Sam Bankman-Fried and the FTX Saga Could Be a Blessing in Disguise for Crypto and NFTs. Here's Why. With these markets still in their infancy, investigating and adjudicating the FTX scandal will turn out to be a vital evolutionary, developmental and restructuring step.
By Jonny Caplan
Opinions expressed by Entrepreneur contributors are their own.
While navigating a tragedy, few people welcome a comment like, "It was all for the best." Too often we hear this pep talk from compassionate friends or family, as we quietly think to ourselves, They just don't understand what I'm going through.
But do they? A recent investment scandal might offer some insights into why that cliché can be spot-on after all.
Truth be told, there have been many bad eggs in the crypto space: The sheer fact that the technology was created to allow for anonymity created a breeding ground for hustlers and scammers. But over the last few months, the U.S. government (including the SEC) has finally been cracking down on Web3 crooks, with the first NFT indictment — filed on June 1, 2022 by the U.S. Attorney's Office of the Southern District of New York and charging Nathanial Chastain of the NFT marketplace OpenSea with wire fraud and money laundering — and with an abundance of other rug-pulls currently being investigated by a variety of law enforcement agencies.
For a market to mature and evolve, bad actors must be identified and quashed, and in assessing these recent scandals, what I have never understood is why someone would think about doing a crime on a digital public ledger. I mean, yes, some of the tools can be used anonymously, but nothing digital is untraceable.
Related: How This Digital Currency Will Transform The World and Benefit Cashless Societies
Sam Bankman Fried (SBF) and his FTX crew have allegedly committed among the most major financial and securities crimes of the new century, a case for the courts to now decide. Many in the media have been quick to characterize this as the "nail in the coffin for crypto" or "The end of Web3," in a long-apparent journalistic sea of anti-crypto bias.
There are certainly many cowboys/pirates still in the Web3 domain, and I do not doubt that a string of indictments and the SBF situation will send fear into the hearts of some investment opportunists and crypto execs. But consider a few points when assessing the situation broadly:
1. SBF and FTX are not representative of the market in general. Every company consists of key individuals (one of the reasons why VCs often invest in people, not necessarily companies), and they are responsible for what happens within it, not simply "the market" or technology.
2. For every bad crypto actor taking advantage of other human beings, there is a good one helping others and creating opportunities. Would you blame the gun for murdering someone, or is it the person holding it? I have personally seen what others in Web3, along with its opportunities and resources, have done for the underprivileged.
3. FTX was clearly a unique and complex example, about which we may never know the full story, and it certainly is not a typical Web3 enterprise.
Related: 5 Things to Expect from Crypto in 2023
4. Regulation was coming anyway, with or without FTX. The fact that trauma has occurred may well accelerate the need to deal with this faster and regulate the market, hopefully in an effective and non-damaging way.
5. The world has awakened to the world of crypto, and a myriad of media outlets are now reporting on FTX and other incidents. But, as P.T. Barnum said, "There's no such thing as bad publicity."
6. Apart from FTX (which I had never heard of before this incident: something I can say about many players in this space), there have been billions being injected into Web3, crypto, NFT, blockchain and metaverse projects. Almost every major brand is developing or launching associated strategies. META recently spent $10 billion developing their metaverse, an amount which might not even be enough, given that Apple, Google and many others are creating and investing in similar platforms. The market is only in its infancy, and the removal of bad can only do it good.
Don't get me wrong: I am not trying to play down or justify any of the bad acts that might have been committed at FTX or any other player in the Web3 market. If they have acted wrongly, they should be dealt with accordingly. As philosopher Alfred A. Montapert said, "Nobody ever did, or ever will escape the consequences of his choices."
My point is that this tragedy can lead to more transparency — enhance due diligence on the part of investors and partners in Web3 companies, result in more guidelines for safer market interaction and increase users' understanding. The result will be cleaner and more efficient (and fair) sectors, a better understanding of the risks, fewer bad actors, and boosted efficiency, trust and accountability.
Lastly, this market is still heavily under-developed, with its technology still in its earliest stages and with little to no legal guidelines, regulation or accountability. There's a lot to be done, and with the downturn over the last year, the only real way is up.
I view the FTX situation as akin to a tumor that lingered for years. Had FTX endured in its compromised state, it would have been even worse for crypto. Bernie Madoff managed to commit a similar crime, just with very different tools: Crypto or Web3 isn't to blame, they just happened to be the tools chosen by these perpetrators.
Thankfully, the tumor was identified and is supposedly in the process of being sectioned from the healthy parts of the body. Therefore, it's time for recovery and rehabilitation, and then perhaps we can enjoy some of the benefits of this intriguing sector.
Web3, blockchain, crypto, NFTs and the metaverse all have the power to be used for good or bad. For example, blockchain could be used for socialism, crypto could be used to steal, NFTs could be used for plagiarism, etc. But we can embrace new technologies and regulate, police, verify and work together to stamp out negative uses of an otherwise empowering technology. The framework of this new Web3 market enables us to change the world and provide access, opportunity and reward to some of the most persecuted and famished people on the planet.
Let's not blame the tools for our choices and actions, but instead work together to refine our behavior — to protect, elevate and use resources to benefit each other.
Related: $465 Million of Robinhood Shares Linked to FTX's Sam Bankman-Fried Are in Question — What Now?
