FTX is the name trending on the Internet for the last few days and if you are connected to crypto or the financial world then you probably know what’s going on with one of the biggest crypto exchanges in the world.
How everyone lost their money in the FTX scam and how the FTX founder lost Billions of Dollars and how people got scammed in this, and how the founder got out of prison with $250 Million Bail, we are going to talk about this in detail.
First of all, for those people who don’t know about FTX,
What was FTX?
FTX is one of the biggest crypto exchanges in the world, that allows you to trade crypto and also provides many other services like leverage trading and NFTs.
FTX was started in 2018 and expanded rapidly like a fire in 4 years, they made separate platforms for countries that have distal assets regulations like the US, and Binance has also created Binance US for united states users.
What went wrong with FTX?
Well, everything was wrong with the FTX at first, a group of 4 friends created the exchange in 2018 with the primary purpose of circulating money in other words you can say that money laundering.
They took crypto that people deposited on the exchange and did a series of investments in different crypto startups many of which failed.
Second, they used people’s money to fund their lavish lifestyle.
These were the normal problems, the main problem started when they started to give loans to customers and when this news leaked out everyone panicked and started to withdraw their funds from the exchange.
If you see this clearly they were following the model that modern banks use, what banks do is take money from you and then give loans to people on interest. The problem with this model is that if everyone at once tried to withdraw their money from the bank, the Bank didn’t have that much money to return to their customers and ultimately the bank will fail.
The same thing went with the FTX exchange, the main purpose of crypto is decentralization and people have total control over their crypto assets but in the case of FTX, the exchange was using people’s funds, this is the thing that went totally wrong with the exchange.
After this news got leaked out FTX token went down from the moon.
What happens to the money that people deposited?
This is also one of the most asked questions on the Internet, will they get their money back? Sorry to say but your money was never on the exchange it was already used by the Sam Sam Bankman-Fried and no one is gonna get a single penny.
After a few days, the FBI arrested Sam Bankman-Fried and he was imprisoned for around 120 years but he was bailed out on $250 Million Dollars. and let me remind you that was your money that he used to get the bail.
How stay safe on Exchanges?
To avoid these types of situations you should take precautions so that all your funds are not lost in fraud.
First, If you are an investor never deposit your crypto on the exchange, buy a cold wallet to store your crypto here are the best crypto cold wallets.
If you are a trader withdraw your funds weekly. and also don’t use a single exchange to trade, there are many exchanges that provide the same service you can use them as backups.
Be active in the market, and ready for daily news about crypto in order to be updated in this way you can save some of your assets before they went zero.
I have written a separate article on the best crypto exchanges you can read it here.