Was FTX Hacked? FTX Bankruptcy Explained

Nate Crosby |
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Information keeps swirling about the FTX situation (dare we say scam) but if you’re following along beware of the sources because the latest news is hard to fact-check. We have done our best and here’s the latest! 

FTX fallout 

FTX has officially filed for Chapter 11 bankruptcy and brought in a new CEO with 40 years of experience in corporate restructuring. John Ray has lots of experience as he also guided Enron through its bankruptcy in the early 2000s. It was reported this week that John was quoted saying in all his experience he has never seen anything as bad as FTX. 

Further, a class action lawsuit has been filed against FTX and some high-profile people – including Kevin O’Leary, Larry David, Tom Brady, Shaq, Steph Curry, and the Golden State Warriors. 

There are some interesting lessons here about marketing and trust. Sam portrayed exactly what he wanted his investors to believe that FTX was. People trusted him and hung on every word and the more trust he built with other high-profile people; the more people assumed someone else had done the due diligence. 

Meanwhile, Sam Bankman-Fried is seemingly hiding in plain sight in the Bahamas. We are hopeful that justice will prevail as FTX (and Sam) are exposed for the fraud that they have been committing since seemingly day one. Stay tuned! 

Is there an investment shift on the horizon 

Nate recently found a Bank of America study that targeted the investing trends of roughly 1,000 ‘wealthy’ Americans. In this case, wealth is defined as having over $3M in investable assets. The study reports that we are seeing a shift in the way wealthy Americans invest – but we are not so sure we agree. 

The study looked at two age brackets to see how they allocated their investments – here is a breakdown:  

  • Older households (age 55+) – 55% stocks, mutual funds, and ETFs with the best returns coming from stocks, real estate, and emerging markets 
  • Lower aged households (under 55) – 25% stocks and the rest are in things like real estate and crypto (15%) with the best returns coming from real estate, crypto, private equity 

The outcome is the study suggests that the next generation of wealthy investors is valuing alternative assets (hedge funds, crypto, private equity) higher than traditional assets, like stocks. While that may be true, we think it’s important to consider the possible study flaw which doesn’t consider how this demographic made its $3M. For example, the older households likely made their money over time in things like stocks and investments, while the lower-aged people were likely very successful in a business (stock options, buy-out, lucky on investments, etc.). These approaches are extremely different and – we believe – would impact the way an investor would build their strategy.