It’s tempting to treat FTX founder Sam Bankman-Fried’s conviction as a morality play, replete with the familiar elements of a hubristic protagonist’s rise and fall. That’s understandable, but the bigger lesson here is not that startup founders should be humbler, true though that may be. It’s that regulation is better than criminal law at preventing harm.
In short, criminal law is not a very good deterrent to wrongful action when people either think they’re doing nothing wrong, or think they won’t be caught.
Regulation, on the other hand, takes a completely different approach. Its aim is to operate ex ante, before any crime can be committed, rather than ex post, after money has disappeared.
‘Enforcement 40’ for 2020
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