Former SEC official, cybersecurity expert opines on ‘catastrophic’ spot Bitcoin ETFs

John Reed Stark, a former investigator with the U.S. Securities and Exchange Commission (SEC), has blasted the pending approval of spot Bitcoin exchange-traded funds (ETFs), arguing vehemently against the inherent value of cryptocurrencies.

In a lengthy Jan. 7 post on social media, Stark painted a grim picture of Bitcoin (BTC) and cryptocurrencies in general, suggesting their only proven utility lies in criminal activities.

“To me, the stark reality is that the approval of a Bitcoin Spot ETF is sadly, tragically and catastrophically… another fee-suck… Ponzi scheme… masquerade,” Stark says.

See the full statement below.

Stark was the former chief of the SEC Office of Internet Enforcement. In his view, cryptocurrencies facilitate an array of devastating crimes and terrorism. He argued that the main beneficiaries are predominantly “grifters” and “criminals” who exploit the pseudonymous nature of cryptocurrencies to perpetrate a vast array of crimes across the globe.

Stark’s comments come amidst reports that the SEC may approve the offering and inception of a Bitcoin spot ETF as early as Jan. 10.

In his view, the approval of a Bitcoin spot ETF is yet another “fee-sucking” venture, an opportunistic move by billionaire financial magnates.

According to Stark, Bitcoin ETFs are a means of creating more opportunities for investors to experience financial ruin while lining the pockets of the wealthy.

Stark criticized the crypto ecosystem, describing it as a toxic combination of computational blather, 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 mask a monstrous Ponzi scheme.

Stark concluded with a warning that the agency’s possible approval of a Bitcoin spot ETF would expose millions of American investors to the risks inherent in investing in digital assets.

He further called on the SEC not to facilitate the financial damage that would follow the widespread dissemination of a financial product that he described as a “socially worthless gambling chip.”

Stark sentiment

Stark’s scathing attack on crypto follows hot on the heels of a similar submission by Better Markets, a non-profit organization advocating for stricter financial regulations.

On Jan. 5, Better Markets CEO Dennis M. Kelleher addressed the SEC in an official letter, imploring the regulator to reject the ongoing applications for a Bitcoin ETF.

Kelleher warned that greenlighting the financial instrument could pose a significant risk to investors, characterizing it as a “volatile and speculative product of no societal value” that could impact millions of American investors and retirees.

The CEO further cautioned that this could set a concerning precedent, making it harder for the SEC to secure victories in future legal disputes and paving the way for an onslaught of misguided promotion by the crypto industry aimed at encouraging an array of retirement savers to diversify into cryptocurrency.

Kelleher questioned whether the Bitcoin market is mature enough for such an ETF and highlighted issues such as the potential for wash trading and the uneven distribution of Bitcoin ownership.

The risk of fraud in the Bitcoin market, according to Kelleher, is so high that an exchange 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 contended that the inherent volatility of Bitcoin should automatically disqualify it from being offered to investors, stating that the unpredictably fluctuating price poses risks inconsistent with the obligation to safeguard investors and public interest.

Kelleher’s sentiments were roundly criticized by a section of the crypto community, notably Bloomberg ETF analyst James Seyffart, who argued that dismissing ETF applications at this juncture would be a “criminal move,” given the time and effort spent on them by both the SEC and potential issuers.

Others, like FOX News journalist Eleanor Terrett, called out Kelleher for his long history of anti-crypto statements as well as his alleged close relationship with Senator Elizabeth Warren, who often scrutinizes the crypto industry.