Crunch time for crypto

If you thought things couldn’t get worse for the crypto world, think again. 

Driving the news: Developing stories around alleged misconduct, fraud, and criminal activity in the crypto space continue to fill the headlines, serving up enough reputational damage to erode whatever trust the public has left in the sector.

  • Sam Bankman-Fried, the disgraced CEO of FTX, will testify at the US Congressional House Committee on Financial Services today, where lawmakers will grill him on how he lost billions in customer assets.
  • FTX’s current CEO, John Ray, will also testifying and will (according to his prepared remarks) place the blame for the company’s failure squarely on SBF and his top lieutenants.
  • Meanwhile, the US Department of Justice is investigating Binance, the world’s largest cryptocurrency exchange, over reports that it processed more than $10 billion in illegal payments this year. 

Why it matters: The growing number of scandals (not to mention criminal investigations) in the crypto space has investors fleeing for the lifeboats with whatever assets they have left — last month saw the largest outflows of Bitcoin on record from centralized crypto exchanges.

Even crypto businesses that seem to be the most stable are getting walloped: Coinbase, which is publicly traded and regulated by the Securities Exchange Commission, could see its bond rating downgraded due to deteriorating market conditions, per the Financial Times.

Bottom line: The days of Tom Brady and Matt Damon starring in crypto Super Bowl ads earlier this year feel like a world away—we’re now deep into a brutal crypto winter.