“Man, I can’t even talk about how I’m feeling. Now, a little better. But when it really happened, I fell to the ground.”
This is the story of Antônio (fictitious name), one of the Brazilians who lost their savings by investing in the FTX cryptocurrency brokerage.
Last month, the company filed for bankruptcy in the United States.
The collapse of FTX, until then the second largest in the cryptocurrency market, made disappear something estimated between US$ 1 billion (R$ 5.3 billion) and US$ 2 billion that belonged to its customers —from various parts of the world— and triggered a new crisis of confidence about virtual currencies.
The company was valued at US$ 32 billion (R$ 169.7 billion) in market value and had 1.2 million registered users.
In recent years, Brazilians have delved into the universe of bitcoin and other lesser-known cryptocurrencies as an investment alternative. The country is the seventh in adoption of virtual assets, according to a recent survey by the Chainanalysis data platform.
Antônio is a chef in Santa Catarina. He told BBC News Brasil that he saved for almost 6 years to be able to buy a house. He later sold the property to invest in cryptocurrencies.
Lured by Internet word-of-mouth about the rise of FTX as a player in the crypto market, he decided to move his funds there from another exchange. Antonio estimates that he had around US$50,000 (approximately R$260,000).
FTX functioned as an exchange for transactions between different cryptocurrencies (for example, bitcoin and ethereum, the two most popular virtual currencies among the thousands that exist) or for converting conventional money into cryptos (and vice versa).
As in the traditional financial market, there was also the possibility of carrying out more aggressive types of investment. “I was pretty confident that [a cotação] would go up and thus make some “swing trades”, says Antônio, referring to short and medium term trading that bets on the strong oscillation that characterizes cryptoassets.
When the rumors that the American company would not be able to honor its commitments began to grow stronger, he rushed to withdraw his savings. But it was too late.
“I tried to transfer the money. I received the transfer email from FTX, but nothing was transferred. Nothing was completed. says Antonio.
“It was all I had. I was at zero.”
A loss of R$ 1 million
André Fauth, from Rio Grande do Sul, has been in contact with the cryptocurrency universe since 2014, when he bought his first bitcoin. Today, he has a YouTube channel on the subject and is a staunch supporter of virtual assets as the future of finance.
He reports that he lost the equivalent of R$ 1 million in investments in FTX.
“Fortunately it’s not all my assets, but it’s a significant part of it. It will be missed. My idea was to use that money invested in real estate and make other investments in the coming years. These dreams I’ll have to leave for later”, he says.
“It really hit me hard. It took me a while to accept, to believe that this had happened. Sometimes I would wake up in the morning and think ‘is this a dream? Is this a nightmare? Is it real?’.”
As a youtuber and cryptocurrency influencer, Fauth says he received “very negative messages” from part of his audience after the FTX crash.
“There were people who said to me: ‘Are you an expert in cryptocurrencies and you lose BRL 1 million?’ million. But I had the money stolen. It was something different, out of my control”, he says.
Fauth says that, even with the significant loss recorded in FTX, he maintains confidence in cryptocurrencies as a concept. “It doesn’t change at all how I see bitcoin, mainly, and other cryptocurrencies.”
“We don’t suspect until the reality arrives. The appearance of the FTX group was something strong, solid. They rescued other companies in the market that were going bankrupt. FTX had a market value of R$ 32 billion, I would never go imagine that there was a risk to the money there. FTX appeared in the media, named a sports arena in the USA and sponsored a Formula 1 team. What happened was a fraud.”
Another Brazilian who lost money at FTX, web project manager Nélio Castro said that he trusted the brokerage because “it was listed among the three largest in the world. There were several recommendations from experts. In addition, the interface was very good to operate. were zero for operations with ethereum and bitcoin. And the transactions there were very fast. The technology was impressive”.
He claims that he lost US$ 10,000 (approximately R$ 52,000) and that he was “very impacted psychologically”. “That was money that I was going to use to pay my daughter’s school early for the whole year and also help with the exchange of my vehicle. It’s too hard to take a loss like that from a company in which you had complete confidence and that the market pointed out as positive.”
