By now you have heard about the implosion of FTX. Among others, the Brady’s, Shaquille O’Neal, Steph Curry, David Ortiz, Shohei Ohtani and Naomi Osaka. Even “Mr. Wonderful”, Kevin O’Leary is apparently named in the lawsuit. The suit said FTX needed these big names, “to continue funneling investors into the FTX Ponzi scheme…” It also said their “misrepresentations and omissions” make them liable after FTX’s downfall.
So, what does FTX do? We all know the term cryptocurrency. It is ubiquitous. Let’s face it, “Crypto” is part of our vernacular today, but what is it? That’s the problem, we don’t know what it is. It’s crazy. I learned that there are over 17,000 different types of cryptocurrencies. Yup, 17k. Get this, it’s become so acceptable as ‘currency’ today that some professional stud athletes are requesting that their salaries be paid in Bitcoin. Scary, but true. We all have a choice. It’s your decision.
Many equate FTX with Bitcoin, as being one in the same. Two of a kind. They’re two very different things. With equities, that’s like saying Apple stock is the same as Revlon stock. Very different, one is very profitable (and some say, overvalued), whereas the other is bankrupt. The crypto understanding gap is huge; we need accurate information. Understanding what it is, and what it is not crucial.
A WSJ article (11/17/22) spells it out. Entitled, “New CEO Says FTX Suffered ‘Complete Failure of Corporate Controls”.
Closer to home, here’s a question I get from well-intentioned clients: ‘Hey G, should crypto be a part of my investment portfolio?’ My boilerplate response, ‘it depends’. My response is often twofold: Number one, do your due diligence (your homework) based on your risk tolerance (crypto is not for the frail at heart). Secondly, why do you have an interest in crypto? Of course, like all investing, most blurt out: ‘to make money’. But is it worth the immense risk? To be sure, there’s a lot of equities and securities out there that are equally risk oriented. But why crypto? Because it’s exciting and relatively new? I get it. But please do your research.
Despite the long-term unknown, I actually believe that cryptocurrencies will be around in the future. At least some iteration of it. In what form exactly? Who knows? One thing I do know is it remains an emerging asset class. And if you’re going to invest serious money (‘serious’ is relative to you), you need to triple-down on your research. Go deep and study. It’s your money. I’ve said it repeatedly vis-à-vis investments—caveat emptor (buyer beware). We live in the age of scams and scammers. Protect yourself or just don’t play the game. It is zero-sum. It’s just too easy to fall prey to these rip-off artists with their slick, manipulative marketing. Research. Take your time. And I implore you, do not invest your life savings into crypto. Unless, of course, you’re willing to lose it all. Not unlike Vegas in that way.
In full transparency, I have a small investment in Bitcoin through Gemini. However, I do not put myself out as an expert in Cryptocurrency, nor do I have specialized knowledge in blockchain technology. I am a licensed fiduciary; fee-based financial advisor (series 7, 65, 63). This is not an offer to sell or buy any security or interest. The content of this article is strictly for informational purposes only. It is not intended as professional or expert advice in any way. Seek advice from your legal counsel, and/or financial advisor.