Crypto Crash: A Former SEC Official’s Advice for Investors

A former SEC official warns crypto investors to get out now

John Reed Stark, the founder and former chief of the SEC’s Office of Internet Enforcement, has issued a stark warning to crypto investors: get out now. Stark, who has been vocal about the risks and frauds in the crypto space, told Yahoo Finance that the fall of crypto exchange FTX is “worse than Theranos, worse than Madoff” and that the “contagion is rapidly spreading amongst all of the various crypto ecosystem.”

Stark pointed to the reports that FTX transferred client funds to trading house Alameda earlier this year, which he said was a clear violation of securities laws. He also noted that FTX and its affiliates are facing multiple federal probes from the Justice Department, the SEC and the CFTC. He said that the SEC’s enforcement division is likely standing down while the DoJ conducts its investigation, which could involve informants, search warrants and arrests.

The Block quoted Reed saying, “There is not just a gap in customer protections, but a chasm.”

Stark also criticized the lack of transparency and accountability in the crypto industry, saying that some companies don’t even disclose where they are headquartered or who works there. He said that crypto investors are putting their money at risk by trusting unregulated and unscrupulous actors who can manipulate prices, evade taxes and launder money.

Stark urged crypto investors to get out of the market before it’s too late. He said that crypto is not a legitimate asset class or a viable alternative to fiat currency. He said that crypto is a “speculative bubble” that will eventually burst and leave investors with nothing.

“This is not investing. This is gambling. This is speculation. This is a Ponzi scheme,” Stark said. “Get out now.”