Should big investors bear some liability for small time investors in the FTX debacle?

November 29, 2022

Every time something new and seemingly innovative makes alot of money in an impossibly short time. Otherwise ‘smart’ investors make really dumb decisions by rushing in, all because they invariably suffer from the fear of missing out complex and this psychosis (for lack of a better word) seems to be amplified considerably when they see rival investors and funds jumping on the bad wagon. The problem as I see it is like this – when these risky investments turn out to be duds. Then you know that all the talk about due diligence has to be unadulterated bullshit! BC if it was real due diligence where you have seriously smart folk going thru the numbers with a fine tooth comb. They would NEVER have made a decision to go in. The way I see it is like this. If the decision to invest in FTX was made without due diligence, then don’t insist that was the rationale for going in. Keep quiet. Or if you really have to disclose then just hang a big sign in red letters that say ‘Casino in session’. Because insisting the rationale for the investment was based on the outcome of the due diligence report when it wasn’t is nothing short of misrepresentation of a crucial fact. In the same way if I take my car in for a regularly quarterly service and there are 25 items on the ticker box that has been contracted to be checked off by a qualified mechanic. But let us assume this mechanic derelict supervisor just signed on the dotted line knowing full well that none of the work was actually done. Then in my book that’s willful negligence and possibly even fraud. I don’t wish to mince words here! There is a clear presence of deception here. Now if that really happened and one day I am driving on the PIE or AYE and suddenly a mechanical failure that could have been easily avoided had the checks been done. Then I have a right of claim on the garage BC they owe me a duty of care to be diligent and professional. So I think this example is extendable to the FTX case as well. Because when the term due diligence features as the basis for investing and it turns out to be a lousy call that makes a mockery of the DD report. Then these big investors have to bear a certain degree of culpability to the small investor for the same reason as the example of the wayward garage as the owe the small investor a duty of care to disclose honestly. Because the question you have to ask is this – would a small time investor like dumbo farmer me or some kid whose just investing in crypto as a hobbyist be unduly influenced to invest in FTX when he has been informed A, Y or Z whale investors have decided to go in after conducting a rigorous due diligence?

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