The cryptocurrency market was just recently hit by the ruination of one of its biggest service providers, FTX, after it filed for Chapter 11 bankruptcy a week ago. The valuation of FTX from $32 billion to its crash in a matter of days is now the subject of investigations by lawmakers, regulators, and law enforcement in the United States, who all want to find out how there came to be a gap of around $6 billion between its assets and liabilities.
Investopedia, the leading financial information website based in New York City, quoted FTX's new CEO John Ray III as saying that the company's founder Sam Bankman-Fried did not have the appropriate resources to run a company that offered massive investments to clients. Ray said Bankman-Fried lacked human resources, cybersecurity, accounting, and auditing teams.
Last 16 November, a class action lawsuit was also filed against Bankman-Fried alleging that he created "a fraudulent cryptocurrency scheme designed to take advantage of unsophisticated investors from across the country," according to Investopedia.
The lawsuit by investors also included major celebrities and recognized sports athletes who endorsed FTX. Among notable names were the National Basketball Association superstars Steph Curry and Shaquille O'Neal, the National Football League's Tom Brady and ex-wife model Gisele Bündchen, and tennis superstar Naomi Osaka, among others. Even the NBA champion team Golden State Warriors was listed as a defendant for what investors called "hawking" FTX as a credible crypto exchange.
The permanent and irreparable damage to the crypto market due to FTX's scheme raises a bigger question: How safe is your real money in the cryptocurrency industry?
Here in the Philippines, I recall how Lodicoins was a cause of concern for the Security and Exchange Commission which alerted the public not to invest in the virtual currency.
The Facebook account of Lodicoins describes itself as a project by the global Filipino using a "community utility token on the Binance blockchain designed to empower Filipinos and cultural arts using three functionality components — Digital Wallet, Gallery, NFT Creator, and Marketplace."
The SEC, however, saw red flags as LodiTech, put up a disclaimer on its now non-operational website, that "LodiCoins cannot and should not be considered as a share or security of any type."
"However, LodiCoins and Lodi Technologies Incorporated's CEO/co-founder hyped or shilled on Facebook that Lodicoin would be listed at ten times the pre-sale or original private price, making it appear that those who will purchase the coin in the Initial Coin Offering will earn at least 1000 percent in profits. Further, several posts on its official Facebook page state that investing in Lodicoin will give the investor an opportunity to earn through the virtual currency," the SEC added. It also said that Lodicoins did not have the necessary permits and licenses to operate in investment opportunities.
