Where did all the money go? Why was Sam Bankman-Fried on the cover of so many magazines and newspapers? What board games were they all playing in that apartment in the Bahamas and how much partner swapping was actually going on? As the FTX scandal unravels, with billions of dollars still to be tracked down and with other cryptocurrency firms likely to follow it into oblivion, there will be plenty of questions to be answered. But perhaps the biggest one will be this: why were so many of the biggest names in business, politics and the media so willing to go along with the whole charade?

In the immediate aftermath of the collapse, we have already learnt that the respected management consultancy Bain contributed to “due diligence” on the firm before an investment by Tiger Capital; that some of the leading names in venture capital, from Sequoia to SoftBank, poured hundreds of millions into the enterprise; that major media brands such ProPublica took money from the founder along with plenty of charities; and the likes of Sir Tony Blair and Bill Clinton were happy to pontificate at its conferences.

The capital markets will recover from the collapse of FTX. So in time will most, if not all, of the individuals trading through it, even if they lose some money. But the reputations of its cheerleaders will be permanently damaged, and perhaps fatally so - they should never have lent their weight to such a flimsy enterprise.

Less than a fortnight after its chaotic collapse, there are already signs the FTX scandal is starting to spread throughout the rest of the crypto industry.

The trader Genesis said this week that it had halted all redemptions and followed that up with a statement that bankruptcy was one of the options, not usually an encouraging sign. Other crypto traders, brokers and hedge funds may well be in trouble soon.

Loading

Surprisingly, the price of Bitcoin itself has held up rather well in the aftermath of the scandal. Yesterday, the price per coin rose back above $US16,000 and has fallen only from $US20,000 since FTX started to unravel. It’s hardly a dramatic drop by the standards of digital tokens, although it was already a long way off the $US60,000 it hit last year. Investors may well hold on to their money, so long as they didn’t buy at the peak or through FTX, and have strong nerves. Bitcoin itself may survive this crisis as it has several earlier ones.

The real damage will be done to FTX’s cheerleaders and outriders. Serious questions have to be asked of all the people and institutions who helped create the fiction of Sam Bankman-Fried as the boy wonder of finance. It emerged this week that the consultancy Bain reportedly contributed to the due diligence work for Tiger Capital on its investment in FTX. Seriously? After all, this is a company, which, according to John Ray, the man drafted in to clear up the mess, didn’t even have the kind of financial records in place you might expect of your local window cleaner, and where three or four billion dollars could be transferred without anyone writing it down.

True, we also don’t have high expectations of Bain. After all, it is only a couple of months since the firm was banned from doing any more work for the British Government for three years after it was caught up in a scandal in South Africa (and, just taking a wild guess here, but that probably won’t be lifted early).