Cryptocurrency industry under intense scrutiny by investors and regulators

Levon Campbell III Staff Writer

“If you got into crypto late, then you’re most likely getting scammed, especially if you don’t know what you’re doing,” Terri Madden, the director of Community Lending from Atlanta, Ga.

Many people do not know what cryptocurrency is. According the Associated Press, cryptocurrency is a type of digital money that uses encryption technology to make it secure. Cryptocurrency is not the same as virtual currency, which is used in virtual worlds, such as online games.

Recently however, the world of cryptocurrency has proven to not be as secure as once believed.

The cryptocurrency industry has caused many firms that used it to go bankrupt last year, including FTX, a centralized cryptocurrency exchange that specialized in derivatives and leveraged products which filed for bankruptcy on Nov. 22, 2022.

According to Investopedia, FTX filed for Chapter 11 Bankruptcy protection. FTX, which was once valued at $32 billion, now cannot pay as many as 1 million creditors.

Investopedia also reports that FTX was widely known for heavily used cryptocurrency exchange that allowed users to buy, sell, and enter into derivative contracts for coins and tokens. Now because of their bankruptcy, getting hacked and their CEO stepping down and getting arrested, FTX is now getting recognized as a Ponzi Scheme.

A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. A Ponzi scheme is a fraudulent investing scam which generates returns for earlier investors with money taken from later investors.

John J. Ray III, the new chief executive of FTX, said that it is unlikely that the investors and creditors will get all their money back. Ray also told a U.S. House of Representatives committee hearing on Dec. 13, that FTX appeared to be a case of “oldfashioned embezzlement”.

Sam Bankman-Fried, the former and disgraced owner of FTX, was indicted by the U.S. District court in Manhattan on eight counts, including securities fraud and money laundering according to Investopedia.

Following a court hearing on Dec. 22, a federal judge decided to release Bankman from custody after he agreed to a $250 million bond, the largest one in history

On Jan.3, the former CEO pled not guilty in a New York federal court and his trial will be held on Oct. 2. A lot of investors and creditors who have lost money because of cryptocurrency and now they want their money back. Many blame the advertising from celebrities for their predicament. According to www.forbes. com, some celebrities are being sued because of their affiliation with FTX. People like Tom Brady are facing lawsuits of endorsing failed cryptocurrency exchanges and because of Bankman-Fried, at least 11 celebrity endorsers have been wrapped up into the FTX drama without facing jail time, like NBA star Stephen Curry and tennis phenom Naomi Osaka. The complaint argues that FTX’s customers were buying and selling “unregistered securities,” regulated by the Securities Exchange Commission (SEC). Brady and the other celebrity endorsers were required to reveal the details of their financial agreements with FTX. The plaintiffs allege that these celebrities violated securities and consumer-protection laws by failing to provide specific information on their financial arrangement with FTX, and not going through the right terms before promoting the company.

Madden does not think the celebrities should be sued but feels they should have encouraged more research.

“I wouldn’t blame the celebrities because the people should’ve done their research first,” Madden stated. “On the other hand, celebrities were the reason people got into it, especially because of their influence. We buy shoes, clothes, and makeup because of them so they should’ve told people to do more research so they wouldn’t lose their money.”

Some JSU students agree with Madden and also feel the celebrities should not be sued.

Jamal Walker, a senior graphic designer major from Atlanta, Ga. said, “They shouldn’t sue the celebrity just because they were advertising the product.”

Andre Jones, a freshman with a biology pre-physical therapy major, from Birmingham, Ala., has a similar stance on the issue. “They just did promotion for crypto so there should be no reason for them to get sued for it,” Jones stated.