Bring on the Crypto Regulators
Bloomberg Businessweek US|December 12, 2022
○ If FTX had followed existing US rules, many customers would have been protected and it may not have imploded
Bring on the Crypto Regulators

In retrospect, there were red flags everywhere. Sam Bankman-Fried’s FTX crypto empire was a tangled web of offshore companies rife with conflicts. It mixed client money with its own. It had little or no corporate governance. There were few financial disclosures. But there were celebrities— lots of celebrities.

As prosecutors and creditors circle, everyone seems to be asking a version of the same two questions: How could this have been allowed to happen? And what can be done to keep it from happening again?

The FTX flop has driven home that a large chunk of the digital-asset industry thrives in regulatory gray zones and jurisdictional gaps, adding urgency to calls for new laws and regulations. Yet many experts agree that even though its offshore location put it largely outside US jurisdiction, there already are road-tested rules that might have prevented FTX’s downfall, if only they’d been followed. “FTX is a centralized entity like any other corporate entity,” says Carla Reyes, an assistant law professor at the SMU Dedman School of Law. “It wasn’t a case that the rules didn’t exist. It was a case that they didn’t follow them.” In interviews with securities experts and statements from lawmakers and regulators, five areas have emerged as crucial for Congress and regulators to focus on.

○ COMMINGLING OF ASSETS

At the center of a string of crypto failures is the lack of protection of customer assets. FTX may be the most egregious case, having lent customer funds to its sister company, hedge fund Alameda Research, to shore up risky trades.

This story is from the December 12, 2022 edition of Bloomberg Businessweek US.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

This story is from the December 12, 2022 edition of Bloomberg Businessweek US.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

MORE STORIES FROM BLOOMBERG BUSINESSWEEK USView All
Instagram's Founders Say It's Time for a New Social App
Bloomberg Businessweek US

Instagram's Founders Say It's Time for a New Social App

The rise of AI and the fall of Twitter could create opportunities for upstarts

time-read
4 mins  |
March 13, 2023
Running in Circles
Bloomberg Businessweek US

Running in Circles

A subscription running shoe program aims to fight footwear waste

time-read
3 mins  |
March 20 - 27, 2023
What I Learned Working at a Hawaiien Mega-Resort
Bloomberg Businessweek US

What I Learned Working at a Hawaiien Mega-Resort

Nine wild secrets from the staff at Turtle Bay, who have to manage everyone from haughty honeymooners to go-go-dancing golfers.

time-read
10 mins  |
March 20 - 27, 2023
How Noma Will Blossom In Kyoto
Bloomberg Businessweek US

How Noma Will Blossom In Kyoto

The best restaurant in the world just began its second pop-up in Japan. Here's what's cooking

time-read
3 mins  |
March 20 - 27, 2023
The Last-Mover Problem
Bloomberg Businessweek US

The Last-Mover Problem

A startup called Sennder is trying to bring an extremely tech-resistant industry into the age of apps

time-read
10+ mins  |
March 20 - 27, 2023
Tick Tock, TikTok
Bloomberg Businessweek US

Tick Tock, TikTok

The US thinks the Chinese-owned social media app is a major national security risk. TikTok is running out of ways to avoid a ban

time-read
10+ mins  |
March 20 - 27, 2023
Cleaner Clothing Dye, Made From Bacteria
Bloomberg Businessweek US

Cleaner Clothing Dye, Made From Bacteria

A UK company produces colors with less water than conventional methods and no toxic chemicals

time-read
3 mins  |
March 20 - 27, 2023
Pumping Heat in Hamburg
Bloomberg Businessweek US

Pumping Heat in Hamburg

The German port city plans to store hot water underground and bring it up to heat homes in the winter

time-read
3 mins  |
March 20 - 27, 2023
Sustainability: Calamari's Climate Edge
Bloomberg Businessweek US

Sustainability: Calamari's Climate Edge

Squid's ability to flourish in warmer waters makes it fitting for a diet for the changing environment

time-read
4 mins  |
March 20 - 27, 2023
New Money, New Problems
Bloomberg Businessweek US

New Money, New Problems

In Naples, an influx of wealthy is displacing out-of-towners lower-income workers

time-read
4 mins  |
March 20 - 27, 2023