Less than a year ago, FTX was valued at $32 billion dollars and was the world’s second-largest cryptocurrency exchange. That’s pretty impressive considering FTX was co-founded by Sam Bankman-Fried, aka SBF, when he was just 26 years old in 2019.
He also co-founded Alameda Research, a quantitative cryptocurrency trading firm. Both businesses were enormously successful.
To put that in context, FTX had a higher valuation in three years than Twitter, Nasdaq, and even Deutsche Bank. Even in the world of crypto, where lots of people have gotten rich quickly, FTX’s meteoric rise was absolutely stunning.
Source: CoinMarketCap
According to Fortune magazine, at his peak, SBF’s net worth was estimated to be around $26 billion. That earned him a ranking among the top 100 richest people in the world and the fame that came with it.
Many Wall Street veterans were already hailing Sam Bankman-Fried as the “JP Morgan of Crypto.” A reference to his efforts to save bankrupt blockchain companies like BlockFi.
Source: Twitter
Today, FTX is essentially worthless and evidence of potentially criminal misconduct continues to mount. Investigators are still looking into what went wrong, but it’s likely that it will be some time before we have all of the facts.
In the meantime, however, the Wall Street Journal reported that the exchange has been charged with using customer money for investments without authorization. If proven true, this would be a violation of their own Terms of Service.
In addition, a leaked Excel spreadsheet, as reported by the Financial Times, added more fuel to the fire. According to the leaked document, FTX had approximately $9 billion in liabilities and less than $1 billion in assets. In other words, FTX’s balance sheet has an $8 billion hole with no convincing explanations.
Understandably, this debacle has raised concerns among both large investors and everyday consumers about the lack of safeguards in cryptocurrency.
FTX Files for Bankruptcy
The potential balance sheet issues at FTX set off a chain of events that led to the exchange declaring bankruptcy on November 11. Its then-CEO, Sam Bankman-Fried (SBF), has since resigned and appears destined to go down in Wall Street history amongst the most infamous.
To make matters worse, a report revealed that FTX was the victim of a cyberattack on the day it filed for bankruptcy. According to FTX’s lawyers, a “substantial amount of assets” from user accounts were suddenly stolen and/or went missing.
With obvious holes in their balance sheets and explanations, the chances of FTX victims recovering their funds appear to be shrinking. Authorities in the Bahamas, as well as the US Justice Department, are investigating potential criminal charges.
The New Boss at FTX
On the same day that FTX filed for bankruptcy, John Jay Ray III was named its new CEO. In the early to mid-2000s, he guided embattled energy giant Enron through complex bankruptcy proceedings and a flurry of settlements.
The Enron scandal brought accounting and corporate fraud to light. In the four years prior to its bankruptcy on December 2, 2001, its shareholders suffered losses totaling $74 billion. Additionally, billions in pension benefits were lost to its employees.
Source: Flickr
Ray oversaw initiatives to return more than $20 billion to investors defrauded by Enron. He also gained a reputation for opposing Wall Street and its interests. Naturally, it didn’t take him long to start denouncing Sam Bankman-Fried’s “unprecedented” poor management practices.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,”
Needless to say, this can be a worrying time for those who have money invested in the markets. The fact that a company valued at $32 billion at the start of the year is now worthless begs the question, “How was this allowed to happen?”
Unsurprisingly, authorities in both the Bahamas and the United States are now busy pointing fingers at one another. At the very least, it appears that stricter crypto regulations may be on the horizon.
At Tradeview Markets, we believe that regulation is essential for assuring clients that their investment is secure and, most importantly, legal. We are a fully registered Broker/Dealer under the regulations of the Cayman Island Monetary Authority (CIMA).
What Is a Regulated Broker?
When looking for an online broker, you should consider more than just the spreads and commissions you’ll pay on each trade. Your first priority should be to ensure that the broker is properly regulated. This is critical for ensuring that the funds you deposit are secure.
With Tradeview Markets, you get the best of both worlds. We offer some of the industry’s tightest spreads as well as world-class customer service to our clients. But we are also regulated by some of the world’s leading authorities including CIMA, FSA, SUNARP, and MFSA.
These international regulators frequently collaborate to protect consumers, maintain industry stability, and promote healthy competition among financial service providers. CIMA’s website even offers educational resources from other regulators that can assist consumers and investors in making informed decisions.
Case in point is a document provided by the Financial Conduct Authority (FCA) to raise awareness on the dangers of investing in crypto.
Source: CIMA
Regulated brokers like Tradeview have their trading activities monitored and controlled by a local regulatory body. These oversight organizations are also known as “watchdogs” of the financial markets.
Financial regulatory organizations monitor regulated brokers like Tradeview and impose specific requirements for them to operate in the market. These requirements are intended to keep the financial system in check and to protect the resources of retail investors.
The Benefits of Trading with Regulated Online Brokers
We’ve learned about forex regulation and how it works, but what advantages do working with a regulated intermediary provide a trader? Here are some of the benefits of trading with licensed forex brokers:
- Transparent business practices: Traders who look for a regulated broker will be able to participate in transparent and honest trading operations. This is because regulated brokers are required by law to provide their clients with complete transparency while not manipulating the market in their favor.
Regulated brokers must also submit financial reports to the regulatory body on a regular basis. Failure to do so may result in the termination of their membership and notification to traders.
This is why you must verify the license of any potential broker. You can also check their historical records with the regulatory authority to avoid working with a broker who is not properly licensed.
- Security of client funds: Regulated brokers are required by law to keep investor funds separate from firm funds. This means that the broker needs to keep its clients’ money in a separate account. It may never use these funds to pay for its own needs.
Furthermore, if a brokerage firm declares bankruptcy, it cannot use the funds of its clients to repay its creditors. This money should be used solely to compensate its clients. As a result, no matter what happens to the broker, your money as a trader will be safe.
- Recourse in the event of a disagreement: Fly-by-night brokers are difficult to reach in the event of an issue. Regulation guarantees that a broker always has a functional customer service desk, a working phone number, an email address, and a live person ready to help you.
Any claim you need to make against a regulated broker will undoubtedly go more smoothly. As a result, using regulated brokers will make it simpler to get the help you need to solve your problem.
Fraud protection: Licensed and regulated brokers should not engage in any financial malpractices or fraud that could jeopardize their traders’ market positions.
Illegal practices can result in harsh penalties, including a permanent ban from the industry. Typical behaviors include tampering with the trading platform, price manipulation, opening positions against their clients, and unjustified money withholding from clients.
As a result, traders who choose to work with regulated brokers are protected from unethical practices.
Source: by Gerd Altmann from Pixabay
Trading with Tradeview Markets
Regulation is crucial in ensuring that online brokers like Tradeview Markets follow the established guidelines. Additionally, it makes sure they don’t engage in any unlawful behavior. In order to protect your interests, you should make sure to work with brokers who are regulated and licensed.
Try Tradeview Markets by signing up for a free DEMO account or by registering for an active account. Contact our sales team if you have any questions!
Check out our online trading room, TradeGATE Hub!, as well. The GATE, or Global Active Trading Environment, is a place where you can follow and interact with professional traders from all over the world who have over 100 years of trading experience combined.
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