FTX: Over a million are owed money

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Image Source: Fox Business

Based on bankruptcy filings, crypto exchange FTX may owe more than a million people and businesses after the company shut down.

It is rumored that FTX was hacked and millions of dollars worth of cryptocurrency were stolen from the company.

People with money in the business have a lot to worry about.

There are few UK crypto assets rules, and experts and financial watchdogs warn that consumers don’t have much protection.

Even though watchdogs have been very clear about the risks of crypto investments. About 6.7 million people in the UK have crypto assets or have bought them. This is close to 10% of the population.

In September, the Financial Conduct Authority (FCA), a group that keeps an eye on finances, warned. That FTX might be selling or offering financial services in the UK without permission. It said, “If things go wrong, you’re not likely to get your money back.”

It now has a page about the FTX going out of business. But again, the message is that those who have put money into it have few choices.

Act of vanishing

In the case of FTX, at least a liquidation process will divide what’s left of the company among the people it owes money.

Gavin Brown, an Associate Professor in Financial Technology at the University of Liverpool, pointed to a recent report saying, “42% of failed exchanges simply vanished without a trace.”

But bankruptcy might not bring much comfort.

Few choices for FTX users

The FCA says that people should go to Moneyhelper, which the government backs. But Moneyhelper is a service that gives advice, so it can only tell you how to live if you run out of money.

Through the Financial Services Compensation Scheme, it is possible to get money back if a bank or building society goes bankrupt. This is true for some joint investments (FSCS)

But the FSCS says it doesn’t protect crypto assets because they are not regulated financial products in the UK. So all it can do is warn consumers about the risks and give them tools to check if the scheme protects their investment.

The company says that customers ask about cryptocurrency every week through its customer service team, on social media, or when they look for information on its website.

It says that one of the most searched-for words on its website is “crypto.”

Next step

With a few exceptions, regulators like the Financial Ombudsman Service don’t have much power over crypto assets. So, unlike other products, consumers need an explicit right to take action.

Consumers could file a civil claim against a broker or other party involved in an investment. But if the investments didn’t work out as planned, there isn’t much they can do to compensate for their losses.

The Financial Services and Markets Bill will start adding more crypto rules. But in the meantime, it was still a risky place for people who wanted to invest.

Read Also: Crypto giant FTX collapses into bankruptcy

Haider Rafique, who works for OKX, a crypto exchange, said that consumers could take some steps to avoid losing money in the same way in the future. Mainly by giving careful thought to where they kept their assets.

Benjamin Dean, who runs an asset management company called WisdomTree Investments, told people to think about blockchain-related investments the same way they think about stocks, shares, or gold investments.