The FTX Meltdown Calls for Higher Standards in Crypto Journalism

The law is catching up with Sam Bankman-Fried (SBF), co-founder and former CEO of collapsed crypto exchange FTX.

The whole situation has led to a loss of trust in the cryptocurrency industry, which needs to be addressed by financial advisors.

If there is a bright side to this mess, it’s that the traditional finance (Tradfi) industry has managed itself through these types of crises regularly over the past century. Memories of the Occupy Wall Street movement and the massive Bernie Madoff Ponzi scheme still loom large in the industry.

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Now FTX’s bankruptcy is rippling through the crypto industry and impacting other major exchanges like Binance and Coinbase. Can any of these exchanges be trusted as a place to store crypto?

The best answer we have right now is probably “maybe.”

We’ve talked about the issue of trust in the crypto space – that it’s hard for advisors to tell clients where to store their crypto because there is no one perfect answer for everyone. It’s hard to know which service providers to trust.

Well, that concern about trust applies equally to crypto journalism, as we have lately been thrown into doubt over whose advice to take.

Crypto journalism and trust

When CoinDesk published a piece by Ian Allison revealing problems with the FTX balance sheet and tipped off the entire meltdown, it provided perhaps one of the better examples of independent journalistic reporting. CoinDesk’s parent Digital Currency Group (DCG) also owns crypto trading firm Genesis, which was forced to halt withdrawals and thrust under regulatory scrutiny following the FTX collapse.

But a recent turn of events has revealed that journalism in crypto has also contributed to increasing distrust. A great example is the revelation over the past week that Bankman-Fried was secretly the financial backer of The Block, another cryptocurrency news publication.

Those of us journalists covering crypto know that finding and delivering trustworthy information in the industry has been hard enough to begin with.

Crypto journalists have already had to contend with the most aggressive financial marketing blitz of the last 20 years as startups and incumbents alike tried to capture some of the benefits of the crypto gold rush. So while many of us searched in earnest for good sources to share information on a very new and sometimes arcane phenomenon, we have had to sort through the people talking about their own book and looking for free advertising space to pitch their product.

We’ve also had to deal with conflicts of interest. Crypto publications are supported by advertisements of crypto companies, naturally. But in the traditional news industry there is typically a strict separation between the editorial content and what is advertised.

You may notice that the websites you read my material on are supported by advertiser dollars – but those dollars don’t impact what I write or what I get to cover. Nothing should be able to stop a good journalist from being a truth-teller and a tireless pursuer of fact.

Political implications of mistrust

Bankman-Fried has had tendrils that wrapped around so many entities within and outside of the digital assets industry – it’s hard to tell what’s legitimate anymore.

It seems that even those of us working in the margins of the cryptocurrency industry are going to be directly impacted by the avalanche of distrust that Sam Bankman-Fried and FTX have set off.

The revelation of Bankman-Fried's funding of CoinDesk competitor The Block comes at a time when trust in the media is at an all-time low, especially online where the depths of social media censorship and cooperation with public and political officials are only now being seriously plunged.

But SBF’s influence didn’t stop there. On Tuesday, a federal indictment was unsealed in New York alleging that FTX client funds were used to fund the campaigns of recently elected public officials from both major parties, in hopes of influencing the future direction of crypto regulations.

Nevermind that we’re also in an era of declining trust in elections and public institutions that has led to civil unrest at the U.S. Capitol in recent years.

A word of caution

As we come to the end of a tumultuous year, it’s still very hard to know who is really a truth-teller in the crypto industry right now, even for those of us trying to cover the industry.

When information is tainted by questionable actors like Bankman-Fried, the deliverers of information are rendered less worthy of trust.

This issue of misinformation is especially important to keep in mind as an investor in the crypto space. Nowhere is misinformation better reflected than in cryptocurrency prices.

While we’ve discussed some of the fundamentals behind various crypto tokens – like the network effect and processing power – the main driver of token prices is human sentiment, and human sentiment is flawed and easily misled.

Is bitcoin really worth $17,800? Is ether really worth $1,300? Like with many of the serious questions in finance, the best answers we have are “maybe” and “it depends.”