The Biggest Cryptocurrency Meltdown Yet
I report about crypto exchange hacks every week, so what is different here?
Crypto Exchange FTX filed for Chapter 11 bankruptcy the day after it said everything is fine.
There are more than 130 investors involved. Or should I call them suckers? Okay, end of editorial.
While Chapter 11 allows a company to “reorganize”, it is unlikely that this is possible for them.
The company and its owner, Sam Bankman-Fried used customer funds on risky bets, burning a $10 billion hole in its checkbook.
There are other crypto firms that have filed for bankruptcy like Celsius and Voyager Digital.
Bankman-Fried stepped down as CEO and John J Ray III – who led the liquidation of Enron replaced him. That is not a good sign.
Sequoia Capital, which led a $400 million fundraising round that valued the company at $32 billion, zeroed out its investment. Cutting its losses, I guess. California is investigating them. Only the first of many. The feds are looking into them also.
Crypto lender BlockFi has “paused” withdrawals. It was supposed to be being bailed out by Bankman-Fried.
The company’s entire compliance and legal team quit.
As did the team running it’s philanthropic foundation.
Here is the thing.
This is going to happen a lot before people get real about crypto. It is not magic.
Reports say that about a half billion in crypto is missing. Stolen? Hacked? To be determined. FTX says it is investigating trading anomalies. That is one term for massive fraud or theft.
At this point, if you have “money” at FTX, you are likely pretty much out of luck. Under US law, you are an unsecured creditor in the bankruptcy, pretty much like the janitorial service that didn’t get paid.
As long as you understand the risk and can deal with losing 100% of your investment, continue to invest. I invested about a hundred bucks to better learn how things work. I think it is worth about $20 now. Assuming the exchange doesn’t go belly up. There are a lot of people who went all in on crypto. They are in a world of hurt now and it is unlikely to get better any time so on.
El Salvador made crypto its national currency – but did not eliminate its regular money. I wonder how that is going right now. Make sure you understand the risk.
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