So full disclosure that title makes no sense and is a little bit of clickbait to get people rattled. If you are rattled, calm down and just enjoy the read. Clearly I hit some home truths you didn't like so perhaps someone with an opposite view to your own could be helpful.
If you have never heard of FTX it was an online cryptocurrency exchange platform, where people could exchange Bitcoin for Ethereum or Tether, similar in how you would change US Dollar for British Pounds.
FTX was based out of Bahamas and ran by a young chap called Sam Bankman-Fried. He was billed as the next big thing. Compared to the amazing Warren Buffett with investors flocking to throw money at him. Naz daily did a video on him highlighting his philanthropist side of things. Life was sweet for Sam.
A quick reminder of what a Ponzi scheme is. It's capitalised because it's named after Charles Ponzi who in the 1920's would promise investors high returns for his plan on selling postal coupons, and would then need more money to repay the initial investors and so on. There ultimately is no good return, just a very good salesman/conman telling you nice things so you give them more money.
At its peak FTX had a valuation of $32 billion. To put that into perspective WhatsApp was bought in 2014 for $19 Billion. On 11th November Sam resigned as CEO as the company filed for bankruptcy.
Sam managed to get investment from many investors, and not just your young naive new to the game investor either. Celebrities such as Shaqueil O Neil and Tom Brady are known to have invested, along with huge organisations such as Sequoia Capital and even the Ontaria Teachers' Pension Plan.
There was also countless YouTubers who took the sponsorship money, plugged the product to their huge subscription base, and then when it all came crashing downplayed dumb. One of the worst offenders here was Stephen Graham. I'll be honest I lost any respect for him after this. Not because he got done but more of his bullshit apology that had zero sincerity at all. I've decided not to link a video to him, but instead to Coffeezilla who is amazing and well worth a watch.
It's since emerged that Sam was taking money from FTX and using it to invest in other ventures through another company called Alameda Research.
So here is the trail as an investor.
You go to FTX and deposit your money thinking it is being stored as a crypto coin, but instead is used elsewhere in high volatile investments. When you decide to take your money out, there isn't any left because the owner has gambled (invested) it elsewhere in failed projects.
Now this practice isn't new and traditional banks have been doing this for years. But a few major differences between FTX and major platforms and banks such as Vanguard and HSBC for example. Firstly, they are protected under the Financial Security Compensation Scheme, which as an investor/user this means that if the company goes bankrupt, you are protected up to £85,000. Obviously platforms and banks that do not have this means they have not created this reputation or proven their reliability to look after your money.
Secondly, these other platforms are more transparent with what they are doing with your money and this is open access if you wanted to find this information out.
The biggest take away from this for me is to make sure wherever you store your investments make sure it is FSCS protected.
Investors who got scammed by this guy I have some sympathy for. He conned some big names and big companies. It sucks. I'm sure in time I will make a stupid decision so I am not going to be all smug here and using there error as a lesson in due diligence.
Let's remember some basics:
1/ If it seems too good to be true - it probably is.
2/ You are an adult, so you need to take responsibility for your choices, do your due diligence
3/ Get rich quick schemes do not work. Say it again!
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