Is crypto proving to be more of a con than a craze amid scandals?

Former FTX CEO Sam Bankman-Fried's fraud trial is set to commence next week, just another watershed moment in the crypto space leaving digital asset holders worries. Bloomberg Investigative Reporter Zeke Faux joins Yahoo Finance Live to discuss his experience exploring the cryptoverse and how Bankman-Fried's case may not be an outlier in the industry.

"If you think about a poker site, if all the top executives entered the tournaments, wouldn't they be tempted to cheat?" the Number Go Up author asks. "This was a conflict of interest out there in the open."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video transcript

- What's fascinating to me is that there are still diehards, there are still believers in the crypto verse, right? And I think when you talk to many of these people, even when the prices were going up and up and up, there was this sense that maybe something wasn't always right. But sort of give me some examples of the concrete things that you found that showed-- I mean, besides the obvious one of SBF-- that showed that something indeed was not right here. It wasn't just a feeling.

ZEKE FAUX: Yeah, I mean-- OK, this is kind of a silly story, but one thing that I found really telling is that, for the book, a lot of people told me, as I looked into this, that there was no way I could understand crypto unless I got some and that I was just kind of an outsider who didn't know what I was talking about. So I decided to get some. I decided to buy a Bored Ape, one of those NFTs if you remember those. These were the pictures of monkeys that went for $500,000. And that was an awkward conversation with my wife. I was able to get a cheaper one. It was more like $20,000.

But the process of sending my money into the crypto world-- sending my real US dollars into MetaMask to purchase this ape-- was so convoluted, so hard to do, so scary. What I found out was like, essentially, I had to send my money to like this random 32 digit string of numbers and characters. And if I made any typo, it would be gone. And everyone was warning me it was going to get stolen. And then I found out my money lived in a tiny little icon next to the URL bar in my browser.

And I thought to myself, wait, this is really the thing that everyone's been hyping to me as the future of finance? No one's going to do this. What's going to make a normal person try this out? Because most people, if they've done anything with crypto at all, it's just to go on Coinbase or something or Robinhood or whatever and buy a couple coins. But that's not really interacting with the crypto world. The user experience is similar to the stock market. So once I actually tried crypto stuff, I realized this is a terrible product and I can't imagine that this is going to take off any time soon.

- And Zeke, I do want to ask you about Sam Bankman-Fried as well-- the trial kicking off. And you met him, you interviewed him, you reported on him. Hailed as a visionary, now in a jail cell. Were you surprised by that implosion, Zeke, or as you interviewed him and reported on it, did you see red flags?

ZEKE FAUX: So I was totally surprised. In hindsight, there were a lot of red flags that I missed. He had this exchange-- FTX-- and we all knew he had this hedge fund, Alameda Research, that was one of the biggest traders on FTX. That's like a conflict of interest that would never be allowed in the world of traditional finance. I mean, if you think about an online poker site, if all the top executives also entered the tournaments, wouldn't they be tempted to cheat and like look at people's cards?

So this was a conflict of interest that was out there in the open. And it turned out that, yes, Alameda did have special privileges at FTX and that Alameda dipped into the customer funds, borrowed $8 billion of them, and vaporized them pretty much. And that's why Sam's facing fraud charges now, something that should have paid more attention to at the time.