{"id":1781029,"date":"2022-12-20T08:02:36","date_gmt":"2022-12-20T13:02:36","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1781029"},"modified":"2022-12-20T08:02:43","modified_gmt":"2022-12-20T13:02:43","slug":"top-lessons-investors-should-take-away-from-the-collapse-of-ftx","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/top-lessons-investors-should-take-away-from-the-collapse-of-ftx\/","title":{"rendered":"Top Lessons Investors Should Take Away From The Collapse Of FTX"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">22<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Ftop-lessons-investors-should-take-away-from-the-collapse-of-ftx%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1781029&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>The U.S. attorney\u2019s office for the Southern District of New York officially\u00a0<a href=\"https:\/\/www.wsj.com\/livecoverage\/sam-bankman-fried-arrested-ftx-congress\" target=\"_blank\" rel=\"noreferrer noopener\">charged<\/a>\u00a0cryptocurrency exchange FTX\u2019s founder Sam Bankman-Fried (SBF) with eight counts of fraud and conspiracy, calling the collapse of FTX \u201cone of the biggest financial frauds in American history.\u201d The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission also sued SBF for fraud on the same day. These lawsuits came just the day after the Royal Bahamas Police Force <a href=\"https:\/\/www.wsj.com\/articles\/ftx-founder-samuel-bankman-fried-arrested-in-bahamas-11670890250?mod=article_inline\" target=\"_blank\" rel=\"noreferrer noopener\">arrested<\/a>\u00a0SBF.\u00a0<\/p>\n<p>Although the FTX case dealt with cryptocurrency, the crime SBF was alleged to have committed was no different than Bernie Madoff\u2019s, which was stealing money from customers. Federal prosecutors <a href=\"https:\/\/www.wsj.com\/livecoverage\/sam-bankman-fried-arrested-ftx-congress\/card\/ftx-incurred-losses-in-excess-of-7-billion--7t13uSoc6HoCknguWDZd\" target=\"_blank\" rel=\"noreferrer noopener\">accused<\/a>\u00a0him of \u201cmisappropriating FTX.com customers\u2019 deposits \u2026 and violating campaign finance rules for conspiring with others to make illegal political contributions.\u201d The SEC\u00a0<a href=\"https:\/\/www.wsj.com\/livecoverage\/sam-bankman-fried-arrested-ftx-congress\/card\/what-we-learned-from-the-sec-s-complaint-tuGXYk4dOPX5RyJtpdI7\" target=\"_blank\" rel=\"noreferrer noopener\">accused<\/a>\u00a0SBF of building \u201ca house of cards\u00a0on a foundation of deception while telling investors that it was one of the safest buildings in crypto\u201d and using customers\u2019 money (without their knowledge nor permission) to support his trading firm Alameda, and \u201cundisclosed private venture investments, political contributions, and real estate purchases.\u201d <\/p>\n<p>During his congressional testimony, FTX\u2019s new CEO, John Ray,\u00a0<a href=\"https:\/\/www.breitbart.com\/politics\/2022\/12\/13\/ftx-ceo-john-ray-on-scandal-this-is-just-plain-old-embezzlement\/\" target=\"_blank\" rel=\"noreferrer noopener\">called<\/a>\u00a0SBF\u2019s crime \u201cplain old embezzlement.\u201d He further warned that FTX has already incurred a loss north of\u00a0<a href=\"https:\/\/www.wsj.com\/livecoverage\/sam-bankman-fried-arrested-ftx-congress\/card\/ftx-incurred-losses-in-excess-of-7-billion--7t13uSoc6HoCknguWDZd\" target=\"_blank\" rel=\"noreferrer noopener\">$7 billion<\/a>, and its U.S.-based customers might not get their investment back. The public should learn four lessons from this case to better protect their assets in the future and avoid becoming victims of another con.<\/p>\n<p> Be Aware of Early Warning Signs <\/p>\n<p>Fraud never happens overnight. There are always red flags. A firm that engages in fraudulent activities lacks transparency, and the fraudster in charge ensures only a few in the inner circle have knowledge of the firm\u2019s complete business operations and accurate financial information. The recordkeeping in such a firm is intentionally lacking to make external auditing almost impossible. For example, current CEO John Ray\u00a0<a href=\"https:\/\/www.breitbart.com\/politics\/2022\/12\/13\/ftx-ceo-john-ray-on-scandal-this-is-just-plain-old-embezzlement\/\" target=\"_blank\" rel=\"noreferrer noopener\">said<\/a>\u00a0that FTX was \u201cunusual in the sense that literally there\u2019s no recordkeeping whatsoever.\u201d FTX was once valued as a $32 billion company, yet the company relied on the chat service Slack and accounting platform QuickBooks for recordkeeping. According to Ray, QuickBooks is not a suitable accounting tool for \u201ca multibillion-dollar company.\u201d The SEC also\u00a0<a href=\"https:\/\/www.wsj.com\/livecoverage\/sam-bankman-fried-arrested-ftx-congress\/card\/what-we-learned-from-the-sec-s-complaint-tuGXYk4dOPX5RyJtpdI7\" target=\"_blank\" rel=\"noreferrer noopener\">alleges<\/a>\u00a0that\u00a0<strong>\u201c<\/strong>From its inception, FTX had poor controls and risk management procedures.\u00a0Assets and liabilities of all forms were generally treated as interchangeable, and there were insufficient distinctions between the assignment of debts and credits to Alameda, FTX, and executives.\u201d\u00a0<\/p>\n<p>Another warning sign investors should look for is whether the firm has an overly complex corporate structure. For instance, SBF owned or managed over 100 companies under FTX Group\u2019s umbrella. A supposed audit of FTX\u2019s 2021 financial statement\u00a0<a href=\"https:\/\/tokenist.com\/vc-firms-ignored-red-flags-in-ftxs-financial-statements-report\/\" target=\"_blank\" rel=\"noreferrer noopener\">revealed<\/a>\u00a0that \u201cFTX and\u2019 related parties\u2019\u201d engaged in \u201ctangled relationships\u201d worth over $250 million and that \u201cnumerous FTX employees were working for those related parties.\u201d Complicated corporate structures and cross-ownerships indicate that the company and its founder may have something to hide because complexity is often deployed to obscure the movement of funds and make them hard to trace.<\/p>\n<p>It is a red flag if the company\u2019s founder<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Investors should have known that SBF&#8217;s unique personal brand was not a replacement for reliable economics and market principles.<\/p>\n","protected":false},"author":536,"featured_media":1781032,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_image_alt":"","footnotes":""},"categories":[546],"tags":[7385,6919,7334,5311,7843],"class_list":["post-1781029","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-the-federalist","tag-collapse","tag-federalist","tag-ftx","tag-investors","tag-lessons"],"fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1781029","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/536"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1781029"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1781029\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1781032"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1781029"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1781029"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1781029"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}