The FTX Debacle Has Created a “Deficit of Trust” in Crypto Market, Says Mike Novogratz

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Galaxy Digital's Mike Novogratz
Galaxy Digital's Mike Novogratz

The FTX fiasco has caused a “deficit of trust” in the crypto market, according to bitcoin investor and Galaxy Digital CEO Mike Novogratz, who argued that the industry should and will be regulated after the implosion of Sam Bankman-Fried’s exchange.

“This is about transparency and disclosure in lots of ways. Our industry has failed to self-regulate. I think the money side of crypto, companies like ours that buy and sell and lend and do derivatives, are going to get regulated and should be,” he said in an interview with CNBC on Wednesday.

Novogratz pointed to the messy balance sheet at FTX, which didn’t have an in-house accounting department and intertwined its financials with Alameda Research, its affiliated trading firm. 

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“I think coins should be segregated in your account, and they shouldn’t be lent unless you give them permission to lend,” Novogratz said, noting that other exchanges, like BlockFi, had more transparent terms on what customer funds would be used for.

“This is always about building trust with your clients. And right now we’re in a deficit of trust. People think there’s a black swan around every corner, that everyone else is a sociopath, saying one thing and doing something else,” Novogratz said.