Former Federal Deposit Insurance Corporation (FDIC) Chair Sheila Bair likens the fall of crypto exchange FTX and its former CEO Sam Bankman-Fried to the infamous Ponzi Scheme of Bernie Madoff. “It felt very Bernie Madoff-like in that way,” she said.
Former FDIC Chair Compares FTX and Sam Bankman-Fried to Bernie Madoff’s Ponzi Scheme
Sheila Bair, a top U.S. regulator during the 2008 financial crisis, explained in an interview with CNN Monday that there are eerie similarities between the rise and fall of FTX and former CEO Sam Bankman-Fried and that of Bernie Madoff.
Bair chaired the Federal Deposit Insurance Corporation (FDIC) from 2006 to 2011. She now sits on the board of directors at blockchain infrastructure firm Paxos.
She explained that both Bankman-Fried and Madoff proved adept at seducing sophisticated investors and regulators into ignoring red flags hiding in plain sight. FTX filed for Chapter 11 bankruptcy last week and Bankman-Fried stepped down as the CEO.
“Charming regulators and investors can distract [them] from digging in and seeing what’s really going on,” Bair described, elaborating:
It felt very Bernie Madoff-like in that way.
Madoff ran the largest Ponzi scheme in history, worth about $64.8 billion. He promised investors high returns but rather than investing, he deposited their money into a bank account and paid, upon request, from existing and new investors’ funds. Convicted of fraud, money laundering, and other related crimes, he was sentenced to 150 years in federal prison. Madoff died in prison on April 14, last year, at the age of 82.
Bankman-Fried secretly transferred about $10 billion of customer funds from FTX to his other trading firm Alameda Research and reportedly used a “backdoor” to avoid triggering accounting red flags.
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