Anyone familiar with crypto trading had a pretty good “spidey sense” that something wasn't right with the now bankrupt digital asset exchange FTX, according to Arthur Hayes.

The former BitMEX CEO claims just about everyone knew that the failed crypto exchange FTX was “a little bit shady,” but most investors in the company were blinded by greed, he says.

In a scathing attack on the ethics of the broader crypto industry during a recent guest appearance on the gm from Decrypt podcast, Hayes said he's sure investors knew that FTX founder Sam Bankman-Fried was running some sort of public image game. But as long as SBF was successful and made them money, investors were willing to ignore the disgraced founder's methods, says Hayes.


“If you actually ask people who know about trading, you would know there was latency arbitrage happening on the exchange,” referring to a trading strategy used by investors to capitalize on minor price discrepancies for the same asset across different markets.

“Market makers did not want to trade on FTX, because they knew they were going to front-run. This stuff was common knowledge,” Hayes said. Front-running is taking advantage of pre-market knowledge to buy or sell before other trades have been executed. According to November report from crypto compliance firm Argus, FTX's sister trading firm Alameda Research would routinely front-run token listings on FTX.

“Everybody knew that this exchange was a little bit shady, but it didn’t matter. Right? Because they were still around. And this is crypto, right?,” continued Hayes, adding that “everyone had their spidey sense of something might not have been right.”

FTX, whose valuation ballooned to $32 billion by early 2022, collapsed in November of the last year following a selloff of its FTT token and a liquidity crunch on the exchange that revealed the company did not hold one-to-one reserves of customer assets.


Bankman-Fried has since been arrested and charged with 13 financial crimes related to the exchange's collapse. The founder has pleaded not guilty to all charges and is currently awaiting a trial scheduled for October. In various interviews following FTX’s demise, SBF blamed the liquidity crisis on mistakes and mismanagement, but denied knowingly breaking the law or misleading investors.

To bolster its image, FTX had used endorsements from celebrities like Tom Brady and Larry David, while SBF himself was actively courting prominent politicians and regulators across the U.S. and donating hefty amounts of money to various charities.

When asked whether it would be possible in the future to spot people who fit that type of archetype and call it out before billions of dollars are gone again, Hayes said that in the case of SBF “people did call it out.”

“It’s just that everybody stood to make a lot of money if he was successful, whether you agreed with his business perspective or not,” said the former BitMEX chief.

“If you were a TradFi person, you wanted a foothold into crypto. And you wanted your type of person who was in charge of the leading exchange," said Hayes. "If you were a crypto person, you thought that Sam had the ear of the regulators globally, and he could help push the agenda for crypto. So everybody was invested in him being successful [...] and were willing to not look too much deeper beneath the disservice."

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