Bitcoin Magazine: The Warning Signs Were There: The Collapse of FTX Was Inevitable

The past two weeks have seen a wave of defaults and bankruptcies among cryptocurrency platforms and brokerages. The reason? The failures of FTX, then the second-largest platform globally.

As with the traditional financial system, the brokerage platform was supposed to have a fiduciary duty to its customers. Instead, it used customer funds to shore up its financials, and make transactions with other parties. FTX’s collapse has been as fast and stunning as its initial rise since 2018.

However, all the signs for a potential fraud were there. The company’s founder became valued as a billionaire overnight. And he spent plenty of time and company/user money hosting conferences, making investments, and other high-profile activities.

And FTX started appearing everywhere, spending millions on ads, naming arenas, and garnering celebrity endorsements. Yet many well-respected fund managers and billionaires invested in FTX despite all the red flags.

With the collapse of FTX has come a crisis of confidence in the crypto space.

Those who stored their own cryptos off of exchanges on digital or hardware wallets are fine. They don’t have to deal with the bankruptcy case now winding its way through the courts to get their money back.

Part of the idea behind cryptocurrencies was to take possession of your wealth without having to deal with a third party. The blowup of FTX reveals why that forgotten element of the space remains crucial.

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