3 Things That Can Destroy Crypto Exchange Named by SEC Chair, FTX as Example
During his recent appearance on CNBC's Squawk Box show, SEC boss Gary Gensler was snowed under with questions about the agency's investigation into the FTX situation.
He also named three stones that can drag a crypto exchange down to the bottom and destroy it.
Three things that destroyed FTX, per Gensler
Gary Gensler reminded the host Andrew Sorkin that he cannot disclose anything about the SEC's current investigation into FTX. However, he shared a few other interesting things.
He reminded Sorkin about the collapse of Terra Luna and then of several crypto lending platforms, likening FTX to those and saying that they are all interconnected.
He believes that the sad situation with FTX is as old as finance, and it was down to three things – "a bunch of customer money," "non-disclosure" and "leverage" as FTX borrowed against its clients' money.
"When you mix together a bunch of customer money and borrowing against it, investors get hurt," says @GaryGensler. "This is a very interconnected world in #crypto with a few concentrated players. When markets turned on them it appears that a lot of customers lost money." — Squawk Box (@SquawkCNBC) November 10, 2022
There are a few concentrated players in the crypto space, Gensler stated, and FTX was one of them. As it and its token began sinking, the crypto space got an electric shock. Bitcoin falling below the $18,000 level was one of its consequences. Besides, a lot of investors lost money not only on the FTT token but also on other cryptos falling in price.
Overall, Gesler stated that investors need a lot more protection in the space than they have now.Source