On November 3, John Reed Stark, the former Chief of the SEC’s Office of Internet Enforcement and the president of Stark Consulting, provided a critical perspective on CNBC’s ‘Squawk Box’ regarding the guilty verdict of FTX founder Sam Bankman-Fried. Stark’s analysis delved into the trial’s proceedings and its broader repercussions for the cryptocurrency sector.

Stark praised the prosecution’s approach, emphasizing the substantial evidence against Bankman-Fried, which included numerous cooperative executives and extensive data from FTX. He characterized Bankman-Fried as a “sociopath” and “egomaniacal lunatic,” whose frequent public statements often contradicted the truth, aiding the prosecution’s case.

He cautioned that the FTX case is merely the surface of deeper issues within the crypto industry, which he described as a fragile “house of cards.” Stark was dismissive of the entire sector, including blockchain and Web3, labeling them as “nonsense” and arguing that they fail to provide any real financial solutions, instead enabling schemes like Bankman-Fried’s. He referenced articles from the Brookings Institute and ‘The Washington Post’ that challenge the purported benefits of crypto for disadvantaged groups, reinforcing his view that the technology is detrimental.

Here are a few highlight from his comments on blockchain and crypto:

  1. “People should not think that it is safe to go back in the water. It’s not safe. It’s a mammoth house of cards.“
  2. “Crypto, Web3, blockchain … it’s all a bunch of nonsense.“
  3. “Crypto hurts people of color. Crypto hurts the unbanked.“
  4. “Crypto — it’s mathematical computational blather. Crypto represents nothing. There’s no cash flow. There’s no earnings. There’s no balance sheet. There’s nothing to it.“
  5. “If you look at blockchain, the foundation of it all, this glorified append-only limited writer’s spreadsheet, you wonder what people are talking about.”
  6. “I listen to every earnings call. Apple, Google, Oracle … what are they talking about with blockchain? Nothing.“
  7. “Crypto is not innovation, Joe. The iPhone, that’s innovation. The Internet, the cloud, A.I. — those are nnovations.“

Discussing the FTX scandal, Stark described Bankman-Fried’s actions as “pure thievery,” involving the misappropriation of customer funds to finance a lavish lifestyle until the scheme’s inevitable collapse. He underscored the complicity of influencers and lobbyists in the fraud, including payments to public figures like Kevin O’Leary to promote FTX.