FTX COLLAPSE OCCURS IN THE WAKE OF A RISE IN CRYPTO SCAMS
The collapse of FTX, a digital currency exchange valued at $32 billion earlier this week has shocked the cryptocurrency industry. Investors lost millions of dollars after former FTX CEO Sam Bankman-Fried declared bankruptcy. Before it collapsed this month, FTX stood apart from many rivals in the largely unsupervised crypto industry by boasting it was the “most regulated” exchange on the planet and inviting closer scrutiny from authorities.
One investor talked about how it felt to lose $2 million in the catastrophe.
Investor Evan Luthra stated on “Cavuto Live” that “everyone in the crypto world can learn a lot from this.” “It’s a big, strong lesson that, not your keys, not your crypto. If you don’t hold the keys to crypto, it’s not really your money.”
The former CEO was criticized by Luthra for using the exchange as “his personal bank account” in response to fresh information published in the Wall Street Journal that Sam Bankman-Fried stole close to $300 million from money raised in October 2021.
It was a well-orchestrated scam from start to finish…
The U.S. government warns that crypto fraudsters are leveraging cryptocurrency assets to defraud customers and that you should take necessary precautions to safeguard yourself.
According to a complaint bulletin released on November 10 by the Consumer Financial Protection Bureau (CFPB) that examines an increase in crypto-asset complaints, the phrase “pig butchering” refers to a specific scam that con artists use to defraud cryptocurrency investors, however, there’s no connection with a slaughterhouse.
The Director of CFPB Rohit Chopra said in a statement that “our study of consumer complaints reveals that criminal actors are utilizing crypto-assets to perpetrate frauds on the public.” Investors from different parts of the world are experiencing issues with transactions, frozen accounts, and lost savings.
In addition to customer complaints received by Polygon Decipher, a Crypto Forensics and Recovery Agency, it was recorded that most customers experienced difficulties accessing funds in their accounts as a result of consistent platform failures, problems with identity verification, security holds, or platform-related technical difficulties.
FTX COLLAPSE A BIG SLAM ON THE CRYPTO SECTOR
Following a fruitless attempt by Bankman-Fried to collect emergency cash, FTX collapsed last week. Through the dozens of licenses, it acquired through its numerous acquisitions, it had been subject to some regulatory scrutiny. However, that did not protect its clients and investors, who now stand to lose billions of dollars. According to the information provided, FTX had been covertly gambling with customer funds, utilizing $10 billion in deposits to support a trading company run by Bankman-Fried.
The documents reveal that FTX also considered its regulatory standing as a means of securing fresh funding from significant investors. It touted its licenses as a crucial advantage over competitors in the documents defending its request for hundreds of millions of dollars in funding. It claimed that the “regulatory moats” it had built would keep competitors at bay and grant it access to lucrative new alliances and markets that were out of reach for unregulated organizations.
FTX’s demise on November 8 may have served as a wake-up call for investors who had expressed uncertainty and worry about the value of digital assets. These events serve as the perfect reminder of the risks present in the cryptocurrency ecosystem, notwithstanding the staggering size of the financial losses at FTX and the possible damage to bitcoin’s reputation as a respectable asset class. In the crypto industry, there are no bailouts. Since they are not banks, they are not subject to severe rules like reserve requirements or insurance.
The collapse of FTX could result in several casualties, but one worry is how it can affect the entire crypto industry, which had an August market value of more than a trillion dollars. Although there are obvious ripple effects, it is difficult to say who has been affected at this stage.
The two most popular cryptocurrencies, bitcoin, and ether have seen their prices fall by more than 20% in the last week. The news that Bankman-Fried’s trading company, Alameda Research, has large stakes has also hurt the value of the Solana digital coin. The Tether stablecoin, which is meant to be a secure location to store money, just lost its one-to-one peg to the US dollar. Also, BlockFi, a cryptocurrency lending company, announced on Thursday that it was halting customer withdrawals.
Traditional investors have also suffered losses, but they are assuring customers that they can manage the consequences. Despite the unpredictability, the Ontario Teachers’ Pension Plan stated that losses related to its $95 million investment in FTX would have a “minimal impact” because the share accounts for less than 0.05% of the total assets.
Can the crypto industry survive?
After turbulent months in the crypto space, analysts remark that a significant amount of nefarious behavior has already been eliminated from the system. More hardship could occur as investors flee the cryptocurrency market out of fear. According to JPMorgan, the price of bitcoin might drop below $13,000, or about 22%, from its current level. The digital coin may go below $10,000, a low it hasn’t been since 2020.
In that scenario, the “crypto winter” is likely to get worse, especially as concerns about the larger economic landscape keep people from wanting to invest in riskier assets.
This will have an immediate negative impact on the cryptocurrency sector, but it doesn’t spell the end of the world since crypto-innovators from all over the world are doggedly trying to create more transparent and decentralized crypto platforms.
Just as institutional investors were beginning to show interest in the cryptocurrency field, the collapse of FTX will drive them away. It may take years to convince people again of the sector’s potential, even though some people will continue to work on exciting initiatives.
Additionally, it’s very certain to give regulators more confidence to tighten the knot, increasing expenses for cryptocurrency companies that make it through the ongoing purge. It reinforces the view that any sort of financial enterprise needs extensive regulation, the whole world will look much more coherent and watertight.
CZ of Binance said in a recent speech that the 2008 financial crisis is probably an accurate analogy for what’s playing out amidst the FTX saga, and the numerous crypto scams swamping the crypto space. “We’ve been set back a few years,” he said. “Regulators rightfully will scrutinize this industry much, much harder, which is probably a good thing, to be honest.”
WHAT TO DO IF YOU LOST YOUR CRYPTO TO FTX
Our Cyber-Threshold team has mastered the modus operandi of these con arts and has designed a recovery framework to recover the assets of victims. File your complaints now!
In addition, Gary Gensler, head of the US Securities and Exchange Commission, said on CNBC Thursday that while the crypto space is regulated, investors “need better protection.” The Wall Street Journal has reported that the SEC and the US Justice Department are investigating FTX.
