While details of FTX’s collapse continue to emerge, the core of its downfall stems from a murky, damaged market, according to one tech entrepreneur.
“It’s almost like the equivalent of the biggest market maker, the biggest bank, the biggest stock exchange, and the biggest hedge fund all crashing at the same time. So Web3 and the crypto capital markets look like they’re broken,” AVA Labs President John Wu said at ” Cavuto: from coast to coast.”
On Wednesday, the founder of cryptocurrency exchange FTX Sam Bankman-Fried was hit with a class-action lawsuit by investors claiming that he and other high-profile celebrities have caused consumers over $11 billion in damages.
FTX, which at its peak was the third largest cryptocurrency exchange, filed for Chapter 11 bankruptcy protection on Friday, and the company confirmed over the weekend that millions of dollars worth of assets were gone. The company’s founder, Sam Bankman-Fried, faces allegations that he secretly transferred $10 billion from FTX to Alameda Research, his hedge fund that also filed for bankruptcy.
INSIDE THE FTX CRYPTOBURCH COLLAPSE: EVERYTHING YOU NEED TO KNOW
John Wu claimed that “the whole spirit of cryptocurrency is transparency and all [Bankman-Fried] did and everything FTX did was not really in the spirit of what crypto is, which is transparency and less centralization.”
Until now, investors have struggled through the shocking collapse despite deep-seated investor uncertainty about the future of the crypto world.
The fall of FTX has drawn comparisons with previous financial crises such as Enron, Adelphia and Lehman Brothers – all of which left major scars on the financial world. While the economic consequences of FTX’s collapse are nothing short of historic, Wu argues that the “loss of confidence” in the crypto space will have an even worse effect on the market.
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“It’s almost as if the lessons of the past have not been learned. So there is no confidence in the system that will start to improve,” he continued.
Eric Revell and Greg Norman of Fox Business contributed to this report