Nouriel Roubini is known for his scathing criticism of cryptocurrency and blockchain.
“Literally all of them are crooks!”
NYU Professor Nouriel Roubini claims that 99% of the crypto industry is a scam. Speaking to Yahoo Finance at Davos, Switzerland during the annual meeting of the World Economic Forum (WEF), Roubini as usual, lashed out at the industry calling out the FTX fallout.
“Literally 99% of crypto is a scam. A criminal activity. A total real-bubble Ponzi scheme that is going bust.” The professor is also known as “Doctor Doom” because of his predictions on global trends.
“FTX and SBF are not an exception — they’re a rule,” said the NYU professor. FTX was one of the largest cryptocurrency exchanges. A series of murky revelations about its financial health exposed gross mishandling of customer funds. It filed for bankruptcy protection in November last year; An estimated $8 billion in customer funds was lost when FTX filed.
FTX’s co-founder and ex-CEO Sam Bankman Fried is charged with wire fraud and securities fraud among felonies. SBF has not pleaded guilty to any of those charges yet and a hearing is scheduled for October 23rd, 2023. He faces nearly 115 years in prison if he’s convicted for all charges.
Roubini has strongly criticized cryptocurrency as a technology and the market. He says most of those involved in the market are con men.
Madoff affected 1000; FTX was 1 million people
Roubini compared Bernie Madoff’s scam with FTX: “I mean Madoff had a ponzi scheme, a few thousand people lost their shirts. FTX alone was 1 million customers; in the US alone, there are 40 million people who have invested into crypto, mostly young people or people who have lower income or minorities. And none of them, 99% of them did not buy bitcoin at a $1000 or even $10,000, most of them got FOMO (Fear Of Missing Out) 2021 when it was skyrocketing from $20,000 to $30,000 to $50,000 to $69,000 and 99% of them bought well above the current market value so they lost their shirts…and this is just bitcoin…there are others.”
He said that out of 20,000 ICOs (Initial Coin Offerings), ‘officially,’ 80% were scams and another 17% have gone to 0.
“You have to stay away, you have to absolutely stay away. And most of these people belong literally in jail; they are all crooks”
You cannot create trust with technology alone
When asked whether Blockchain had a chance as a technology, Roubini said he was skeptical and called it an ‘overhyped technology.’
To emphasize the role of institutions that validate transactions, Roubini explained that an organic foods business like Whole Foods sends people to check whether producers were using pesticides or GMOs or other chemicals; and they test the stores in a similar way. After it has been confirmed that the produce is organic, you can create a centralized database.
“So the idea that a DLT (Decentralized Ledger Technology) can create trust is impossible because the reality is that you always need some credible institution that validates transactions. Once you have done that hard job, then put it on a centralized database, so most of what they call blockchain is blockchain in name only. It tends to be private, not public, centralized, not decentralized, permission, not permission-less and based on trusted validators rather than a trustless system. So it’s not blockchain, it’s a glorified database.”
“Google Docs is a permissioned database, everybody’s using it. Nobody is calling it a blockchain because it’s not blockchain. So blockchain is a fad. And it’s totally useless technology and wastes a lot of energy.”