What’s Going On With FTX?
If you’ve been following the financial headlines, you have likely seen news stories about the collapse of cryptocurrency giant FTX. This was a major event in the world of crypto, and it bears discussion on our platform, as digital currencies are becoming an increasingly-popular asset in estate plans. In this article, we will talk about what happened with FTX (including the latest news and updates), as well as how you can protect your cryptocurrency in the future.
Who Was FTX And What Happened?
We are using the past-tense because FTX, as of January of 2023, has folded. FTX was a giant cryptocurrency exchange that filed for bankruptcy in November of 2022. Its CEO, Sam Bankman Fried, admitted that the company did not have the capital to meet customers’ demand for withdrawals.
Not only did FTX crash due to not enough liquidity, it also went under because its funds were mismanaged. Investigations by the SEC revealed that FTX had diverted assets that customers had designated for certain coins (Bitcoin, Litecoin, etc.) and taken those assets, without permission, to fund Alameda Research, a venture capital firm. Alameda then took those misappropriated funds and used them to make large political donations and lavish real estate purchases. So, when customers came to withdraw money, FTX did not have that capital on-hand because it had blown it all, spending it clients’ money on assets said clients didn’t know about.
Bankman-Fried was charged with criminal counts in a court in New York City, and he, along with others from the organization-turned-criminal-enterprise, are facing lawsuits by the federal government for wire fraud and conspiracy. In total, more than $8 billion went missing due to FTX’s fraud. In December of 2022, FTX announced that it had recovered $1 billion of assets, but it still owes billions more to its creditors and very unhappy clients.
Ramifications On The Cryptocurrency World
According to Coin Telegraph, the impact of the FTX collapse has been “devastating” for consumers. It sent lawmakers and pundits into a tizzy, as they quickly latched onto FTX’s disintegration to call for more regulation within the crypto industry. Another domino effect had to do with investor confidence.
Shaken by the events and not wanting to potentially fall victim to such a scam, Legal 500 reported that investors fled from crypto, causing Bitcoin’s price to drop 25%. Social media and public opinion largely turned against cryptocurrencies, and the market has attracted attention, mostly negative, even from people who had no interest in it before.
Tips To Protect Your Crypto
We’ll leave it up to you to decide what you want to do with your cryptocurrency. Should you want to continue in the market, here are some tips to protecting your digital currencies:
· If you own crypto, put these assets into an estate plan, so that someone can inherit them if something happens to you. Make sure you include all pertinent information on how to access the currencies (keys, passwords, etc.) within the estate plan. An estate planning attorney will be able to help you with this process.
· Use 2FA (Two-Factor Authentication) for your crypto exchange.
· Use an authenticator app to ward against hacks.
· Back up your seed words (master key) thoroughly.
· Always use a strong password.
· If possible, use a hardware wallet.
When it comes to choosing a cryptocurrency exchange, here are some tips on what to look for:
· Look up the company’s tax reports and any information on its liquidity.
· Compare fees between platforms.
· Ensure there is a wide variety of coins with which to trade.
· Check out the platform’s insurance policy, if applicable.
· Make sure the platform has security protocols in place.
This fintech scandal, perhaps one of the biggest, monetarily, in history, is still developing. Its impact on the crypto world can’t be understated, and it is important to protect your digital currencies now. Learn more about cryptocurrency by visiting our website.