The collapse of FTX was a stark reminder that users can lose everything if they keep their crypto on an exchange.
It took a multi-billion-dollar disaster to learn the lesson the hard way, but the message has been received.
And now investors have pulled more than $1 billion from Binance in the past 24 hours alone.
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Crypto exchanges are basically like banks for cryptocurrencies.
Except they’re usually unregulated, and that means that everything can be lost if the exchange goes belly-up.
That’s what happened to FTX users.
FTX collapsed about a month ago, going from a $25 billion evaluation to zero overnight.
Even though other exchanges like Coinbase and Binance are deemed more secure, users are no longer taking any chances.
Sam Bankman-Fried, the exchange’s founder and former CEO, is currently awaiting extradition in the US after being arrested in the Bahamas.
Bankman-Fried was denied bail after a Bahamian judge deemed him a flight risk.
He’s been charged with eight counts, including wire fraud and conspiracy to commit fraud.
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FTX’s new CEO, John Ray III, has recently testified before the US House Committee on Financial Services to shed light on the collapse of the crypto exchange.
Ray III is the same attorney that oversaw the bankruptcy of Enron, and he says the state of FTX is much worse.
Shortly after being appointed, Ray III said he’d “never seen such a complete failure of corporate controls”.
In his testimony, he added that “there’s literally no record-keeping whatsoever [in FTX]”.
Ray III also said that he and his team were able to secure $1 billion of recovered assets so far.
You can watch the full testimony in the video below.
This was a bad year for crypto.
In May 2022 we saw the $45 billion collapse of LUNA, one of the largest cryptocurrencies at the time.
Since then, several crypto exchanges have filed for bankruptcy.
And then of course we need to talk about NFTs.
Non-Fungible Tokens were all the rage last year but most of them are now worthless.
The situation is getting so serious that celebrities who promoted some NFTs – whether directly or indirectly – are getting sued for it.