Ben McKenzie, who starred in “The O.C.” in the aughts, labeled cryptocurrency the “largest Ponzi scheme in history” during a Senate committee hearing Wednesday about the collapse of the crypto exchange FTX.
He based that argument on the fact that cryptocurrency “resembles nothing more than a massive speculation bubble built on a foundation of fraud,” according to the Washingtonian magazine.
Mr. McKenzie told lawmakers at the Senate Banking Committee hearing that the roughly 40 million American investors in cryptocurrency “have been lied to, in ways both big and small, by a once seemingly mighty crypto industry whose entire existence in fact depends on misinformation, hype and, yes, fraud,” according to the Hill.
The actor’s testimony comes as the Securities and Exchange Commission accused Sam Bankman-Fried, the CEO of FTX, of using customer funds to buy real estate and make political donations while also diverting them to support his own crypto trading firm, Alameda Research.
Mr. Bankman-Fried was arrested Monday in the Bahamas and charged with multiple fraud and money laundering charges, according to U.S. federal prosecutors.
FTX filed for bankruptcy on Nov. 11, when the firm ran out of money after the cryptocurrency equivalent of a bank run.
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Mr. McKenzie — a self-described “former teen idol” — became an outspoken critic of cryptocurrency during the COVID-19 pandemic after taking an online course on the digital currency hosted by SEC Chairman Gary Gensler, according to the New York Times.
He came away thinking that the high valuations for popular cryptocurrencies such as Bitcoin and Ethereum were driven by unchecked speculation more than any real-world use.
“Anyone with even an undergraduate degree in economics, such as myself, can tell you that money serves three functions: medium of exchange, unit of account and store of value,” Mr. McKenzie, who received his bachelor’s in economics from the University of Virginia, said Wednesday. “Cryptocurrencies cannot do any of the three well, and they have no hope of ever doing so.”
In his testimony, Mr. McKenzie referenced conversations he had with Alex Mashinsky, former CEO of “failed crypto lending firm” Celsius, who said only 10% to 15% of the crypto industry’s $1.8 trillion valuation consisted of real money.
— Victor Morton contributed to this report.