Sam Bankman-Fried played with the government and got burnt. Much of the discussion surrounding the FTX debacle has centered on how the lack of crypto regulations allowed people like Sam Bankman-Fried to defraud everyone. The real lesson of the FTX corruption scandal, however, is that a member of the ruling class was once again able to manipulate the system to his advantage. And this is precisely what happens when a massive administrative state wields so much power in our government.
SBF wanted to manipulate the system
Multibillion-dollar healthcare corporations play an active role in shaping healthcare legislation. The largest pharmaceutical companies influence our drug laws. America’s largest food processors dictate our dietary and nutritional guidelines.
So it’s not surprising that Sam Bankman-Fried (SBF) decided to try the same thing. He gave millions to members of Congress and frequently met with Biden White House officials, the chairman of the SEC, and the chairman of the CFTC, all in an attempt to pass regulations that ran counter to everything Bitcoin stands for but would benefit his company while driving competitors out of the market.
The Status Quo needs to go
The scope of corruption FTX participated in revolves around more than money laundering. SBF used his hedge fund, Alameda Research, to siphon clients’ money out of FTX. Most of this money allegedly ended up in either SBF’s accounts or those of his close circle. But SBF’s close relationship with Congress and regulators shows he was parading right under everyone’s nose.
So, as long as SBF kept his elite class connections and said the right things about how he would help with climate change, save the world, and fix the weather—you know, the usual nonsense— he could avoid politicians scrutinizing his business. That, in essence, is the moral of the story.
More government regulations aren’t always the answer. Why? Because they’re almost always designed to benefit the powerful. Instead, it’s time to demand accountability from corrupt government officials and system gamers like SBF. It’s unlikely we’ll see any change until that happens.