The FTX Crypto Victim Card Can Be Hard to Play
The crypto industry has suffered many booms and busts in its brief lifespan, but nothing like this. Sam Bankman-Fried, currently sitting in a Bahamian jail, has been accused by the US securities regulator of orchestrating a years-long fraud that diverted billions in customer funds from opaque and offshore exchange FTX to a now-bankrupt trading empire.
The outrage among FTX's roughly 1 million creditors is understandable, as is the skittishness of investors yanking money from other crypto platforms like Binance. Bankman-Fried has tried to present himself as a naive 30-year-old who got out over his skis, but each day brings new reports of elaborate internal tools used to support the profits of trading firm Alameda.
Less understandable, however, is the narrative of victimhood emerging from crypto-friendly firms that did business with FTX as an apparently trusted counterparty.
That includes entities that themselves went under months ago, such as crypto hedge fund Three Arrows Capital — whose co-founder recently claimed FTX colluded to bring it down — and crypto lender Voyager Digital, which said it was “shocked, disgruntled and dismayed” by FTX's collapse. (Voyager had in September agreed to be bought out of bankruptcy by FTX.)
Meanwhile, Silvergate Capital Corp., which provided banking services to FTX and Alameda, is now in the sights of three US senators who want information on fund transfers between the two entities. Silvergate says it was a “victim” and will cooperate fully.
The causality of some of these claims is a little ironic, considering the likes of Three Arrows Capital and Voyager first went under as a result of a market-wide loss of confidence in crypto following the collapse of stablecoin Terra — and they
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