February 8, 2023

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Small investors who jumped into cryptocurrency on FTX are saying, now what?

Small investors who jumped into cryptocurrency on FTX are saying, now what?

When BlockFi’s marketing materials and sales agents said his investment was safe and redeemable at any time, he took them seriously.

“They sold it to me, and there was no risk,” Mr. Butkus said, adding that he was unaware that BlockFi, which has borrowed money from FTX, is closely linked to the exchange.

Much of the money invested by Mr. Butkus, a self-employed businessman, came from the recent sale of his home in Plainfield, Illinois. He hoped to increase his savings with interest on his BlockFi loan and then use the money to build a new home for his family. Now he wonders where his family, who are temporarily staying with his in-laws, will eventually live.

Lawyers for FTX and BlockFi did not respond to requests for comment.

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FTX, which was founded by Sam Bankman-Fried and was once a behemoth in the cryptocurrency industry, imploded last month after some major trading firms withdrew their funds amid allegations that the exchange used billions of dollars in customer deposits to bail out Alameda Research, Inc. Cryptocurrency trading company who co-founded it. The fall of the stock exchange was so spectacular because FTX gained an air of legitimacy through a wasteful advertising campaign showing their product as safe, fun and easy to use.

Federal authorities in New York are now trying to determine whether criminal charges should be filed against Mr. Bankman Fried and others about the collapse of the company and the possible improper use of customer deposits. Mr. Bankman Fried insisted, during a media blitz last week, that he had never intended to defraud anyone and was completely unaware of the amount of customer money being diverted to Alameda.

Frank Frimmel, 39, is among the FTX customers wondering if they’ll get any of their money back from the now-bankrupt exchange. When he opened an account with FTX in March, Mr. Frimmell said he knew it was unregulated but wasn’t too concerned.

He found that FTX, as the second largest cryptocurrency trading platform in the world, with the financial backing of well-known professional investment firms such as Sequoia and SoftBank, was on a solid footing.