The fall of the “crypto king” could reverberate for years


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Wednesday, November 16, 2022

By today’s newsletter Brian Sozzisenior editor and Host at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and continues LinkedIn. Read this and more market news on the go Yahoo Finance Software.

Trust is an important element in investing – stocks, bonds, you name it. I trusted Walmart when it reported Tuesday that sales rose last quarter. I confided in Walmart CFO John David Rainey on Yahoo Finance Live about his expectations for the retailer’s holiday sales. I believe that when I buy a bond, I will pay back the principal with interest at some point in the future.

Unfortunately, the cryptocurrency space is now facing a major lack of trust following the FTX explosion. The cryptocurrency exchange filed for bankruptcy last week and its CEO Sam Bankman-Fried resigned. SBF, as he is known, became a crypto billionaire and industry star at the age of 29. Now, at 30 years old, SBF has lost its fortune and FTX has admitted to lending client funds to trading firm Alameda Research. co-founder.

Sam Bankman-Fried, third from left, testifies during a House Agriculture Committee hearing Thursday, May 12, 2022, at the Longworth Building titled Changing Market Roles: FTX Proposal and Trends in New Clearing House Models. (Tom Williams/CQ-Roll Call) , Inc via Getty Images)

Cryptocurrency already had a reputation for carrying more risk than traditional investments. But the FTX drama has certainly raised more doubts about digital assets.

“I mean, actually, SBF is kind of like the Jordan Belfort of the crypto era. Instead of ‘The Wolf of Wall Street,’ they’re going to make a movie called ‘The King of Crypto,'” – Microstrategy founder and bitcoin bull.

Belfort pleaded guilty to stock manipulation fraud in 1999 and served 22 months in prison. He was later portrayed by Leonardo DiCaprio in the 2013 film The Wolf of Wall Street.

SBF has not been charged with a crime, but there is no question of opening a criminal case against him. Federal prosecutors in Manhattan are investigating the FTX collapse, the Wall Street Journal reported, citing unnamed sources familiar with the matter. Still, US prosecutors could be in trouble because FTX SBF is based in the Bahamas, where he lives in a house with a group of friends.

How can the world trust an industry where a major player is doing business offshore and then potentially being criminally prosecuted?

How can you put a dime of your hard-earned money into crypto, knowing that a rich man living in the Bahamas could disappear in a minute due to his absurd actions?

There is SBF , wrote after the firm filed for bankruptcy: “Hopefully things can find a way to recover. I hope that this can bring them some amount of transparency, trust and governance.”

These words alone will not restore investor confidence in cryptocurrency. But experts tell Yahoo Finance that the cryptocurrency has a ways to go to gain more legitimacy. Key elements needed to regain that trust include:

  • Strict rules treating crypto as securities.

  • Consequences for individuals and businesses that violate the new rules.

  • Removal of questionable cryptocurrencies.

Even with proper regulation and enforcement, the cryptocurrency industry will not recover from the FTX fiasco overnight. How long will it take for confidence to return?

“I think it will take years,” said Semaphore’s business and finance editor.

Sounds about right to me.

What to Watch Today

Economy

  • 8:30 a.m. ET: Retail sales, October (1.0% expected, 0.0% in September)

  • 8:30 AM ET: Import Price Index, October (-0.4% expected, -1.2% in September)

  • 8:30 AM ET: Export Price Index, October (-0.3% expected, -0.8% in September)

  • 09:15 ET: Industrial production (0.1% expected, 0.4% in September)

  • 9:15 a.m. ET: Capacity utilization (80.4% expected, 80.3% in September)

  • 10:00 a.m. ET: Business inventories, September (0.5% expected, 0.8% in September)

  • 10:00 a.m. ET: NAHB Housing Market Index, November (36 expected, 38 in October)

  • 4:00 pm ET: Net long-term TIC flows, September ($197.9 billion in August)

  • 4:00 pm ET: Total Net TIC Flows, September ($275.6 billion in August)

Earnings

  • 6:00 a.m. ET: Lowe’s Companies (LOW) is expected to report adjusted earnings of $3.09 per share on revenue of $23.14 billion

  • 6:30 a.m. ET: Target ( TGT ) is expected to report adjusted earnings of $2.15 per share on revenue of $25.98 billion

  • 7:30 a.m. ET: The TJX Companies ( TJX ) is expected to report adjusted earnings of $0.80 per share on revenue of $12.30 billion

  • 4:05 PM ET: Cisco (CSCO) is expected to report adjusted earnings of $0.84 per share on revenue of $13.31 billion

  • 4:20 PM ET: Nvidia ( NVDA ) is expected to report adjusted earnings of $0.70 per share on revenue of $5.80 billion

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