FTX investors fear they have lost everything and wonder if there is anything they can do

FTX spent big bucks to popularize crypto trading and gain people’s trust. The company had an arena in Miami named after him and aired numerous TV commercials starring superstars like Tom Brady and Steph Curry.

“I’m not an expert and I don’t need to be,” NBA champion Curry said in an ad. “With FTX I have everything I need to buy, sell and trade Crypto safely.”

Trade Crypto Safely? Apparently not.

Terri Smith is a Seattle-area architect who says she may have lost about $30,000 in the FTX implosion. “I was really devastated,” she says. “That’s a huge chunk of money for me.”

Smith and a wave of other investors attempted to divest billions of dollars from FTX after panic spread that the company was on shaky ground. But while a run on the stock market was underway, FTX froze accounts, quickly declared bankruptcy, and now many clients could lose some or all of their money.

“It feels like someone is stealing your money,” says Smith. “It feels like stealing.”

Terri Smith is a semi-retired, part-time architect from the Seattle area.  Now, with the FTX collapse coupled with the fall in stock and bond markets, she's considering going back to work full-time to make more money.

/ Terri Smith

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Terry Smith

Terri Smith is a semi-retired, part-time architect from the Seattle area. Now, with the FTX collapse coupled with the fall in stock and bond markets, she’s considering going back to work full-time to make more money.

Investing in crypto is inherently risky. But people didn’t lose money this time because bitcoin or any other cryptocurrency went down in value.

That was because the FTX trading platform itself imploded. Sort of like if you were investing in stocks through E-Trade, Schwab, or Fidelity and the company said, “Oops, sorry, we’re filing for bankruptcy and you can’t withdraw your money.” (Of course that didn’t happen. )

Nick Howard didn’t think he was making speculative bets on crypto. He worked for a foreign startup video game company, which he said prefers to be paid in a cryptocurrency called USDT, which is said to be equal only to the value of the US dollar.

“And they said we suggest you use FTX,” he says, his employer told him. “This is a well-known high-profile company, they seem to be doing really well, really stable.”

He says he still had $16,000 worth of paychecks in his FTX account when it imploded. At 33, he says, that was about half of all the savings he had.

“I feel like I’m in the middle of a trauma reaction,” Howard says. “It’s just a numb feeling for me.”

Nick Howard says his employer paid him in cryptocurrency.  He fears he lost about $16,000 worth of paychecks he had in his FTX account.

/Nick Howard

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Nick Howard

Nick Howard says his employer paid him in cryptocurrency. He fears he lost about $16,000 worth of paychecks he had in his FTX account.

Jake Thacker in Portland, Oregon may have lost a lot more money.

“About $70,000 in FTX when it all went down,” he says.

Thacker is 40 years old and works in the tech industry. He has been trading crypto for a few years. He says he cautiously started taking advice from groups of investors and managed to make about $200,000.

Then he heard the news that FTX was merging. He tried to log into his account.

“I went in, looked at where some of my bank balances were, it didn’t seem right,” says Thacker. “Everything was frozen, there were all sorts of bug issues. I was definitely in freak-out mode.”

He tried messaging and calling FTX but couldn’t find out much.

“I hired my attorney,” says Thacker. “He said I don’t really know, Jake. I don’t know what’s going to happen here.”

So what’s likely to happen next for all these investors?

“It’s not looking good,” said Charlie Gerstein, an attorney with the law firm Gerstein Harrow who has filed class-action lawsuits against other cryptocurrency companies.

The bankruptcy filing states that FTX could owe more than 1 million people money. And the basic facts are pretty grim. Gerstein says FTX told investors it would keep their wealth safe. So if it can’t give people their money back, he says, it probably broke the law by doing something else with it.

“The company is missing $8 billion,” says Gerstein. “And there are only two conceivable explanations for what happened to that $8 billion. The first is that they traded them in speculative investments and lost them.”

In other words, he says the money is gone. “Or they stole it.”

There is that too. There are also reports that hackers may have stolen hundreds of millions of dollars in customer funds amid the frenetic wave of customer withdrawals.

Gerstein says the bankruptcy court will eventually try to figure out how much money is left and how it’s going to be divided among all of those people.

FTX said in a statement, “We will conduct these efforts with care, thoroughness and transparency.”

Meanwhile, the sudden collapse of FTX has some contagion effects as people lose confidence in other crypto trading platforms. Jake Thacker says he and other crypto investors are unsettled and wondering if FTX collapses, who says another platform won’t be next?

“I think that fear creeps into the back of people’s minds,” he says. “I could be the best trader, I could get the best returns, do I trust the system that allows me to do that?”

So, Thacker is saying that he takes some of his money off other platforms as well.

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