If we think this is something we can sell, we’re all in

• SEC stopped ICOs, lending programs, agreements for future tokens
• Dinner meetings between Bankman-Fried and government officials were “bad judgment”

John Stark, a former chief of the SEC office of internet enforcement and president of John Reed Stark Consulting, joined CNBC’s ‘Squawk Box’ to discuss the collapse of crypto exchange FTX.

Worrying lack of due diligence

The host raised the issue of due diligence, more specifically the lack thereof where investments in FTX were concerned. He asked Stark what can be done about that. John Stark responded by quoting Sam Bankman-Fried himself: 

We don’t look at the product, service, etc…we look at whether this is an idea we can pitch to someone. If we think this is something we can sell, then we’re all in. Due diligence is absurd. It’s just the wrong way to invest. When you invest, you should look for value, you should look for the long-term. 

The (FTX) business model is something the public isn’t used to…

Stark replied:

I agree the model is different, and to me it’s absurd, but…these are investors like everyone else. 

Which agency…should be ashamed that we’re in this situation, where customers have lost their money and have no claims on anything coming out of bankruptcy?

Stark defended the state agencies in response, pointing out they’ve won many cases; they stopped ICOs, lending programs, agreements for future tokens, they stopped Coinbase from doing the lending program…They have been very aggressive and are going to be more aggressive when it comes to these crypto intermediaries.  

He added that he would be ‘shocked’ if regulators did not meet with FTX, saying:

You try not to meet with con artists. 

Prompted by the host to discuss the “dinner meetings” between Bankman-Fried and government officials, he said those occurrences weren’t impeachable offenses, only bad judgment.