Madoff was also involved in a highly regulated industry. That's one thing that confuses me about all of this. A main selling point - probably _the_ main selling point - for crypto has been that it allows users to avoid the current legal framework. And that was also the main reason FTX gave for moving to the Bahamas - there was much less regulations.
It's strange to see people actively seeking a space outside of the government's legal jurisdiction, and then getting incensed that the government isn't entering that jurisdiction more quickly to protect them when things inevitably go sideways.
The secret is that regulators can only have a fairly limited effect, and retrospectively. As well as the inherent jurisdiction difficulties in operating out of the Bahamas. Mind you, that's something crypto investors wanted: freedom from government!
There's a real "accountability overhang" not just in crypto but so many other things. Justice is slow and getting slower.
I agree regulations is good and I am for it. However, all of your comments are just pointing a finger at cryptocurrency as the cause of the issues here when it's not. Your arguments might be valid in other discussions, but your premise is misinformed.
The FTX fallout wasn't not a result of the asset class in question. It was much more than that. Even IF crypto had regulations, it wouldn't have been able to prevent the blatant fraud and criminal activities that happened in FTX. I would really suggest you to read more about it first.
I think that's a case-by-case thing and we're finding out the answers to it now. I had no stake in FTX and keep almost all of my rather meager crypto in paper wallets.
My point here isn't about whether or not I think crypto should be regulated. My point is if crypto is going to be regulated, shouldn't regulators be able to sniff out a bad actor? Imagine if Madoff had started working with the SEC to help consult on policy. Wouldn't people have been upset with the SEC when he went bust since he was rubbing shoulders with them?
I think what a lot of crypto people want to avoid is misguided regulation on decentralized protocols. But regulation that makes it less likely that central exchanges will rug you? I don't think many people mind that much.
SBF himself was lobbying for regulations that many people claimed would have outlawed defi in the US, pushing people to use outfits like FTX instead. People certainly do object to that.
What is the crime here? Crypto trading is done by willing individuals, no one is forcing you to participate in this market.
Moreover, “regulation” is not a synonym of “good and righteous”, especially in the US, where things are quite shady when you look from the outside. FTX was the dear of the regulators, and ended us as a massive scam. The recurrent crises in the banking sector show that regulation is, frankly, quite useless.
Furthermore, the US has a long history of using “regulation” as a way to do financial repression against its population and other countries. Crypto, among all the scams and dubious projects, is one of the last harbingers of financial freedom in a world that gets darker and darker every day on that aspect.
Don't believe me? Well, the day you'll be on the longer end of the stick, you'll understand.
People have completely unrealistic expectations of our criminal justice and regulatory system. FTX failed less than a month ago, investigators need to collect evidence of their wrongdoing, establish some sort of jurisdictional claim that allows them to be prosecuted in the US, present that evidence to a Federal Grand Jury, and then have them authorize an indictment. At that point the DOJ would need to get cooperation with wherever the executives are physically located to have them arrested and then eventually extradited.
They didn’t set up in the Caribbean for the weather, but to ensure they were largely free from US regulation. As desired by most crypto enthusiasts!
None of this is quick but as true as before, “The wheels of Justice turn slowly but grind exceedingly fine.”
Nothing to do with crypto and more with the fact FTX corporate struture is such a mess, and account owbership close to impossible to identify. Based on that, authorities on the Bahamas, which hold jusrisdiction over at least part of FTX, did their thing by getting a person, that might or might not have been in a position of authority, to comply with a legal court order.
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All in all, nothing to see here. And in case the confiscated assets cannot be confiscated by the Bahamas a court will ultimately return them.
This doesn't make any sense. There is legal clarity and regulation inside the US. Crypto largely is deliberately attempting to create ambiguity. All the financial instruments created by crypto have real world regulated equivalents, whether that's ICOs or currencies of commodities. They already exist. What was FTX doing that CME, or a big hedge fund aren't? Well for one, FTX is a mix of those two businesses - why doesn't that exist in normal finance? Because of the dead obvious conflict of interests that we have seen resulted in exactly what happened at FTX.
So what do you want? FTX to operate under the same regulations as traditional financial institutions? Ok. That's fine, but we already have those regulations, it's the crypto organisations that are pretending that they don't exist - for the exact reason they don't want to follow them.
Mad because some entrepreneurs makes the effort to build legitimate business entities, and what certain governments find to do is any scheme to keep them out of legitimity.
Not that crypto fans would care all that much about these businesses, but there is a need to onramp and offramp given transactions are made in their vast majority in fiat. An exchange run as a business having at least a lot at stake in ensuring continuity is one of the decent ways to get on with crypto.
