Disgraced billionaire Sam Bankman-Fried, founder and former CEO of FTX, has made it known that he will testify before the U.S. Congress after he's done “learning and reviewing” the events that caused the leading crypto exchange to collapse and file for bankruptcy. 

If by “learning and reviewing” he means “strategizing the best way to stay out of prison,” we might be waiting a while. Because SBF, as he was known to community enthusiasts and people who put their trust (and their savings) in his supposed genius, didn’t just fail his company and investors. He also failed the crypto community by leveraging its belief in new and innovative business models, and their enthusiasm about FTX getting as big as it did, to commit alleged fraud.

Cryptocurrency Market Capitalization 2014–2022

  • Dec. 1, 2014: $5.9 billion
  • Dec. 1, 2015: $5.84 billion
  • Dec. 3, 2016: $14.2 billion
  • Dec. 3, 2017: $352 billion
  • Dec. 1, 2018: $135.5 billion
  • Dec. 1, 2019: $201 billion
  • Dec. 3, 2020: $580 billion
  • Dec. 3, 2021: $2.5 trillion
  • Dec. 1, 2022: $890 billion
  • Source: CoinGecko.com

It has been reported that he created many back doors to steal crypto, and that he did so with the help of high-profile people who may not have known the full extent of his criminal activities. The Financial Times reports that Sam Bankman-Fried’s Alameda Research was “allowed to exceed normal borrowing limits on the FTX exchange since its early days,” which illustrates how the trading firm “enjoyed preferential treatment over clients years before the 2022 crypto crisis.” 

The whole time, of course, customers and investors were none the wiser, and while FTX and Alameda appeared as “distinct entities to avoid the perception of conflicts of interest,” SBF made bank in the Bahamas. 

More On Crypto RegulationsU.S. Sanctions on Tornado Cash: What Does This Mean for Crypto?


Heavy Repercussions

It’s only natural that the negative effects of this unfortunate saga will have heavy repercussions on the whole industry. While we wait with bated breath to find out exactly what those will look like, we can begin to theorize as to what the legal and regulatory ripple effects of FTX’s collapse might be.

In the long-term, this will affect centralized blockchains and centralized projects that actually more or less have their days numbered. Take the average retail investor: even once they understand what a centralized crypto service is, they are going to stay away from them, unless a better decentralized model is available.

What we have to look at is how regulation is going to affect crypto, and effectively shape its future, while at the same time people become more and more educated on decentralized services. Despite all the regulations targeted at crypto markets and business models, governments will necessarily need to find new ways of infringing on decentralized services. There are ways in which lawmakers and regulators alike can really come after people, for almost any reason they want, which is a terrifying prospect for anyone interested in developing the sector further or even simply being a part of the future of Web3.

While the Tornado Cash developer, Alexey Pertsev, is in prison on suspicion of money laundering, people like Do Kwon (of Terraforma Labs and Luna fame) and Sam Bankman-Fried are walking free. It makes no sense.

Read More About Crypto What Does the Collapse of FTX Teach Us About Entrepreneurship?


Looking to the Future

What this is really about is time. 

We need to look to the future, and try to predict what might happen over the next five or ten years. Realistically, the universal need for consolidated decentralization and something like Decentralized Finance is upon us, and their actualization and widespread adoption simply is a matter of time. 

Governments will try to play catch up as always, and regulators and big businesses will try to adapt as best they can. Eventually, and perhaps inevitably, ordinary folks who have waited this long to join the crypto game will grasp the fact that you can withdraw your money from centralized banks and put it in crypto, and this simple act will change everything. 

Look at it like this: if you leave your money with another custodial service, like a centralized exchange, it is still theirs. They own it. They can keep it, do whatever they want with it, use it as collateral, even use it to protect their sister company (yes, Alameda Research, I’m looking at you) — just like a bank would be able to, if you chose to entrust them with your hard-earned cash. The bank has the money, not you. 

Now, it doesn’t work like that when it comes to blockchain technology, and the world is still catching up with the new and complex mechanisms at play. Regulators have a hard time leveling the score, because they are still employing antiquated mentalities and basing their actions on outdated beliefs that have no place in the world as we know it today. They still want to protect the centralized banking system that the whole world runs on, while people want to do away with the whole system and rewrite the rules of the game from scratch. 

It’s a battle fought on entirely different levels, and only time will tell which side will manage to write the history of the next decade or so. One thing is for certain: it will be a decade to remember.

Expert Contributors

Built In’s expert contributor network publishes thoughtful, solutions-oriented stories written by innovative tech professionals. It is the tech industry’s definitive destination for sharing compelling, first-person accounts of problem-solving on the road to innovation.

Learn More

Great Companies Need Great People. That's Where We Come In.

Recruit With Us