Looking back on FTX, the company’s fall now looks inevitable. When any company offers high rates of return with no risk guaranteed, as Alameda Research did at the end of 2018, you can be reasonably confident there’s a scam behind it. And yet, while hindsight is always 20/20, only a few people had the insight to sound a warning while everyone else was cashing in.
One of those people is Brad Mills, a life-long entrepreneur with a focus on product development and marketing. Mills has been active with Bitcoin for more than a decade and has been calling out bad practices in DeFi for some time, helping big investors pull out their funds before prices collapse. Talking to the Bad Crypto Podcast recently, Mills explained how he warned one investor friend who’d put a million dollars into Celsius and another friend who’d invested $10 million from a fund he manages. Both got out in time, despite some initial reluctance.
“Institutional investors are just as dumb as the rest of us when it comes to FOMO,” Mills mused.
Watch Brad Mills’ Interview on The Bad Crypto Podcast
Mills argues that the problems at FTX and Celsius weren’t limited to individual companies or the unethical behavior of individual entrepreneurs. Back in January, he told the podcast, he started paying attention to the large growth in DeFi Ponzi schemes like the Wonderland protocol and Terra Luna, and realized they were going to go the same way as other bubbles and Ponzi schemes in traditional markets.
“They’ve basically just rebuilt everything that was toxic and over-leveraged nonsense from the traditional markets in crypto and they call it innovation,” he explained. “And they put it on a blockchain and call it DeFi. Well, it doesn’t take like a lot of digging to start to realize it’s unsustainable.”
The industry is supported in the short term by large investors who try to bail out DeFi and crypto companies because they hold large amounts of tokens themselves. They provide liquidity and make the markets, and they use their success to suggest that it’s possible to mint a token and tell people it’s valuable. The only people who get rich with DeFi, argues Mills, are the VCs and insiders who can pre-mine the tokens and have enough liquidity to get their tokens out.
“I do believe that it’s built on an unethical foundation,” he said of DeFi. “Like a sort of a grifty insider whale game.”
Mills doesn’t see the current contagion spreading to any specific coin but suggested the entire market is inflated and stuck in bear territory. Bitcoin, he said, is the only real decentralized property in the crypto space.
For investors in other cryptocurrencies, that might not be welcome news. But don’t say you weren’t warned.