If it was my call I would skip the perp and earn products to stay clear of regulators when operating in the US, but there must be stories behind closed doors that we don't easily get to know would be my guess.
In my opinion, authorities avoided regulating this space because they already have a precedent. They convinced Bitfinex to use multi-segregated wallets to store customer funds, and this resulted in the Bitfinex Hack. My guess is that authorities are probably keeping too careful when it comes to regulation.
The great part about this is that you are not forced to use cryptocurrency. It is entirely voluntary.
I like cryptocurrency as an open platform. I don't have a problem with the market clearing out the speculative mania. I do disagree with detractors who admit that they have no use for cryptocurrency demanding regulation. If you like regulated markets, stick to them. If you love the security of the petrodollar, good on you. Live and let live.
Can I just publish a few cryptogames without the obscene generalizations?
The worst part of this is that the entire FTX debacle comes on the heels of SBF demanding even more regulatory capture. Shades of Bernie Madoff. The insider connections to regulatory bodies and SEC board members. History repeats itself.
There's a big difference between offshore crypto - where the name of the game was (apparently) to evade US KYC/AML & securities law, and domestic companies trying to operate within the law.
Binance, FTX, etc. are the former, and I'd say Coinbase is the latter... there's a big difference between wilful non-compliance, and disagreements between regulators and counsel at firms like Coinbase about interpretation of law.
The fact that all of these regulatory actions are happening at once suggests that regulators either may not appreciate the difference or may not care, which is unfortunate.
To all the people replying that crypto isn't regulated: that's a myth. Exchanges are regulated and keep KYC info of their customers.
If the FTX hack is true, then all that KYC info will be sold in the black market.
Regulation didn't prevent the hack (or rug-pull?). Self-custody with DeFi does prevent it.
It's shocking how some people are for tinkering hardware/software and self-hosting services like Nextcloud, but it comes to money they would rather leave their life savings with a third party (a bank or a custodial exchange) and renounce to all financial privacy.
Yes, that's the selling point of crypto. This is not about crypto however, which continues to work perfectly fine, this is about an exchange.
Nobody would be opposed to have these companies audited. In fact people have been asked for tether and so on to be audited for ages.
The problem is anytime regulations are mentioned, they are about hurting the user, and not preventing things like FTX from happening.
I'm talking of things like the bill SBF himself proposed, which aimed to fuck defi (actual crypto, where you can't steal people's money like FTX did), to force people into these centralized exchanges where you don't actually own or hold any crypto.
The USA has an incredibly robust, tightly monitored and regulated financial market. The SEC, FDIC and associated regulators and auditors carefully control bank reserves, prosecute insider trading, prevent and insure against fraud.
Some people decided to opt-out of that system and send their money to an unregulated entity in the Bahamas to buy imaginary money without government oversight.
Honestly the government shouldn't have intervened here at all. The people who lost money should have been laughed at and told that's why you put your money in the regulated market. If you intentionally try to avoid taxes, anti-money laundering regulations, audits and securities law by buying crypto overseas, then taxpayer resources don't go bail you out.
Somewhat unrelated to this article, but could someone clear up a point of confusion for me?
There are people blaming the CTFC and Congress and the Democrats that SBF donated to for not regulating this.
But was FTX (the Bahamian entity) even under their purview?
AFAIK, you weren't even allowed to access FTX from a USA IP address, you had to use a VPN. You could access FTX US which was a different thing and offered a much smaller subset of the products FTX did (and that business seems solvent?)
Like what jurisdiction does the USA have over a crypto exchange elsewhere? I know anything that touches a US dollar can be tried in a Manhattan court and maybe he gets convicted of a crime and extradited here. But like Japanese banks touch US dollars as well, but the USA doesn't get to regulate them, right?
Feds allege that about every unregulated crypto exchange of any kind.
It does seem like this particular business was relying upon legal hacks and obscurity more than following the established rules for financial firms, probably for ideological reasons.
Hold on a second, I thought the whole point of crypto was having minimal to no government regulations. Now the article’s author wants to blame the SEC for having minimal to no government regulations?
well sure because that's what crypto advocates are paid for. States can very easily take legal action against businesses that circumvent trade sanctions through crypto currency. And with businesses and institutional investors out of the window, it's uninteresting.
It's strange to see people actively seeking a space outside of the government's legal jurisdiction, and then getting incensed that the government isn't entering that jurisdiction more quickly to protect them when things inevitably go sideways.
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