The duality of crypto
Image: Kevin McGovern/Shutterstock
Alex Mahinsky, founder and ex-CEO of failed crypto lending platform Celsius Network, was arrested yesterday and released on a $40 million bond after pleading not guilty to federal charges of securities, commodities, and wire fraud.
In addition, three federal agencies – the SEC, FTC, and CFTC – filed civil lawsuits yesterday alleging that Celsius and Mahinsky defrauded hundreds of thousands of customers by misrepresenting how the company profited from lending out their tokens.
🏦 A deeper dive… Mahinsky is accused of falsely advertising Celsius as a stable, modern-day bank where customers could deposit their crypto assets and earn as much as 17% interest with little or no risk.
Which, compared to the near-zero interest rates offered by conventional banks, sounded like a pretty good deal. By the fall of 2021, Celsius was one of the world’s largest crypto platforms with $25 billion in customer assets.
- But just like a $7.50/month MoviePass subscription, the deal proved waaaay too good to be true. Prosecutors allege Mahinsky actually operated Celsius as a risky investment fund and consistently put customers’ money in danger.
- When Celsius’ investments went sour in the spring of 2022, the crypto bank abruptly halted all withdrawals and eventually filed for bankruptcy, wiping out customer assets worth more than $4.7 billion.
🪙📈 Zoom out: Though the Celsius case marks another example of a crypto company being shady, the industry may as well be named “Mark Twain” – because the rumors of its demise have been greatly exaggerated.
The prices of bitcoin (+89%) and ethereum (+66%), the world’s two largest cryptocurrencies, have risen sharply this year. And on the legal front, a federal judge handed the SEC its first-ever loss against a crypto company in a landmark decision yesterday, ruling that Ripple Labs’ XRP token is “not necessarily a security on its face.”
📊 Flash poll: Fill in the blank: In my opinion, the crypto industry will play a ___ in the US economy over the long term.
See a 360° view of what media pundits are saying →
Sprinkles bullish on crypto
- Some commentators argue that crypto is more than just financial services; it’s a transformative technology that can facilitate cross-border payments, offer protection against inflation, reduce fees and wait times, and democratize access to financial services.
- Others contend that some parts of the crypto industry – specifically blockchain technology – could prove extremely useful to helping existing financial institutions do business.
- “Crypto’s future is a matter of national security.” –Brian Armstrong, Coinbase CEO
- “Blockchain Is Much More Than Crypto” –David Solomon, WSJ
- “Why it is essential to view cryptocurrencies as just another form of currency” –Evald-Hannes Kree, Finbold
Sprinkles bearish on crypto
- Some commentators argue that the entire crypto industry is little more than a gambling establishment with a nearly 100% edge for the house, and should be regulated for the benefit of all household investors.
- Others contend that the crypto industry isn’t delivering real-world benefits to offset the many downsides it carries, especially the fact that it's a hotbed for fraud and criminal activity.
- “Why America Should Ban Crypto” –Charlie Munger, WSJ
- “There might be no such thing as a legal American crypto exchange” –Megan McArdle, WaPo
- “Crypto Is Still a Mess. A Crackdown Would Do It Good” –Bloomberg Editorial Board
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