What has almost gotten lost in the Sam Bankman-Fried saga is that the former billionaire’s scam was a fundamental violation of the securities laws—using customer funds to place his own bets. His personal control of both the exchange FTX, and his investment company, Alameda, and the comingling of their funds, puts Bankman-Fried right up there with Ponzi and Madoff as common crooks and outright felons.

Bankman-Fried’s disgrace will have some salutary side effects. It will derail the effort, heavily promoted by Bankman-Fried himself in his political giving and his lobbying, to take most crypto regulation away from the Securities and Exchange Commission in favor of the light-touch Commodity Futures Trading Commission. This ploy was shamelessly welcomed by the CFTC chair Russ Behnam and his patron, Sen. Debbie Stabenow, whose Senate Ag Committee stood to gain jurisdiction (and fundraising opportunities). That caper is now kaput.

Another side effect will be to cast grave doubt on the entire fable that crypto is either useful or reliable. If we are fortunate, it will sink the entire sector before more damage is done. The irony is that an innovation promoted for its transparency is in fact a dark playpen for insiders at the expense of investors. This is why we have securities laws in the first place. The abuses just keep repeating themselves in new forms.

But Bankman-Fried’s fall should not obscure some questions about his rise. When Bankman-Fried amassed his billions by creating a platform, FTX, that he personally controlled and incorporated offshore, this was widely seen as merely a clever business model. In fact, it violated the core premises of securities and exchange regulation dating back to FDR.

Any exchange that is someone’s personal property is a scam waiting to happen. Incorporating it offshore compounds the damage. The New York Stock Exchange was a not-for-profit until 2007.

Defenders of crypto are trying to scapegoat SEC chair Gary Gensler, who is the one real hero of this mess. Some (Pat Toomey) are charging him with having been too aggressive, driving crypto offshore; others (Andrew Ross Sorkin) charge him with being too lax. The fact is that the SEC, somewhat hamstrung by hostile court rulings, has been doing its best to crack down on abuses that keep ramifying. Matt Stoller has a terrific summary of the attempt to blame the one tough, honest, and knowledgeable cop.

One bizarre aspect of this story has been the remarkably gentle coverage of Bankman-Fried in The New York Times. The Times piece last Wednesday, as Bankman-Fried’s efforts to raise money were collapsing, seemed to blame investors and rival crypto-scamster Changpeng Zhao more than Bankman-Fried himself, compared FTX’s woes to a bank run, and didn’t even mention the fraud at the heart of Bankman-Fried’s business model.

A Times story yesterday, touchingly titled "FTX’s Collapse Casts a Pall on a Philanthropy Movement," took at face value that Bankman-Fried’s interest in the "effective altruism" movement was sincere and not just an effort to burnish his reputation and access. The story reported: "Mr. Bankman-Fried went into finance with the stated intention of making a fortune that he could then give away. In an interview with The New York Times last month about effective altruism, Mr. Bankman-Fried said he planned to give away a vast majority of his fortune in the next 10 to 20 years to effective altruist causes." The piece played Bankman-Fried’s collapse as a tragedy for philanthropy.

When a prior generation of robber barons engaged in philanthropy, at least they were good for the money and managed to stay inside the law. Just based on what is already on the public record, Bankman-Fried deserves a long prison term.