- The crypto market is the โbiggest Ponzi scheme in history,โ actor-turned-crypto critic Ben McKenzie said on Wednesday.
- McKenzie, who co-wrote a book on crypto, testified before the Senate banking committee about the fall of FTX.
- Millions of Americans who have invested in cryptocurrency have been "sold a bill of goods," he said.
FTX's collapse highlights the damage done to millions of people around the world who have invested in the cryptocurrency market, an industry that depends on "hype" and "fraud," actor-turned-crypto critic Ben McKenzie told reporters. lawmakers in Washington on Wednesday.
"The demise of FTX and Alameda represents the most spectacular corporate downfall since Bernie Madoff's Ponzi scheme imploded in the aftermath of the Great Financial Crisis." McKenzie said at the Senate Banking Committee hearing examining the implosion last month of FTX and Alameda Research, a related crypto trading firm.
McKenzie was referring to the financier Madoff, who in 2009 was convicted of running a decades-old Ponzi scheme that ripped off its investors out of $65 billion and which collapsed during the 2008 financial crisis.
FTX Founder and Former CEO Sam Bankman-Fried was arrested this week in the Bahamas and faces multiple civil and criminal charges in the United States. Meanwhile, FTX is seeking bankruptcy protection.
McKenzie, who rose to fame starring in the early 2000s TV show "The OC," was invited to testify at the Senate hearing since he co-wrote a book on cryptocurrency and has become a vocal skeptic.
"In examining the cryptocurrency mania during the summer of last year, I came to a frightening conclusion: the supposedly multi-billion dollar industry was nothing more than a massive speculative bubble destined to burst," he told lawmakers. Worse than that, she had "countless reasons" to believe there was a crypto bubble built on a foundation of fraud, she said.
"Investment contracts that are effectively worthless are often described as Ponzi schemes, which are regulated under US law by the Securities and Exchange Commission. In my opinion, the cryptocurrency industry represents the largest Ponzi scheme in the history," said McKenzie, who co-wrote "Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud." The book will be released in July 2023.
โIn fact, by the time the dust settles, cryptocurrencies may well represent a fraud at least 10 times bigger than Madoff,โ he said. Madoff was sentenced to 150 years in prison and died in April 2021.
Tens of millions of Americans have been "tied up" by the crypto market, making it a concern for lawmakers, said McKenzie, who has a bachelor's degree in economics and foreign relations from the University of Virginia.
In addition, he said that FTX investors around the world have lost access to money they had entrusted to FTX and it is unclear if they will ever get it back.
โI think they and the 40 million or so Americans who have invested in cryptocurrency have been sold a bill of goods,โ McKenzie said. โThey have been lied to, in ways both big and small, by a once seemingly powerful crypto industry, whose entire existence, in fact, depends on misinformation, hype and, yes, fraud.โ
The first lie is that cryptocurrencies are not currencies "by any reasonable economic definition," McKenzie told the hearing led by Ohio Democrat Sherrod Brown.
