It's sort of curious that this SEC action is to protect the venture capital investors like Sequoia who invested in FTX shares directly.
If I were a retail investor who lost my savings in FTX, I might be feeling upset that the government is rushing to action in defense of billion-dollar funds whose own due diligence failed massively, while seemingly nothing is being done to help those who invested in crypto based on FTX's Super Bowl ads and celebrity endorsements...
At the same time, I fully understand why it's like this. Because the VCs bought actual FTX shares, the SEC has a clear case of securities fraud. The law is pretty clear about what happens when you sell shares in your company and lie about it.
In contrast, it's not really settled whether the little people who sent money to FTX in exchange for a crypto ledger entry were actually buying securities, commodities, custodial services, or something else — maybe nothing at all. (The crypto guys love this ambiguity, of course! They've been lobbying for regulation that keeps crypto in a no-man's-land where tokens that look and work like securities would still be something else.)
This seems to be the reason why the SEC doesn't have a clear-cut case to protect FTX customers, but does have a case to protect rich VC crypto-bro partners.
If I were a retail investor who lost my savings in FTX, I might be feeling upset that the government is rushing to action in defense of billion-dollar funds whose own due diligence failed massively, while seemingly nothing is being done to help those who invested in crypto based on FTX's Super Bowl ads and celebrity endorsements...
At the same time, I fully understand why it's like this. Because the VCs bought actual FTX shares, the SEC has a clear case of securities fraud. The law is pretty clear about what happens when you sell shares in your company and lie about it.
In contrast, it's not really settled whether the little people who sent money to FTX in exchange for a crypto ledger entry were actually buying securities, commodities, custodial services, or something else — maybe nothing at all. (The crypto guys love this ambiguity, of course! They've been lobbying for regulation that keeps crypto in a no-man's-land where tokens that look and work like securities would still be something else.)
This seems to be the reason why the SEC doesn't have a clear-cut case to protect FTX customers, but does have a case to protect rich VC crypto-bro partners.