King TUT: FTX and Trustless Utility Tokens

Separating crypto’s unsalvageable sublimate from its redeemable remnants

In case you missed it, FTX filed for bankruptcy and its cofounder/CEO Sam Bankman-Fried (SBF) is now in custody. I’m not going to recount the whole background or circumstances regarding that accelerated collapse of the world’s second largest crypto exchange — for which a more forensic autopsy is forthcoming from the courts, regulators, and policymakers. I’m also not going to rehash all of my priors about the legitimacy of crypto, both real and imagined. However, first, I will count many of the ways this scaffolding was architecturally unsound, which is the lesser of my two objectives herein…

To wit, I keep hearing that this FTX saga is an indictment of crypto tokens, which isn’t untrue, but does demand two important caveats, including:

• 1️⃣ $ftt was rather baldly an unregistered security brought to market via ICO
• 2️⃣ utility tokens are not securities (if done correctly)

$ftt’s initial coin offering (ICO) raised capital for FTX, which was part of what made the coin a security that should have been registered and regulated as such. That said, I’ve discussed all the reasons why regulation has deferred on cracking-down on the vast majority of these…