- The crypto market is the “largest Ponzi scheme in history,” actor-turned-crypto critic Ben McKenzie said Wednesday.
- McKenzie, who co-wrote a book about crypto, testified to the Senate Banking committee about the fall of FTX.
- Million of Americans who have invested in cryptocurrency have been “sold a bill of goods,” he said.
The collapse of FTX highlights the harm done to millions of people worldwide who have invested in the cryptocurrency market, an industry dependent on “hype” and “fraud,” actor-turned-crypto critic Ben McKenzie told lawmakers in Washington on Wednesday.
“The demise of FTX and Alameda represent the most spectacular corporate downfall since Bernie Madoff’s Ponzi scheme imploded in the wake of the Great Financial Crisis,” said McKenzie at the Senate Banking Committee hearing examining last month’s implosion of FTX and Alameda Research, a related crypto trading firm.
McKenzie was referring to financier Madoff who in 2009 was convicted of running a decades-long Ponzi scheme that conned his investors out of $65 billion and which collapsed during the 2008 financial crisis.
FTX founder and former CEO Sam Bankman-Fried was arrested this week in the Bahamas and faces multiple civil and criminal charges in the US. FTX, meanwhile, is seeking bankruptcy protection.
McKenzie, who shot to fame starring on the early-2000s TV show “The O.C.,” was invited to testify at the Senate hearing as he’s co-written a book about cryptocurrency and has emerged as a vocal skeptic.
“Surveying the cryptocurrency mania during the summer of last year, I came to a terrifying conclusion: the supposedly multi-trillion dollar industry was nothing more than a massive speculative bubble bound to pop,” he told lawmakers. Worse than that, he had “myriad reasons” to believe there was a crypto bubble that was built on a foundation of fraud, he said.
“Investment contracts that are effectively valueless are often described as Ponzi schemes, which are regulated under American law by the Securities and Exchange Commission. In my opinion, the cryptocurrency industry represents the largest Ponzi scheme in history,” said McKenzie, who co-wrote “Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud”. The book is set for release in July 2023.
“In fact, by the time the dust settles, crypto may well represent a fraud at least 10 times bigger than Madoff,” he said. Madoff was sentenced to 150 years in prison and died in April 2021.
Tens of millions of Americans have been “roped in” by the crypto market which makes it a concern for lawmakers, said McKenzie, who holds a degree in economics and foreign affairs from the University of Virginia.
As well, he said FTX investors worldwide have lost access to the money they had entrusted to FTX and it’s unclear whether they will ever get it back.
“I believe they and the estimated 40 million other Americans who have invested in cryptocurrency have been sold a bill of goods,” said McKenzie. “They have been lied to, in ways both big and small, by a once-seemingly mighty crypto industry whose entire existence in fact depends on misinformation, hype, and yes, fraud.”
The first lie is that cryptocurrencies are not currencies “by any reasonable economic definition,” McKenzie said at the hearing led by Ohio Democrat Sherrod Brown.
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