As Sam Bankman-Fried heads to trial, many digital-asset players remain in survival mode.
-- Sara Feenan took the plunge in 2017, leaving a career in finance for the brave new world of crypto.
While that cloud of skepticism and suspicion has hung over the asset class from the beginning, it’s perhaps never been thicker than in the months since the downfall of FTX and its enigmatic leader Sam Bankman-Fried. The cloud isn’t likely to lift anytime soon as Bankman-Fried prepares to face trial next week for what prosecutors allege was one of the biggest financial frauds in US history. He has pleaded not guilty to the raft of charges against him.
“I’ll be honest and say it's been miserable,” said Nico Cordeiro, chief investment officer of crypto hedge-fund Strix Leviathan. “The revenue is minimal just because of the conditions in the market. You're not bringing in new investors because nobody's investing in the space. The players in the space are kind of in survival mode: Keep operations going for as long as it takes for capital to start returning to the space.
"As soon as I tell someone my startup is related to crypto, they clench up. That is the first reaction I get," he said. “You also have investors who are very skeptical to give us money, especially after the FTX crap. They are afraid of lawsuits." Yet surprisingly, the courts also have been a rare source of optimism that has likely helped cryptocurrency prices find a floor, according to Georgetown University finance professor Reena Aggarwal. She cited an appeals court ruling last month that overturned the SEC’s decision to block Grayscale Investment LLC’s proposed spot-Bitcoin exchange traded fund, and another judge’s ruling that Ripple Labs’ XRP token isn’t a security when sold to the general public.
“The silver lining here is it just advances that conversation in every jurisdiction globally because everyone realizes this industry is not going to go away,” he said. “You can imagine there’s a pre-FTX digital-asset industry and then a post-FTX digital-asset industry. And I think that this will go down potentially in history as a marking point for when the industry became institutionalized, credible and regulated.
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