FTX spent big money to make trading crypto popular and gain people's trust. The company had an arena in Miami named after it and aired scores of TV commercials with superstars like Tom Brady and Steph Curry.
"I'm not an expert and I don't need to be," NBA champion Curry says in one ad. "With FTX I have everything I need to buy sell and trade Crypto safely."
Trade Crypto safely? Apparently not.
Terri Smith is an architect in the Seattle area who says she may have lost about $30,000 in the FTX implosion. "I was devastated really," she says. "That's a huge chunk of money for me."
Smith and a wave of other investors scrambled to try to withdraw billions of dollars from FTX after panic spread that the company was on shaky ground. But with a run on the exchange underway, FTX froze accounts, quickly filed for bankruptcy, and now many customers could lose some or all of their money.
"It feels like someone stealing your money," Smith says. "It feels like theft."
Investing in crypto is inherently risky. But people didn't lose money this time because bitcoin or some other cryptocurrency plunged in value.
It was because the FTX trading platform itself imploded. Sort of like if you were investing in stocks using E-trade or Schwab or Fidelity and the company said "oops, sorry we're declaring bankruptcy and you can't withdraw your money." (Of course that hasn't happened.)
Nick Howard didn't think he was making speculative bets on crypto. He worked for an overseas startup video game company that he said preferred to pay him in a cryptocurrency called USDT that's supposed to just match the value of the U.S. dollar.
"And they were like, we suggest you use FTX," he says his employer told him. "That's a well known high profile company, they seem to be really good, really stable."
He says he had $16,000 worth of paychecks still in his account on FTX when it imploded. At 33 years old, he says that was about half of all the savings he had.
"I feel like I am in the middle of, you know, a trauma response," Howard says. "It's kind of a numb feeling for me right now."
Jake Thacker in Portland, Oregon, may have lost a lot more money.
"Roughly $70,000 in FTX when it all came crashing down," he says.
Thacker is 40 years old and works in the tech industry. He's traded crypto for a couple of years. He says he started out cautiously, got advice from investing groups, and managed to make about $200,000.
Then he heard the news that FTX was melting down. He tried logging into his account.
"I went in, looked at where some of my account balances were, it didn't seem to be right," Thacker says. "Everything was frozen, there were all kinds of error issues. I was definitely in freak-out mode."
He tried messaging and calling FTX but couldn't find out much of anything.
"I got my lawyer involved," Thacker says. "He was kind of like, I don't really know, Jake. I don't know what's going to happen here."
So what is likely to happen next for all these investors?
"It ain't lookin' good, "says Charlie Gerstein, an attorney with the firm Gerstein Harrow, who has filed class action lawsuits against other cryptocurrency companies.
The bankruptcy filings state FTX could owe money to upwards of 1 million people. And the basic facts are pretty grim. Gerstein says FTX told investors it would keep their assets 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 short $8 billion," Gerstein says. "And there's only two conceivable categories of explanation for what happened to that $8 billion. The first is they traded it in speculative investments and lost it."
In other words he says, the money's gone. "Or they stole it."
There's also this. There are also reports that hackers may have stolen several hundred million dollars of customers' money amidst the frantic wave of customer withdrawals.
Moving forward, Gerstein says the bankruptcy court will eventually try to sort out how much money is left and how it gets divvied up among all these people.
FTX said in a statement "we are going to conduct this effort with diligence, thoroughness, and transparency."
Meanwhile, the sudden collapse of FTX is having some contagion effects as people lose faith in other crypto-trading platforms. Jake Thacker says he and other crypto investors are rattled and wondering, if FTX collapsed, who's to say another platform won't be next?
"I think that fear is creeping 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 will allow me to do it?"
So Thacker says he's pulling some of his money off of other platforms too.
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