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Fact-Checking the Latest Theories About FTX Collapse
The cryptocurrency market continues to reel from the FTX collapse, and in more ways than one. Not only is the market’s total cap down by 18.5% in the past month (and by 63% since the beginning of the year), but wild speculation, recriminations and outright conspiracy theories are beginning to circulate on Crypto Twitter and other digital hangouts for the community. While many such ‘theories’ remain marginal at best, others have gained a considerable amount of traction, with Elon Musk providing some degree of encouragement for the claim that FTX laundered money donated to Ukraine, redirecting it to the Democratic Party in the form of campaign contributions.
Needless to say, there’s no specific proof for such an accusation, even though FTX was a fraudulent enterprise, and even though the exchange had donated money to the Democrats (and to Republicans on more than one occasion) prior to its ignominious end. This article takes aim at this and other conspiracy theories doing the rounds online, pointing out the inconsistencies, flaws and downright absurdities in them.
It will show that, in the main, the FTX conspiracy theories have been absorbed into the exploding miasma of anti-Democrat, anti-liberal and anti-World Economic Forum ‘theorizing’ that has gripped much of the Internet in the past few years. And to a large extent, this interpretation of FTX’s collapse (and its aftermath) has emerged partly because some people in crypto refuse to accept that crypto itself is responsible for the bankruptcy, and not some ‘cabal’ or ‘conspiracy’ of people outside of it.
FTX Laundered Money to and from Ukraine for the Democrats
What exactly is the FTX-laundered-money-to-
As set out skeletally in a November 14 Instagram post (which was actually a screenshot of an earlier post from the Trump-founded Truth Social), “It was just PROVEN [obviously no citation or sources for this] #WorldEconomicForum partner #FTX laundered money for the democrats [sic] by means of a #WarFund through their exchange & then converted it to cash & sent it back as donations […] THIS IS ELECTION INTERFERENCE BY FRAUD.”
Given that this post was originally left on Truth Social, and also given its histrionic tone and formatting, you might be forgiven that such an outburst gained little attention. However, the gist of its message made its way to Twitter, where Crypto Twitter personality TaraBull posted a summary of the claim, along with a screenshot of FTX’s sponsor page on the official World Economic Forum website (which has recently been deleted).
Source: Twitter
The beauty of conspiracy theories is that they can be couched as questions (as above), removing the need to offer real proof, but still opening them up to widespread transmission. But what’s especially ‘great’ about this particular theory is the all-but random reference to the World Economic Forum, as if the fact that FTX was a partner with the WEF proves that it was involved in shady dealings.
More about the WEF below, but for now, it’s worth reiterating that no evidence or proof has been presented showing that money/crypto given to FTX in order to be passed on to Ukraine was redirected to the Democratic Party. Yes, FTX did partner with the Ministry of Digital Transformation of Ukraine (and Everstake) to set up an Aid For Ukraine website, through which anyone could donate cryptocurrency that would then be converted into fiat currency and deposited with the National Bank of Ukraine. However, no one has shared even a whisper of evidence (beyond baseless claims) that cryptocurrencies deposited through this website ended up in accounts belonging to the Democratic Party.
Of course, one common tactic of the conspiracy theorist is to take some kind of truth, and then twist it into a more specific claim. In this case, FTX did receive donations for Ukraine (it’s not even clear how many), and it did misappropriate funds belonging to the customers of its exchange, yet there’s no evidential basis for making the particular claim that donations for Ukraine were ‘laundered’ to the Democratic Party.
FTX Collapse Was An Inside Job to Discredit Crypto, Justify Harsh Regulations
Another relatively popular accusation is that the FTX collapse (and presumably its rise) was engineered in order to make crypto look very bad and, by extension, to justify regulators and lawmakers to push through with harsher cryptocurrency regulations in the United States. Other variations of this basic allegation suggest that the US Government crashed FTX in order to be able to buy bitcoin on the cheap.
Source: Twitter
Such a theory assumes that the Securities Exchange Commission (or again, the bogeyman WEF) went so far as having agents/employees installed in FTX and Alameda Research, and that the years prior to the collapse involved setting the scene and setting up the exchange for a massive fall. More specifically, it likely assumes that Sam Bankman-Fried is some kind of agent, a claim given an extremely slim veneer of ‘credibility’ by the fact that his parents have various connections with officialdom. For example, his mother, Barbara Fried is a professor of law at Stanford and a founder of Mind the Gap, a super political action committee (i.e. a lobby group) aimed at helping Democratic candidates win elections.
Almost needless to say, just because Bankman-Fried’s parents (and other people involved/associated with FTX) are linked with the Democratic Party doesn’t mean he was actually an inside man for some arm of the United States Government. Also, if the US Government and/or Congress wants to impose stringent cryptocurrency regulations, it can most likely do this without having to engineer a high-profile exchange collapse. I mean, just look at the Terra collapse from May, or the long, long list of hacks and scams in crypto. There is no shortage of justifications from the vantage point of zealous regulators.
The Media Establishment and the Vague Everything-Conspiracy
One of the things that has fuelled conspiracy theorizing is that the post-collapse treatment of Sam Bankman-Fried has been deplorably light-touch, comprising a series of articles from various major outlets that appear to portray the former FTX CEO as a fundamentally well-meaning person who just fell in too deep.
For example, in response to a Wall Street Journal article with the headline, ‘Sam Bankman-Fried’s Plans to Save the World Went Down in Flames,’ Dylan LeClair vaguely declared, “Bigger forces at play here folks” (note: this article has actually had its headline changed, presumably in response to the fact that its original title was too soft). However, while the titles of many of these pieces do seem to be almost sympathetic to the former chief executive, their actual content — if you bother to read them — is more damning of the activities of FTX and Alameda’s bigwigs.
Still, conspiracy theorists — especially those operating on social media — never let text longer than headline get in the way of a good yarn. And for whatever reason (most likely because of the connection to the Democrats, who they wish to attack) they’ve attached the FTX collapse to pretty much every conspiracy subject of the past few years. Even Covid-19 and ivermectin has been thrown into the mix, owing to a donation that was made by FTX to researchers who published a study suggesting that ivermectin was ineffective in treating Covid-19 (and made after the study was completed). Clearly, this proves that Sam Bankman-Fried was part of some shadowy network working to enslave the human race.
Instead, what Bankman-Fried and his failed exchange really prove is that the cryptocurrency industry remains in a very early and immature form, in which certain bad actors can take advantage of lax oversight and regulation in order to speculate recklessly and sometimes scam their customers, particularly when they encounter financial trouble. In turn, it proves that retail investors need to be very vigilant and careful with their cryptocurrency funds, storing them in their own wallets wherever possible.
