Larry Summers, former senior advisor and board member of Digital Currency Group (DCG), has cut ties with the cryptocurrency conglomerate amid criticism of the group’s alleged fraud. Summers faced criticism for failing to disclose his ties with crypto companies including DCG, as well as having assets stuck at the now bankrupt crypto exchange, FTX. He was also widely quoted comparing FTX to Enron in an interview with Bloomberg. Investors claim DCG’s trading desk is under investigation by the Department of Justice and Securities and Exchange Commission.
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Larry Summers: A TradFi Phony in Crypto
Introduction
The rise of cryptocurrencies has attracted many people from traditional finance, commonly referred to as “TradFi.” Some have embraced the innovation while others have upheld their skepticism towards the new digital assets. However, there are those who have been accused of being “phonies” as they exploit the crypto trend for personal gain without genuine interest in the technology. This article focuses on one of such individuals, Larry Summers, who worked as a senior advisor at Digital Currency Group (DCG).
Joining Digital Currency Group
In May 2016, Summers joined DCG, which had just added new partners. The firm had brought on a former Treasury Secretary and a director of the NY Fed to its ranks. Summers, who was the former Secretary of the Treasury for President Clinton and the Director of the National Economic Council for Obama, became a Senior Advisor at DCG. Despite his affiliation with DCG, Summers still held on to his traditional finance views, as seen in his speeches and interviews.
DCG’s Ties to Enron and Fraud
DCG’s association with Enron-like businesses came to light in November 2021. Summers was quoted comparing Sam Bankman-Fried’s crypto exchange, FTX, to Enron in an interview with Bloomberg. DCG and Genesis, Silbert’s subsidiary, had a trading partnership with FTX and had a small equity investment in the exchange. When FTX suffered losses, over $175 million of Genesis’ assets were stuck in the exchange. The US Feds opened investigations into DCG’s financial transfers to Genesis, with claims of fraud.
Larry Summers’ Resignation from DCG
Summers’ role as Senior Advisor at DCG came under criticism due to his apparent conflicts of interest. He faced scrutiny over his comments about FTX and DCG’s involvement in the exchange. DCG was also facing investigations into fraud. In response, Summers cut ties with DCG in 2021, quietly resigning from the company. However, given the circumstances, it is unclear when Summers left DCG.
The Revolving Door Project’s Call for Action
The Revolving Door Project rightly questioned Summers’ affiliation with DCG amid its fraudulent activities. They also pointed out that Summers’ take on economics is usually sought by the media. Despite this, no media outlet asked about Summers’ involvement in the cryptocurrency firm, which seems rather strange. The organization called for an investigation into how Summers conducts due diligence before affiliating with corporations.
Conclusion
Larry Summers, like many other TradFi individuals, jumped on the cryptocurrency bandwagon for personal gain. His affiliation with DCG was questionable, given the firm’s involvement in fraudulent activities. There is a need for people to be cautious when considering advice from such individuals. It is critical to investigate their backgrounds and affiliations before making any financial decisions.
