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The implosion of FTX last fall dealt crypto a black eye, bruising the nascent industry’s reputation in terms of legitimacy and trust. And this damage is vast, according to Ava Labs CEO and Founder Emin Gün Sirer.
“The damage that Sam did is immeasurable,” he said on the latest episode of the gm from Decrypt podcast. “All of that goodwill that we built over many, many years of hard work is just usurped by some guy who comes in and puts on this boy genius act.”
Sirer said he’s seen the digital assets industry “blossom from nothing” into what it is today. And he said he worked hard as a professor of computer science at Cornell University to foster education around blockchain technology, such as briefing politicians and hosting workshops.
The thought of how far Bankman-Fried set the industry back is something that keeps Sirer up at night, he said, conscious of shifting tides in regulatory circles that could be “very bad” for those that are involved in crypto.
As digital asset prices careened downward last summer, the reputation of FTX founder Sam Bankman-Fried ascended to new heights, as the 30-year-old entrepreneur was compared to John Pierpont Morgan in 1907 for rushing to save embattled crypto firms.
But last November, Bankman-Fried’s reputation swung in the opposite direction as FTX collapsed. The company filed for bankruptcy after a run on the exchange was sparked by a steep drop in FTX’s FTT token, which revealed FTX did not have one-to-one reserves of customer assets and could not honor withdrawals.
Bankman-Fried was then arrested and charged with a litany of financial crimes, ranging from fraud to money laundering, for allegedly misappropriating billions of dollars worth of customer funds. He’s pleaded not guilty, and while additional charges were tacked on last week, the FTX founder has been likened to Bernie Madoff by some of his former business partners since his empire came crumbling down.
Sirer attributed the lack of scrutiny that Bankman-Fried received to the image the FTX founder cultivated, from his “tousled hair” to spending “so much on marketing that the world [treated] him as a genius that cannot be questioned.”
Dealing with the aftermath of FTX’s collapse—which included the failure of dozens of other companies and projects caught up in the contagion—will hinge on establishing a constructive dialogue with regulators, Sirer said.
It’s essential to distinguish to lawmakers that FTX’s fate was the failure of a centralized entity and not a failure of crypto itself in “any shape or form,” he said.
The FTX saga has sent Sirer searching for a silver lining. While he recognizes that a lot of retail investors were harmed by FTX’s swift implosion and the resulting contagion that spread to other businesses, he said he believes the damage would’ve been greater if left unchecked for longer.
“If we had given Sam a couple more years of runway, it would have been far worse,” he said, referencing the many crypto retail investors and venture capital firms damaged by their faith in SBF.
Another consolation is how Bankman-Fried has thrust digital assets into the mainstream as a result of his alleged mismanagement of FTX, putting certain tokens on the public’s radar. “I no longer have to educate people on what Bitcoin [or] Ethereum is,” he said.
Sirer said he’s also relieved that Ava Labs was never a so-called Sam coin, tokens championed by the disgraced crypto mogul which were allegedly inflated in price, including Solana and FTX’s exchange token FTT.
“We were never a Sam coin, and therefore we stayed out of that whole craziness,” Sirer said. “And we're just thanking our lucky stars for it.”