John Reed Stark, a former US Securities and Exchange Commission (SEC) investigator, has criticized the pending approval of spot Bitcoin exchange-traded funds (ETFs) and vehemently argued against the inherent value of cryptocurrencies.
In a lengthy Jan. 7 post on social media, Stark painted a bleak picture of Bitcoin (BTC) and cryptocurrencies in general, suggesting that their only proven use lies in criminal activity.
“For me, the stark reality is that approving a Bitcoin spot ETF is sad, tragic and disastrous… another fee collapse… pyramid scheme… masquerade,” Stark says.
The full statement can be found below.
A Bitcoin Spot ETF: Say It's Not So, Gary. . .
For crypto: There is no inherent value. There is no cash flow. There is no return. There are no employees. There is no management. There is no balance sheet. There is no product. There is no service. There is no operating history. There is… pic.twitter.com/vsrg8DBZqW
— John Reed Stark (@JohnReedStark) January 7, 2024
Stark was the former head of the SEC Office of Internet Enforcement. In his view, cryptocurrencies enable a range of devastating crimes and terrorism. He argued that the main beneficiaries are predominantly “moons” and “criminals” who exploit the pseudonymous nature of cryptocurrencies to commit a variety of crimes worldwide.
Stark's comments come amid reports that the SEC could approve the offering and launch of a Bitcoin spot ETF as early as January 10.
In his view, the approval of a Bitcoin spot ETF is another “fee-guzzling” venture, an opportunistic move by billionaire financial tycoons.
According to Stark, Bitcoin ETFs are a means of giving investors more opportunities to suffer financial ruin while lining the pockets of the rich.
Stark criticized the crypto ecosystem, describing it as a toxic combination of computer chatter, affinity fraud and the “Greater Fool Theory.” He further argued that Bitcoin spot ETF applicants are exploiting the so-called “financial inclusion” of cryptocurrencies to disguise a monstrous Ponzi scheme.
Stark concluded by warning that the agency's potential approval of a Bitcoin spot ETF would expose millions of American investors to the risks associated with investing in digital assets.
He also called on the SEC not to encourage the financial harm that would result from the widespread distribution of a financial product he called a “socially worthless gambling chip.”
Strong feeling
Stark's scathing attack on crypto comes on the heels of a similar filing from Better Markets, a nonprofit that advocates for stricter financial regulations.
On January 5, Better Markets CEO Dennis M. Kelleher wrote an official letter to the SEC, urging the regulator to reject ongoing applications for a Bitcoin ETF.
Kelleher warned that releasing the financial instrument could pose significant risk to investors, calling it a “volatile and speculative product with no societal value” that could harm millions of American investors and retirees.
The CEO also warned that this could set a troubling precedent that will make it harder for the SEC to win victories in future litigation and pave the way for an onslaught of misguided advertising by the crypto industry aimed at diversifying a range of retirement savers to encourage cryptocurrency.
Kelleher questioned whether the Bitcoin market was mature enough for such an ETF, pointing to issues such as the potential for wash trading and the uneven distribution of Bitcoin ownership.
According to Kelleher, the risk of fraud in the Bitcoin market is so high that listing and trading a Bitcoin ETF would contradict the exchange's responsibility to prevent fraud and manipulation and to protect investors and the public interest.
He also argued that the inherent volatility of Bitcoin should automatically result in Bitcoin not being available to investors, stating that the unpredictably fluctuating price poses risks that are inconsistent with the obligation to protect investors and the public interest be.
Kelleher's views were sharply criticized by a section of the crypto community, particularly Bloomberg ETF analyst James Seyffart, who argued that rejecting ETF applications at this point would be a “criminal move” considering the time and effort both the SEC and the SEC have expended on potential issuers.
Given the time and energy spent by all of these issuers AND the SEC staff over the past few months, this would be an absolutely criminal move https://t.co/QZR4pqcyga
— James Seyffart (@JSeyff) January 5, 2024
Others, like FOX News journalist Eleanor Terrett, criticized Kelleher for his longstanding anti-crypto statements as well as his alleged close relationship with Senator Elizabeth Warren, who frequently scrutinizes the crypto industry.
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