FTX.US Review: What Went Wrong and Alternatives to Consider

FTX and FTX.US collapsed dramatically at the end of 2022, leaving many customers unable to withdraw their assets and sending shockwaves through the cryptocurrency world. A court report says around $8.7 billion had been misappropriated from the platform. Customer funds are now tied up in what could be lengthy bankruptcy proceedings, and senior figures in FTX face criminal charges. Read our FTX.US review to find out what exactly happened, whether clients might get their money back, and how to choose a safer cryptocurrency exchange.

Before its collapse, crypto investors could use FTX.US to buy, sell, and store a host of coins and tokens at low prices on what was a popular crypto platform. However, in a matter of weeks, FTX, FTX.US, and Sam Bankman-Fried -- the man behind the brand -- went from being crypto superstars to crypto villains.

Bankman-Fried had appeared on the cover of the likes of Forbes and Fortune, testified to the House of Representatives on the future of crypto, and was widely perceived as a posterboy for cryptocurrency. Sadly, as we're now discovering, things were not as they seemed behind the scenes. The exchange lied about consumer protections and misappropriated customer funds.

An initial report from John J. Ray III, the CEO appointed to oversee the bankruptcy proceedings, is blistering. "FTX Group's collapse appears to stem from the absolute concentration of control in the hands of a very small group of grossly inexperienced and unsophisticated individuals who failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people's money or assets," he said.

Sam Bankman-Fried faces charges of fraud, money laundering, and other violations. He is expected to face trial in October, and has pleaded not guilty to the charges.

Simply put, cryptocurrency platforms are not as safe as banks or brokerages. Consumers do not have the same protections, such as FDIC insurance or SIPC insurance. The platforms are not subject to the same levels of regulation and compliance requirements, and cryptocurrency is a risky investment. If you're looking for a less risky way to build wealth, consider buying other assets such as stocks and bonds from a reliable stock broker.

Centralized cryptocurrency platforms make it easy for investors to buy and sell cryptocurrency. Most of them also allow investors to keep funds in custodial wallets on the platform. Some allow investors to earn interest on their assets, often promising bank-like services. But they are not banks and crypto platforms are not a safe place to put your savings.

That said, some centralized exchanges are safer than others. Look for exchanges that carry out independent audits of their reserves and are registered with bodies such as FINRA. According to the SEC, if an exchange is registered as a broker-dealer or investment adviser, there will be more safeguards in terms of custody and security. Check out our list of top cryptocurrency apps and exchanges for more.

If you want a brokerage that sells crypto and has a wallet function: Robinhood is unusual among crypto brokerages in that it offers customers a self-custody wallet that they can use directly from the platform.

Unfortunately, if you had assets on FTX or FTX.US when the platforms collapsed, there are no guarantees you will be able to recover your money. Cryptocurrency bankruptcy cases are complicated and there is not a lot of legal precedent. The good news is that in June 2023, the team said they have already recovered around $7 billion in liquid assets and hope to recover more. It is early days, but FTX and FTX.US clients have reasons to be hopeful of recovering funds.

According to John J. Ray, the recovery process is complicated because FTX extensively commingled and misused funds. To put that in plain language, the company had been mixing customer money with its own operating funds for years. Ray reports that FTX lied about separating customer and company funds. He lists the way FTX used customer deposits for political and charitable donations, venture capital investments, and to buy luxury real estate in the Bahamas.

FTX customers have until Sept. 29, 2023 to register on the ​​FTX Customer Claims Portal. Take these steps when you visit the claims portal:

• Authenticate your account: Enter your login information, including any two-factor authentication.
• Complete KYC process: You may need to provide proof of address documents, as well as a copy of your ID, and a selfie.

Once your identity has been verified, you'll be able to review your balance and, if necessary, submit an electronic proof of claim.

Head to Kroll for more information on the bankruptcy. The page contains details of the court proceedings as well as key dates, information about how to file a claim, and taxation information.