During his recent appearance on the show Squawk Box from CNBC, SEC boss Gary Gensler was swamped with questions about the agency’s investigation into the FTX situation.
He also named three points that can drive a crypto exchange to the bottom and destroy it.
Three things that destroyed FTX, according to Gensler.
Gary Gensler reminded host Andrew Sorkin that he can’t divulge anything about the SEC’s current investigation into FTX. However, he did share a few other interesting things.
He reminded Andrew Sorkin of the collapse of Terra Luna and then several crypto lending platforms, comparing FTX to them and saying they are all interconnected.
He believes that the sad state of FTX is as old as finance and comes down to three things:”a pile of client money“, “non-disclosure” and “the leverage effect“, FTX borrowing against its customers’ money.
“When you mix together a bunch of customer money and borrowing against it, investors get hurt,” says @GaryGensler. “This is a very interconnected world in #crypto with a few concentrated players. When markets turned on them it appears that a lot of customers lost money.” pic.twitter.com/o1XmXdyt5u
– Squawk Box (@SquawkCNBC) November 10, 2022
There are a few concentrated players in the crypto space, said Gary Gensler, and FTX was one of them. When he and his token began to sink, the crypto space received an electric shock. Bitcoin’s fall below $18,000 was one of the consequences. In addition, many investors lost money not only on the FTX token but also on other cryptocurrencies whose prices fell.
Overall, Gary Gesler said that investors need a lot more protection in the space than they currently have.