The collapse of the cryptocurrency exchange FTX has sparked numerous comparisons to the fall of Lehman Brothers, which caused the 2008 financial crisis.
However, a former Securities and Exchange Commission official likened FTX to the Theranos and Bernie Madoff fiasco.
John Reed Stark, the founder and former chief of the SEC’s Office of Internet Enforcement, pointed to reports that FTX transferred client funds to trading house Alameda earlier this year.
“This is worse than Theranos, this is worse than Madoff, if what I’m reading is true,” he told Yahoo Finance on Thursday, a day before FTX and its affiliates filed for Chapter 11 bankruptcy.
In January, a jury found Theranos founder Elizabeth Holmes guilty of defrauding investors of hundreds of millions of dollars. In 2009, Madoff pleaded guilty to a Ponzi scheme that defrauded tens of thousands of investors of as much as $65 billion.
Stark noted “sophisticated” FTX investors have had to write down their holdings, even after performing due diligence on its financials.
