© 2022 NPR Illinois
Stand with the Facts
Play Live Radio
Next Up:
0:00
0:00
Available On Air Stations
Click here to be "In the know." Subscribe to the NPR Illinois Daily newsletter.

FTX investors are unable to access their money, shaking crypto investors' confidence

AILSA CHANG, HOST:

More than a million people may have lost their money in the spectacular collapse of the cryptocurrency trading company FTX. NPR's Chris Arnold spoke to some of them as they try to figure out what happened and what to do next.

CHRIS ARNOLD, BYLINE: FTX spent big money to make trading crypto popular and to gain people's trust. The company got a stadium named after it, had scores of TV commercials with superstars like Tom Brady and Steph Curry.

(SOUNDBITE OF AD)

STEPH CURRY: I'm not an expert, and I don't need to be. With FTX, I have everything I need to buy, sell and trade crypto safely.

ARNOLD: Trade crypto safely? Apparently not. After panic spread that the company was on shaky ground, there was basically a run on the bank, with people scrambling to try to withdraw their holdings. FTX froze accounts, quickly filed for bankruptcy, and now many customers could lose some or all of their money. So much for trading crypto safely.

TERRY SMITH: I was devastated, really. That's a huge chunk of money for me.

ARNOLD: Terri Smith is an architect in the Seattle area who says she may have lost about $30,000 in the FTX implosion.

SMITH: It feels like someone's stealing your money. I mean, it feels like - yeah, it feels like theft.

ARNOLD: 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 that the FTX trading platform itself imploded - sort of like if you were investing in stocks using, say, E-Trade or Schwab or Fidelity, and the company said, oops, sorry, we're declaring bankruptcy, and you can't withdraw your money. And for Jake Thacker in Portland, Ore., it's a lot of money.

JAKE THACKER: Roughly $70,000 in FTX when it all came crashing down.

ARNOLD: Thacker's 40 years old and works in the tech industry. He's traded crypto for a couple of years. And he'd managed to make about $200,000 using trading bots and advice from investing groups. Then last week, he heard the news that FTX was melting down. He tried logging into his account.

THACKER: Went in, looked at some of where my account balances were, didn't seem to be right - everything was frozen. There was all kinds of error issues. I was definitely in freak-out mode.

ARNOLD: He tried messaging and calling FTX - couldn't find out much of anything.

THACKER: And I got my lawyer involved, and he was kind of like, I don't really know, Jake. I don't know what's going to happen here.

ARNOLD: So what is likely to happen next for all of these investors?

CHARLIE GERSTEIN: It ain't looking good.

ARNOLD: Charlie Gerstein is an attorney who's filed class action cases against other cryptocurrency companies. The bankruptcy filings state that FTX could owe money to upwards of a million people, and he says the basic facts are pretty grim. 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.

GERSTEIN: The company is short $8 billion. 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, it's gone. Or they stole it.

ARNOLD: There is also this. Hackers reportedly may have stolen several hundred million dollars of customers' money as well while all this was going on. Moving forward, the bankruptcy court will eventually try to sort out how much money is left and how it gets divvied up among all of these people. FTX said in a statement, quote, "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 the question basically is, if FTX collapsed, who's to say another one won't, too?

THACKER: I think that's where that fear is creeping into the backs of people's minds right now. It's - I could be the best trader. I could get the best returns. Do I trust the system that will allow me to do it? I think is - that's what's rattling through people's brains right now.

ARNOLD: So Thacker says he's pulling some of his money off of other platforms as well. Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.

NPR correspondent Chris Arnold is based in Boston. His reports are heard regularly on NPR's award-winning newsmagazines Morning Edition, All Things Considered, and Weekend Edition. He joined NPR in 1996 and was based in San Francisco before moving to Boston in 2001.
Related Stories