This article first appeared in The Edge Malaysia Weekly on November 21, 2022 - November 27, 2022

The impact of the recent FTX.com cryptocurrency exchange fiasco, which led to the exchange filing for bankruptcy, is rippling through other exchanges, lenders and companies that have exposure to the exchange.

Crypto deposit and lending platform BlockFi is said to be preparing for bankruptcy. Billionaire Winklevoss twins-linked Genesis and Gemini have also been hit. Genesis has suspended redemptions and new loan origination. 

The FTX.com debacle comes just six months after the Terra Luna crash, which brought Singapore-based crypto hedge fund Three Arrows Capital down with it. Following the FTX.com incident, Singapore’s sovereign wealth fund Temasek International is reportedly preparing to write off between US$200 million and US$300 million that it had invested in FTX.com.

Why are retail investors attracted to crypto despite multiple collapses and hacks of exchanges? Is it an addiction like gambling or is it purely greed to get rich? 

Businessman Kevin O’Leary of Shark Tank fame, who is also known as Mr Wonderful, saw his venture capital firm’s account balance on FTX.com drop to zero. While agreeing that it was a bad investment, O’Leary said in an interview that he was still willing to invest in FTX founder Sam Bankman-Fried in the future. In 2019, O’Leary called Bitcoin garbage but changed his stance last year.

Do investors think nothing can possibly go wrong when celebrities or companies like O’Leary or Temasek invest their money in crypto because they must have done their due diligence? Could seeing the world’s richest man Elon Musk constantly supporting crypto be influencing the public?

Prior to the two major crypto black swan events this year, the crypto world witnessed the Mount Gox bankruptcy in 2014 and Cryptopia liquidation in 2019. Both exchanges were hacked.

Is someone to be blamed? Obviously, like buying anything, caveat emptor, or buyer beware, applies. However, crypto holders should know better than to leave their coins with an exchange. After all, remember that on such exchanges, not your keys, not your coins. 

Also, one question arising from the crypto meltdown is whether regulators have been slow to rein in the mania.

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