Those seduced by FTX CEO Sam Bankman-Fried will ‘look and feel pretty silly’, Larry Summers warns of crypto crackdown
The The trouble is growing exponentially at FTX, formerly one of the world’s largest cryptocurrency exchanges, could be a catalyst for increased federal regulation of the crypto world, former Treasury Secretary Larry Summers warned. .
In one conversation with The InformationSummers has predicted a “meaningful shift” to more aggressive regulations in the coming months.
FTX has seen the price plunge after running on its coin and offer extension to acquire the company
“What has been going on in crypto over the past few days will scare people and will prompt regulators to take action,” he said. “I think there are a large number of people who have been seduced or bought by [Sam Bankman-Fried], people who are looking and feeling pretty silly and who want to correct that by acting nervous and worried. And my feeling is that there is a large amount of regulatory authority at will to do special things at the discretion of the SEC chair. “
Trouble started a few days ago, when the head of crypto exchange Binance, Changpeng Zhao, known informally as CZ, flooded the market with FTT tokens, the currency of the FTX exchange. The head of FTX, Sam Bankman-Fried, also known as SBF, attempted to buy back those tokens to maintain their value. But SBF was overused, and his company soon sank. After Binance initially signed a letter of intent to buy FTX, CZ changed its mind. Now Sequoia Capital, a major investor in FTX, has slashed its $214 million investment down to $0.
Summers also has a warning for the tech sector in general: The current weakness resembles the dotcom crash of 2000.
“You have the combination of a tech sector that has extrapolated excessively from past success to believe that trees are growing into the sky, magnified by… a kind of tech exuberance,” Summers said. speak. “Peloton by Pets.com is a very important equation to understand what is happening. Today, there are viable business models a lot like Pets.com — they just impossible afterward. You have that dynamic. “
However, unlike crypto companies, Summers believes that amazing layoffs at companies like Twitter and Meta, could placate sentiment in Washington, DC, towards regulating tech giants.
“I think when you fire people, you feel less threatened and so you feel less fundamentally need to adjust,” he said.
This story was originally featured on Fortune.com
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