Is the SEC really the issue? | Credit: Shutterstock
Key Takeaways
- Mark Cuban sees FTX as a result of SEC failure
- Former SEC Chief of Enforcement says SEC is not to blame for everything
- Cuban says the American government did not protect customers while other countries did
Mark Cuban, the American multi-billionaire, investor, “shark, and owner of Dallas Mavericks found himself in a Twitter tiff on Tuesday with John Reed Stark, former SEC Chief of Enforcement and president of John Reed Stark Consulting LLC regarding the SEC’s role in the FTX Crash.
The discussion started when Reed Stark tweeted about his views regarding the creation of a Central Bank Digital Currency (CBDC), which he sees as “like building a bridge to nowhere in the middle of a dessert under the auspicious of engineering modernization — and then proclaiming the project to be a triumphant societal panacea.”
“Crypto Is Not Innovative At All”
It all started when Reed Stark shared the news about Senator Ted Cruz introducing legislation to prohibit the creation of a CBDC. The former SEC Enforcement chief says that “the risks of a CBDC remain myriad and raise a variety of important policy questions, including how a CIBC might affect financial-sector market structure, the cost and availability of credit, the safety and stability of the financial system and the efficacy of monetary policy.”
He also added that “What is so incredibly disturbing is that under the auspices of “innovation,” some politicians will preach the gospel of crypto while not only completely, ignoring crypto’s dire externalities, but also failing to understand that crypto is not innovative at all.”
On top of that, he said that “Crypto-enthusiasts will undoubtedly argue that the same risks that exist for crypto also exist at banks. After all, consider the recent collapses of Signature, SVB, Republic and other regional banks. “
With constant shots at the crypto market, the tweet was bound to gather the attention of the crypto enthusiasts who clearly called out. Among the listeners was Mark Cuban, a long-time supporter of crypto, NFTs, and other digital assets.
Cuban started his argument by comparing the regulations put forth by the SEC, and those carried out by foreign governments, specifically Japan.
“When FTX crashed, NO ONE IN FTX JAPAN LOST MONEY.”
“If the USA/SEC had followed their example by setting clear regulations that required the separation of customer and business funds and clear wallet requirements, NO ONE HERE WOULD HAVE LOST MONEY ON FTX.”
The billionaire who is now taking on Big Pharma also added that “The SEC is not infallible. It makes mistakes. In this case it chose the wrong course. It was arrogant in thinking that it’s[sic] framework covered every possible situation”.
Cherry Picking
As a formidable legal expert on the matter of crypto, John Reed Stark composed a lengthy tweet to respond to Cuban’s statement. His response can be broken down into three parts: 1) The SEC has stopped plenty of potential fraud attempts in the past. 2) Laws are meant to be broad, not specific. 3) Praising Cuban and endorsing him for president.
However, here are some of the key statements within the lengthy tweet:
“Blaming the SEC for dumpster fires like FTX/BlockFi/Celsius/Voyager/Terra/EARN (via Gemini) and other dire crypto-frauds seems a bit of a stretch.”
“The SEC:
-Stopped Telegram from defrauding investors with an emergency TRO. https://lnkd.in/gJDuRek
-Stopped BlockFi from doing to its investors what Celsius did to theirs (and fined them $100M). https://lnkd.in/d-Xy45ec
-Stopped Coinbase from selling a crypto-lending product. https://lnkd.in/gmFsAbKV
-Brought 150+ crypto-cases without a loss.”
“Former SEC Chair/Trump-appointee Jay Clayton engaged in an unprecedented multi-year crypto-tour, always speaking bluntly about the dangers of digital assets. Current SEC Chair Gensler/Biden appointee has been even more active regarding the perils of crypto, warning crypto-exchanges years ago that they were squarely within the SEC’s sights.”
Mark Cuban fired back once more, pressing again on his firm belief that the SEC is entirely to blame for failures such as FTX, saying that “You know the best way to prevent crypto fraud?
Set brightline investor protection regulations, like Japan, that detail the protections required and require registration to confirm adherence. Anyone who doesn’t register is de-facto in violation, can’t operate and will be shut down.
That’s how you protect crypto investors.”
The exchange between Cuban and Red Stark went seemingly went on for a long time with the two stances unchanged. John Reed Stark firmly believes that the SEC might have made a mistake regarding the FTX collapse, yet he sees it as an inevitable disaster. Mark sees that the SEC made a huge mistake that resulted in billions of dollars in loss for American customers.
