Sam Bankman-Fried did ‘immeasurable’ damage to the crypto industry: Ava Labs CEO

The implosion of FTX last fall gave crypto a black eye, damaging the nascent industry’s reputation in terms of legitimacy and trust. And this damage is huge, according to Ava Labs CEO and founder Emin Gün Sirer.

“The damage that Sam did is immeasurable,” he continued last episode of gm from Decrypt podcast. “All that goodwill that we’ve built over many, many years of hard work is just usurped by a guy coming in and putting on this brilliant kid.”

Sirer said he has seen the digital asset industry “bloom from nothing” into what it is today. And he said he worked hard as a professor of computer science at Cornell University to promote education around blockchain technology, such as briefing politicians and hosting workshops.

The thought of how far Bankman-Fried set the industry back is something that keeps Sirer up at night, he said, aware of changing tides in regulatory circles that could be “very bad” for those involved in crypto.

As digital asset prices plummeted last summer, FTX founder Sam Bankman-Fried’s reputation soared to new heights, as the 30-year-old entrepreneur was compared to John Pierpont Morgan in 1907 for rushing to rescue distressed crypto firms.

But last November, Bankman-Fried’s reputation swung in the opposite direction when FTX collapsed. The company filed for bankruptcy after a run on the stock market was triggered by a steep drop in FTX’s FTT token, which revealed that FTX did not have one-to-one reserves of customer funds and could not honor withdrawals.

Bankman-Fried was subsequently arrested and charged with a variety of financial crimes, ranging from fraud to money laundering, for allegedly misappropriating billions of dollars in client funds. He pleaded not guilty, and while further charges were turned on last week the FTX founder has been compared to Bernie Madoff by some of his former business partners since his empire crumbled.

Sirer attributed the lack of scrutiny Bankman-Fried received to the image the FTX founder cultivated, from his “unruly hair” to spending “so much on marketing that the world [treated] him as a genius beyond question.”

Dealing with the aftermath of FTX’s collapse — which included the failure of dozens of other companies and projects caught in the contagion — will depend on establishing a constructive dialogue with regulators, Sirer said.

It’s important to distinguish for lawmakers that FTX’s fate was the failure of a centralized entity and not a failure of crypto itself in “any shape or form,” he said.

The FTX saga has sent Sirer looking for a silver lining. While he acknowledges that many retail investors were hurt by FTX’s rapid implosion and resulting infection that spread to other businesses, he said he believes the damage would have been greater if left unchecked.

“If we had given Sam a couple more years of runway, it would have been far worse,” he said, referring to the many retail crypto investors and venture capital firms who were hurt by their faith in SBF.

Another consolation is how Bankman-Fried has catapulted digital assets into the mainstream as a result of his alleged mismanagement of FTX, putting certain tokens on the public’s radar. “I no longer need to educate people about what Bitcoin [or] Ethereum is,” he said.

Sirer said he is also relieved that Ava Labs was never a so-called Sam coin, tokens championed by the disgraced crypto mogul that were allegedly inflated in price, including Solana and FTX’s exchange token FTT.

“We were never a Sam coin, and so we stayed out of the whole craziness,” Sirer said. “And we’re just thanking our lucky stars for that.”