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HomeNewsUS investor loses $896k amid FTX, BlockFi crypto company collapse

US investor loses $896k amid FTX, BlockFi crypto company collapse

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An individual investor has lost an eye-watering $896,000 as a direct result of the collapse of cryptocurrency exchange FTX.

Adrian Butkus, from the US, has essentially poured his life savings of $US600,000 (AU$896,000) into a black hole.

Last month, $32 billion Bahamas-based crypto exchange FTX dramatically imploded and bombshell revelations have since emerged that the platform was poorly managed and little more than a Ponzi scheme.

Its founder and CEO, Sam Bankman-Fried, is facing criminals charges.

FTX’s collapse has caused a chain reaction to other exchanges, with some experts calling it a contagion.

One of those caught up was crypto company BlockFi, which filed for chapter 11 bankruptcy at the end of last month, because a lot of its money was tied up with FTX.

Unfortunately, Mr Butkus had put all his money into BlockFi.

“It just angers me,” he told The New York Times. “Now I’m in a fight to get back some of my money.”

Mr Butkus told the publication that he invested his money in BlockFi because it had been sold as a risk-free investment with a 6.5 per cent return.

At the time, that was a higher yield than other investment options that he explored and it made sense to put his funds there.

He had sold his home in Plainfield, Illinois, and wanted to be smart about the money rather than let it languish.

When he had conversations with BlockFi about the prospect of investing, they misrepresented themselves as a bank-like institution that could guarantee his money and mitigate risk, according to him.

“They sold it to me, that there was no risk,” Butkus said.

At the time, the extent of BlockFi’s close relationship with FTX was largely unknown.

Have a similar story? Continue the conversation | alex.turner-cohen@news.com.au

Blockfi was once valued at $4.5 billion (US$3 billion).

But earlier this year BlockFi was given a massive $600 million (US$400 million) loan from FTX.

Once news broke that FTX had gone down, Mr Butkus rushed to withdraw his funds, but he was too late.

BlockFi had frozen withdrawals because of liquidity concerns. Just a few days later, it had filed for bankruptcy.

“This action follows the shocking events surrounding FTX and associated corporate entities and the difficult but necessary decision we made as a result to pause most activities on our platform,” the company said in a statement.

The company owes money to about 100,000 creditors. It has assets and liabilities between $1.5 billion (US$1 billion) and $15 billion (US$10 billion) each.

It has about $385.51 million (US$256.9 million) of cash on hand which will be used to provide “sufficient liquidity to support certain operations during the restructuring process”.

The company stated it would focus on recovering all obligations owed to BlockFi by its counterparties, including FTX and associated corporate entities.

That means small investors like Mr Butkus will be low on the list of priorities.

Without a home or life savings, his family are living with his in-laws while he decides what can be done, if anything.

In Australia, there are an estimated 30,000 Aussies who have been impacted by putting their funds directly into FTX, who would classify as small investors hoping reclaim their missing money.

In documents filed in the Supreme Court of Victoria, customers told administrators they believed they had between $US40,000 ($A60,000) and $US1 million ($A1.5 million) invested in FTX, but their accounts showed zero balances when they logged in.

Story Credit: news.com.au

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