The downfall of the ‘king of crypto’ could reverberate for years: Morning Brief

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The downfall of the ‘king of crypto’ could reverberate for years: Morning Brief

Brian Sozzi

·Anchor, Editor-at-Large

Wed, November 16, 2022 at 4:00 AM·5 min read

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Wednesday, Nov. 16, 2022

Today’s newsletter is by Brian Sozzi, an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Read this and more market news on the go with Yahoo Finance App.

Trust is a vital element in investing — stocks, bonds, you name it. I trusted Walmart when it reported Tuesday that sales increased last quarter. I trusted Walmart CFO John David Rainey when he told me on Yahoo Finance Live about the retailer’s expectations for holiday sales. I trust that when I buy a bond, I will get the principal back with interest at some point in the future.

Unfortunately for crypto, the space now faces a major trust deficiency in the wake of the FTX implosion. The cryptocurrency exchange filed for bankruptcy last week, and its CEO, Sam Bankman-Fried, resigned. SBF, as he’s known, became a crypto billionaire and a star in the industry by the time he was 29. Now, at 30 years old, SBF has lost his fortune and admitted to loaning FTX customer funds to Alameda Research, a trading firm he co-founded.

UNITED STATES - MAY 12: From right, Terrence A. Duffy, CEO of the Chicago Mercantile Exchange, Sam Bankman-Fried, CEO of FTX US Derivatives, Christopher Edmonds, chief development officer of the Intercontinental Exchange, and Christopher Perkins, president of CoinFund, testify during the House Agriculture Committee hearing titled Changing Market Roles: The FTX Proposal and Trends in New Clearinghouse Models, in Longworth Building on Thursday, May 12, 2022. (Tom Williams/CQ-Roll Call, Inc via Getty Images)
Sam Bankman-Fried, third from left, testifies during the House Agriculture Committee hearing titled Changing Market Roles: The FTX Proposal and Trends in New Clearinghouse Models, in Longworth Building on Thursday, May 12, 2022. (Tom Williams/CQ-Roll Call, Inc via Getty Images)

Cryptocurrency already had a reputation for carrying more risk than traditional investments. But the FTX drama has no doubt sowed even more doubts about digital assets.

“I mean, in fact, in a sense, SBF is like the Jordan Belfort of the crypto era. Instead of ‘The Wolf of Wall Street,’ they’ll make a movie called ‘The King of Crypto,'” Microstrategy founder and bitcoin bull Michael Saylor told me on Yahoo Finance Live this week.

Belfort pleaded guilty to fraud connected with stock market manipulation in 1999 and spent 22 months in prison. He was then portrayed by Leonardo DiCaprio in the 2013 movie “The Wolf of Wall Street.”

SBF has not been charged with a crime, but a criminal case against him is not out of the question. Federal prosecutors in Manhattan are investigating the FTX collapse, the Wall Street Journal reported, citing unnamed sources familiar with the matter. Still, U.S. prosecutors may run into difficulties because FTX is based in the Bahamas, where SBF lives in a house with a group of friends.Story continues

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