FTX’s stunning collapse is unlike Theranos, says venture capitalist and crypto investor Tim Draper
Tim Draper, founder and managing partner of Draper Associates and Draper University, was disgruntled when he compared the staggering demise of crypto trading platform FTX to biotech startup infamous Theranos, in a conversation with MarketWatch.
“It’s not like Theranos,” he said. In a phone interview on Friday, Draper said he doesn’t know of anyone who has actually compared the collapse of congested FTX, which filed for bankruptcy protection on Friday, to Theranos.
FTX founder Sam Bankman-Fried, now former CEO of the platform and its related companies, is facing an $8 billion shortfall, The Wall Street Journal reported.
However, some have made such comparisons, including Galaxy Digital
BRPHF,
CEO Mike Novogratz in an interview with CNBC: “You know, we basically have a Theranos-like situation,” he said on the business network Thursday.
“I am furious,” said Novogratz, referring to how FTX’s debacle affects confidence in the nascent crypto market, with bitcoin
BTCUSD,
ancestor of the current cryptocurrency, formed after the 2008-2009 financial crisis.
Theranos founder, Elizabeth Holmes, became famous for her belief that she had invented groundbreaking advances in blood testing technology. The company’s valuation surged to $9 billion as she attracted a wave of celebrity investors, including Draper, before it was discovered that No such technology exists. She has convicted of fraud in January 2022.
For his part, Bankman-Fried, 30, announced his resignation as head of FTX on Friday. SEC and DOJ is investigating the recent explosion of FTXalthough at this point Bankman-Fried is not in legal trouble.
The fall comes as some saw Bankman-Fried as a savior for other besieged crypto companies earlier this year. SBF, as he is sometimes known, is a member of MarketWatch’s 50 Most Influential People List.
Like Holmes, he is heralded as a phenom, appearing on Fortune magazine’s August/September cover as the “next Warren Buffett,” the legendary value investor.
His rate of decline is also astounding. His net worth was estimated at $15.6 billion as of this week, according to Bloomberg Billionaire Index. But now most of his fortune has been wiped out, Bloomberg said.
According to the WSJ, about $2 billion has been poured into the 3-year-old FTX without close supervision or adequate oversight into its business.
According to the report, the exchange has lent billions of dollars to fund risky bets at its affiliated trading company, Alameda Research, using funds deposited by customers at FTX.
An FTX spokesperson declined to comment.
“This is about people who have risen above their skateboards.” Draper said. He added, “I feel for the people who got caught up in this mess.”
The venture capitalist and crypto enthusiast said he has never considered SBF the golden boy of crypto and has always been skeptical of platforms that do not provide clear transparency regarding holdings. keep theirs.
“I was very cautious with DeFi [decentralized finance] and avoided most of that,” said Draper, an investor in the Coinbase Global Inc. trading platform.
COIN,
and Ledger.
“You’re better off with good management, good performance,” says Draper.
“I tend not to follow the hype,” he added.
For the most part, cryptocurrencies, including Ether
ETHUSD,
and bitcoin, were ecstatic when the FTX movie opened. The stock market fell briefly on Tuesday, with the Dow Jones Industrial Average
DJIA,
down more than 600 points on Tuesday, ahead of the broader market – including the S&P 500
SPX,
– capped back on Thursday, boasting a massive 1,200 point rally.
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