Keynote with Judge Jed Rakoff: Is Cryptocurrency a Racket?
Drawing on years of courtroom experience, Judge Rakoff argues that crypto’s opacity, lack of regulation, and speculative hype have made it a magnet for fraud, money laundering, and financial manipulation. To make his case, he details how crypto schemes have cost investors billions, and why the legal and regulatory system remains ill-equipped to stop the next collapse.
- Keynote Speaker: Judge Jed Rakoff, Senior Judge of the United States District Court for the Southern District of New York
- Moderator: Rohit Chopra, Former CFPB Director and FTC Commissioner
Key Takeaways:
Crypto’s Criminal Roots: Judge Rakoff cited numerous cases to support the view that cryptocurrency’s opaque design makes it highly attractive to criminals, particularly for money laundering and fraud.
Speculative Hype vs. Real Utility: Cryptocurrencies are largely promoted as speculative investments, not functional currencies, leaving investors gambling on hype rather than substance.
The Silk Road & Leniency Regrets: Rakoff discussed his early sentencing of Charlie Shrem for laundering funds on The Silk Road and noted Shrem later became a prominent crypto advocate, highlighting the system’s ability to rehabilitate or enrich even those convicted.
The Terraform Collapse: Rakoff detailed the $40 billion crash of Terraform Labs’ crypto tokens (Terra/Luna), which promised price stability via secret algorithms that turned out to be fraudulent.
Regulatory Retreat: He warned that the SEC and other regulators are scaling back crypto enforcement, even dismissing major pending cases—potentially leaving investors unprotected.
Crypto’s Hypocrisy: Rakoff criticized the crypto industry’s desire to access central banking systems and legitimacy while rejecting regulation, calling the stance “hypocritical.”
Blockchain Evidence Issues: While blockchain was once seen as a transparency tool, Rakoff noted prosecutors face hurdles authenticating records due to alias use and weak business documentation standards.
Regulation by Settlement: Rakoff raised concerns that large corporations often settle with regulators instead of facing trial, creating “regulation by settlement,” which may not deter illegal conduct.
Lack of Congressional Action: Judge Rakoff lamented Congress’s failure to pass crypto or insider trading laws, leaving courts to craft rules case by case, resulting in inconsistent and uncertain standards.
Stablecoin Skepticism: While bipartisan bills aim to regulate stablecoins to support dollar dominance, Rakoff remained wary of industry motives, likening promises of “cooperation” to defense attorneys’ posturing.