Opinion: Crypto is out of control. FTX is just the latest example

Editor’s note: Casey Michel is a writer and investigative journalist covering kleptocracy and dark money networks around the world. He is the author of “American Kleptocracy: How the US Created the World’s Largest Money Laundering Scheme in History,” and is working on a book investigating foreign lobbying in Washington. The opinions expressed in this article are his own. Read more opinion on CNN.com.


As investigators and authorities continue to analyze the consequences of the collapse of the cryptocurrency exchange FTX, the contours of the implosion are becoming clearer. It will likely take many more months to unravel the web of corporate greed and financial malfeasance at the heart of FTX’s bankruptcy. But we can safely say that the company owes billions of dollars to creditors and, according to sources, at least one billion dollars to clientelein what appears to be the biggest crypto crash to date.

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Friendly lawmakers, regulators and celebrities have granted former FTX CEO Sam Bankman-Fried legitimacy, but in the meantime, he was reportedly moving client funds to prop up his related business. Comercial House, allowing him and the company to climb so high and collapse so quickly. And it was the smoke and mirrors that obscured how quickly the cryptocurrency industry became part of the offshore economy and how easily traditional tax havens made it possible.

If anything, the stupendous collapse of FTX shines a light on how symbiotic the entire crypto industry now is with the world of offshore finance, and how open the entire industry is to scammers and scammers, with offshore havens vying to offering criminals the types of allowances, and the lack of regulation, need to thrive.

On Wednesday, during a virtual interview at the New York Times DealBook Summit, bankman-fried He said he “screwed up” and accepted responsibility for the failure of his company, but denied that he tried to defraud investors and customers. But the implosion of Bankman-Fried and FTX is something that the cryptocurrency industry, and even those who are widely familiar with the financial world, could have foreseen, and probably should have. Not only were there all kinds of red flags about FTX’s background, but Bankman-Fried also decided to base its operations on the bahamasone of the most notorious tax havens in the world.

An “offshore haven” can be a somewhat confusing term, but in short, it is any jurisdiction that offers its clients sufficient anonymity so that they can freely hide their wealth or create entire financial operations that are not subject to supervision. The Bahamas It emerged in the early 20th century as a place for wealthy Westerners to hide their finances—and financial fraud—from anyone who would investigate. And although it may not be the center of the relocated world that that once washas recently resurfaced as tax haven. More importantly, “offshore” doesn’t have to mean just banking; instead, as we saw when Bankman-Fried said it moved headquarters to the Bahamas because of its crypto-friendly reputation, it can spread to other industries as well.

So when cryptocurrency emerged as a major player in its own right, it was the Bahamas that stepped up. The Bahamian government made a conscious decision to recruit as many of the growing crypto industry as possible, with Prime Minister Philip Davis hoping to make the Bahamas an “ideal destination for [crypto] operations.” Davis got his biggest client last year when FTX announced that it would be based in the Bahamas, assisting the islands in their efforts to recruit crypto business.

Now, the Bahamas is reeling, and many surely have questions about the country’s regulatory oversight, or lack thereof. In a national address late last month, the nation attorney general defended its regulatory practices, noting the government’s shock at the “ignorance of those who claim that FTX came to the Bahamas because they did not want to submit to regulatory scrutiny.”

And finally, questions are also being asked about the relationship between cryptocurrencies and the broader world of offshore finance. It’s a relationship that has seen surprisingly little attention compared to things like real estate, luxury yachts Y artwork – thanks in large part to the oligarchs surrounding Russian President Vladimir Putin, and how they have used these offshore services to hide their wealth. And there’s actually been fantastic progress trying to shut down some of these offshoring services over the past year, from the US. legislation ban anonymity fictitious companies towards United Kingdom finally moving to target the kleptocrats who park their wealth in London real estate.

But cryptoStrangely enough, it hasn’t seen as much attention or concern. Maybe it was all the excitement surrounding the new technology. Perhaps it was all the get-rich-quick promise associated with early crypto-entrepreneurs. Maybe it was just the fact that several Famous FTX approved.

Whatever it was, researchers and lawmakers apparently didn’t realize that cryptocurrency had become as entangled in the world of offshore finance as any other industry. Amid its meteoric rise, the cryptocurrency market has been something of a financial wrestling match. A complete shortage of regulation compared to the rest of the financial world has allowed the industry to spiral out of control, ending up in the kind of Ponzi scheme affairs FTX illustrates.

That is why the FTX affair will not only be seen as a tipping point to finally link cryptocurrencies with the world of offshore finance, but because of what the regulating hammer down throughout the industry. It remains to be seen what form those regulations will take, but figures like Treasury Secretary Janet Yellen have already called for increased regulatory oversight.

But now, the billion-dollar bill is about to expire, a bill that Bankman-Fried depositors, still searching for their money, won’t be able to afford.