The very-online nature of crypto discourse, she says, creates fertile ground for charismatic grifters able to amass a following. “Hopefully we’ll be ready, more vigilant, and less trusting,” says Acheson.
The industry, says Warren, will only remain primed against the risky financial engineering that led to the collapse of FTX and its peers for so long. “I think it’s time-bounded,” she says. “Until you have a regulatory scheme that encodes [a clear set of rules for crypto businesses]”You’ll have a new generation of people” that try to push the boundaries in dangerous ways. “One of the roles of a regulator is to contain some of that impulse and say, ‘There are consequences.’”
The period of trauma can have a cleansing effect, driving out bad actors and reining in excess. But should crypto fever return, says Warren, the concern is that “a bunch of these yahoos, with their pump-and-dump nonsense, will come right back.”