The fall of cryptocurrencies, the recent wave of the investment craze that includes NFTs and trading cards, has not only ruined bank accounts for many but now has the federal government investigating its dramatic downfall.
FTX, the Bahamas-based cryptocurrency exchange founded just before the pandemic, paralyzed America and much of the world, landed in bankruptcy this month, leaving federal authorities perplexed over the fall of the $32 billion company.
Some have compared the fall of crypto to Bernie Madoff. “And just as Madoff’s Ponzi scheme fell apart during the 2008 financial crisis, FTX’s collapse arrives amid a broader pullback for the tech industry,” Erin Griffith, a tech writer, penned for the New York Times’s digital newsletter.
“Tech stocks have crashed. Venture capital funding is drying up. As a result, nearly 800 tech companies have laid off more than 120,000 workers this year, with cuts hitting Meta, Amazon and Twitter,” Griffith noted.
In a CBS News interview recently, Treasury Secretary Janet Yellen said the fall of FTX should warn Americans about investing their money in “extremely risky” financial products traded in a space lacking “appropriate supervision and regulation. I think this is a space where investors and consumers should really be very careful,” Yellen stated.
“We have very strong investor and consumer protection laws for most of our financial markets, but in some ways the crypto space has inadequate regulation.”
Crypto and the hip hop community
Yet the crypto space has lured not just financial bigwigs but heavyweights in entertainment like Snoop Dogg, Jay-Z, Russell Simmons, and Ja Rule as well.
Along with friend and business partner Herb Rice, Ja Rule co-founded The Painted House and launched the NFT collection Black Is Beautiful, with a charitable component benefiting historically Black colleges and universities. Earlier this year, Ja Rule told the Black Press that he wanted to create a space for people of color in the crypto world.
“That’s important. We need to be at that table,” Ja Rule said. Simmons, the hip hop architect, and successful businessman, said he leaped into the NFT market because he wanted hip hop pioneers to get their flowers and much-deserved money while still alive.
In collaboration with NFT marketplace Tokau, Simmons’ NFT honored individuals like D.J. Hollywood, Bizzy Bee Starski, and Grandmaster Caz. Snoop Dogg agreed to curate the NFT collection.
“This is a multi-billion-dollar industry, and so many of the younger generation don’t know the shoulders on whom they stand,” Simmons told the Black Press at his launch party. “Some of these guys [founders] don’t even have bank accounts, but we have to consider, all of us have to consider, none of us would be here without them.”
Simmons insisted that Snoop Dogg “gets it. He wants to be a part of this. That’s why I love him so much. Snoop has such a big heart. He cares about these guys.”
In June, Jay-Z announced that he teamed with Twitter Founder Jack Dorsey to launch a new “Bitcoin Academy” for underserved residents—particularly those in Brooklyn, New York’s Marcy Houses.
The plan included adding other locations for the program designed in collaboration with Crypto Blockchain Plug and Black Bitcoin Billionaire. Jay-Z and Dorsey said their mission included providing education and empowering the community with knowledge.
Program participants were promised MiFi devices, a one-year limited data plans, and smartphones if needed.
Each of the artists has yet to speak on the current state of the crypto space. Recently, a new study found that the District of Columbia topped the list of American states and places that have demonstrated the most interest in NFTs and cryptocurrency.
The study found that Bitcoin sold for a record $68,000 in November 2021, while NFT sales peaked at $12.6 billion in January 2022. Both have since dropped precipitously.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” John Ray III, the new CEO of FTX, told MSN as he laid out “a damning description of FTX’s operations under its founder Sam Bankman-Fried, from a lack of security controls to business funds being used to buy employees homes and luxuries.
“From compromised systems integrity and faulty regulatory oversight abroad to the concentration of control in the hands of a very small group of inexperienced, unsophisticated, and potentially compromised individuals, this situation is unprecedented,” said Ray.
He performed cleanup work in the aftermath of the disastrous Enron scandal. Griffin wrote in the New York Times newsletter that it would take time and multiple federal investigations to entirely understand what happened behind the scenes at FTX.
However, the impact is already evident. “Lawmakers are calling for more oversight,” Griffin wrote.
“Crypto die-hards are trying to distance themselves. Critics of this sector of finance are crowing. And for those of you who had, until now, managed to ignore the rise and rise and rise of crypto as a phenomenon? First of all, good for you. And second, you may want to watch this one play out.”
Stacy M Brown is the NNPA Newswire senior correspondent.