Nouriel Roubini warns about cryptocurrencies

“The ecosystem is totally corrupt”: Nouriel Roubini

  • Roubini asks to remember other ‘crypto’ managers who are in jail…
  • … with whom he equates Binance and, furthermore, warns of its lack of license
  • Binance and his divestment from FTX is being investigated in the UK

The economist Nouriel Roubini, among other things known for his accurate forecasts on the financial crisis, has warned about the cryptocurrency market after the bankruptcy of FTX. “The ecosystem is totally corrupt,” he warned at an event organized by CNBC in Abu Dhabi, United Arab Emirates.

The New York University professor has summed up the ‘crypto’ world with seven ‘c’s: opaque, corrupt, thieves, criminal, scammers, carnival barkers, and CZ. The latter term refers to Changpeng Zhao, the CEO of the Binance exchange platform, who is known by his initials.

Roubini has been very critical of him and has compared him to other of his colleagues from his sector. In the talk on the US channel, the professor commented that, in previous calls, he debated with Arthur Hayes, former CEO of Bitmax, who soon ended up in jail for money laundering and after the economist himself accused him of being a thief. On this occasion, he was going to share the stage with FTX spokesman Kevin O’Leary, whose presence was finally canceled by the organizers. In 2021 at the same event, he was also going to sit with CZ himself but “at the last moment he decided to escape, he did not want to be on stage with me,” says the also president of the RGE Monitor consultancy.

So the takeaway from him and the lesson to be learned from the FTX collapse is that “all these people should be out of this.” One of the issues that the economist has recalled is that Binance does not have a license to operate in the United Kingdom or that in the United States it has an open investigation for money laundering.

At the same time, the British Treasury Committee has requested information from the exchange to assess the role that this rival played in the fall of FTX. The agency is analyzing what Binance’s divestment announcement from FTT tokens meant and how it contributed to the subsequent chaos in the market. The ‘crypto’ firm has already sent the first responses to the authorities, who regret that internal documents have not been shared, but that the explanations they have given are based on news from various media. According to Bloomberg, a member of said committee interprets this as a lack of transparency on the part of CZ and his company.

CZ’s response to Roubini

In the same talks in Abu Dhabi, CZ has responded to the professor. “We don’t care”, he responded to the accusations against the entire ecosystem. “He’s rude,” he says of Roubini. “Negative energy is useless and those kinds of people are poor in life,” he added.

The Binance CEO has focused part of the attention these days on the recovery fund that he plans to launch to help the ‘crypto’ world. His objective will be to provide liquidity to those “solid” projects that are facing a lack of cash and thus avoid a domino effect, such as the one that has been triggered by the bankruptcy of FTX. This has dragged other platforms such as Gemini, Genesis or BlockFi.

In any case, Roubini’s warnings are better understood when details of FTX’s management are known, which have been transcending these days. The Financial Times had access to the balance sheet of the firm and published the extract from it. Sam Bankman-Fried’s company has self-issued tokens on its balance sheet, such as FTT or Serum. Not only did they create their own assets, but they were also overvalued in their accounts. To this is added that most of these assets were illiquid and that there was a hole in the balance sheet, which did not add up, which gives clues to its lack of control. Likewise, its collapse is comparable to that of Enron, which also alerts us to what happened.