Brazilian investors who spoke to BBC News Brasil were skeptical about participating in legal actions to try to recover the money lost in FTX – the costs of lawyers for a lawsuit in American Justice would not compensate for the entire journey.
But Brazilian businessman Ray Nasser, from cryptocurrency mining company Arthur Mining, intends to represent Brazilian and Latin American funds and investors who lost more than US$ 100 thousand (R$ 530.6 thousand), in a total of US$ 35 million in added losses, according to the Bloomberg Línea website. The lawsuit would be filed in the Florida State Court.
Fauth says he is still evaluating whether he will be part of the group.
BBC News Brasil sent an email to FTX’s communications department to find out if there would be any kind of compensation plan for Brazilian investors, but received no response.
How FTX convinced 1 million people and then went bankrupt
The rise of FTX, which broke the bubble of the crypto community and gained strength as a major platform in the investment world, relied heavily on the charisma of its CEO and founder, Sam Bankman-Fried, 30.
Son of two professors at the prestigious Stanford University in the United States, SBF, as he was better known, was a student at the also prestigious MIT (Massachusetts Institute of Technology) and built an image of the “golden boy” who could represent the future of the financial market .
SBF joined the list 30 Under 30 of Forbes Magazine’s 30 Most Successful People Under 30. He also associated his persona with the “effective altruism” movement, with the aim of “discovering what they can practically do with their lives to have the greatest possible positive impact on the world”, as he said in an interview with the BBC.
FTX managed to reach over a million registered users on its platform also with the help of influential names such as former couple Tom Brady and Gisele Bündchen, basketball player Stephen Curry and tennis player Naomi Osaka as their poster boys.
However, doubts about the financial stability of this empire began to arise. The website CoinDesk claimed that there was evidence that another Bankman-Fried venture, Alameda Research, was funded by a coin created by the FTX group, and not by an independent asset and that would guarantee the reliability of the business.
The Wall Street Journal then published that this sister company of the group used deposits from FTX customers for loans. The beginning of the end came when the head of Binance, which is FTX’s main competitor, said he would sell his stake in the company “due to recent revelations”.
This triggered widespread panic, with investors in a mad dash to withdraw their funds from the cryptocurrency exchange.
Bankman-Fried stepped down as chief executive of the company, which filed for bankruptcy last month and is expected to be investigated for its actions.
In the early hours of Tuesday (13), a spokesperson for the Bahamas Federal Revenue announced the arrest of Sam Bankman-Fried in that country.
The information was later confirmed by the Federal Revenue of the United States, which did not, however, inform what charges weigh against him.
“We hope to be able to announce the terms of the indictment on Tuesday morning, when we will provide more information,” the US revenue said in a Twitter post.
According to Reuters, the note from the Bahamas federal revenue clarifies that Bankman-Fried’s arrest had been made as “a result of the notification received and the material sent” and adds that the investor “will be kept in police custody in accordance with the laws of extradition from our country”.
In the US and in other countries around the world, ways to regulate the circulation of virtual assets are being discussed — something extremely opposed by crypto supporters, who view state interference with distrust — and guarantee more security for customers.
Law in Brazil
About ten days ago, after passing through the Senate, the House approved the project that stipulates guidelines to regulate services involving cryptocurrencies in Brazil. The regulatory framework is now awaiting presidential approval.
But the Central Bank was not explicitly established as a regulatory body, as it was a proposal for a parliamentary initiative. The CVM (Securities and Exchange Commission) may also assume this role.
One of the main points of the project is that companies that do business with cryptocurrencies in Brazil must have headquarters in the country. Companies that already operate here will have a six-month deadline for compliance.
But an item pointed out by specialists as important to provide more security to virtual asset investors was left out of the final text: asset segregation. This rule would prevent customer and operator resources from mixing.
In the event of a company going bankrupt, asset segregation could allow funds to be returned to customers and would also make crypto pyramid schemes more difficult.
This text was published here.
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