Crypto Founder Sam Bankman-Fried Convicted of Fraud as Crypto Market Surges
Sam Bankman-Fried, the founder of FTX, a prominent cryptocurrency exchange, has been convicted of fraud and conspiracy in a trial that uncovered a multibillion-dollar fraud at the heart of the crypto market. Despite this revelation, the enthusiasm of crypto investors remains undeterred as the overall cryptocurrency market experiences a surge.
During the trial, the prices of cryptocurrencies surged on the optimism that U.S. regulators would approve the creation of an exchange-traded fund (ETF) that holds bitcoin. This surge was also witnessed in bitcoin, which has increased by more than 25% since the beginning of October, reaching an 18-month high. However, this rally in crypto prices does not negate the fact that the ambitions of cryptocurrency advocates to revolutionize the traditional financial system remain a distant dream.
Once seen as pillars of a new digital-asset economy, companies like FTX and crypto lender Genesis Global have now filed for bankruptcy. Additionally, venture-capital investment in the crypto industry has plummeted to its lowest level since 2020, and investors have scaled back their efforts to build blockchain-based banks and exchanges.
Sam Bankman-Fried, who was once a major advocate for the idea that crypto would surpass traditional finance, has now been convicted in seven criminal counts of fraud and conspiracy. While his lawyer says he will continue to fight the charges, it is clear that his ambitions to turn FTX into a comprehensive financial supermarket offering various services like payments, lending, and stock trading will not come to fruition.
The narrowing of crypto’s ambitions is evident in the current hype surrounding the approval of a bitcoin ETF. The belief is that bitcoin can function as a store of value akin to digital gold. The launch of a bitcoin ETF could potentially trigger a rally in bitcoin, similar to how inflows into gold funds boost the price of the precious metal. However, a bitcoin ETF does little to make cryptocurrencies a viable form of everyday money for purchasing goods and services, which was the original vision laid out in the bitcoin white paper.
Ultimately, the ambitions of crypto have shifted, and big money managers like BlackRock and Fidelity Investments stand to benefit from the approval of a bitcoin ETF by earning fees. Meanwhile, the creation of a decentralized financial system, known as DeFi, remains a distant goal. Initially touted as a way to cut out intermediaries like banks and provide financial services to the unbanked, DeFi has become primarily a playground for speculative trading, rather than a tool for global financial inclusion.
Investor interest in DeFi has waned, with the total value committed to decentralized-finance projects significantly declining from its peak in November 2021. This shift is reflected in the subdued atmosphere at crypto conferences and the decline in venture-capital funding for crypto firms.
In response to Bankman-Fried’s conviction, decentralized exchange Uniswap creator Hayden Adams urged the crypto industry to focus on technology, values, and avoid idolizing charismatic figures. The hope is that removing criminals from the industry will make room for honest developers to drive innovation.
While the crypto market experiences a surge, it is essential to recognize that the vision of disrupting traditional finance and creating a decentralized financial system remains elusive. For now, crypto’s ambitions have narrowed, and the industry must rethink its approach to navigate the challenges it faces.