FTX, before November 2022, was the second largest crypto exchange in the world with the lowest fees. Today, FTX is insolvent. If you had money in FTX, it is likely lost forever. While Finance Throttle has never promoted FTX, it was promoted by dozens of personal finance YouTubers and Bloggers alike. This whirlwind of a story has been unwinding a bit more day by day and it has been tough to keep up with. I can’t explain it any better than Mark Moss explains it on his YouTube Video titled “The Con Behind The Crypto Blood Bath – Dirty Secrets Revealed“.
What does BlockFi have to do with this?
Earlier this year, BlockFi was not doing too well. In July of 2022, FTX.US and BlockFi made a deal. If FTX.US can provide BlockFi with a $400 million line of credit, FTX.US has the right to purchase BlockFi. While FTX.US has not yet exercised their right to purchase the lender, BlockFi decided to take preventative measures.
As of November 11th, BlockFi released the following statement on their website:
“As always, we want to provide important updates to you about our business as transparently, empathetically, and quickly as possible.
We are in the heartbreaking position of sharing the following news with you:
- We are shocked and dismayed by the news regarding FTX and Alameda. We, like the rest of the world, found out about this situation through Twitter. Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual.
- Our priority has been and will continue to be to protect our clients and their interests.
- Until there is further clarity, we are limiting platform activity, including pausing client withdrawals as allowed under our Terms. We will share more specifics as soon as possible. We request that clients not deposit to BlockFi Wallet or Interest Accounts at this time.
- We intend to communicate as frequently as possible going forward but anticipate that this will be less frequent than what our clients and other stakeholders are used to.
For further questions, please feel free to contact our Client Success team.”
After that communication, BlockFi did not communicate to their customers again until a November 14th email stating;
“Given that FTX and its affiliates are now in bankruptcy, the most prudent decision for us, in the interest of all clients, is to continue to pause many of our platform activities for now.
The rumors that a majority of BlockFi assets are custodied at FTX are false. That said, we do have significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX US. While we will continue to work on recovering all obligations owed to BlockFi, we expect that the recovery of the obligations owed to us by FTX will be delayed as FTX works through the bankruptcy process.
At this time, withdrawals from BlockFi continue to be paused. We also continue to ask clients not to submit any deposits to BlockFi Wallet or Interest Accounts. “
What does this mean for my BlockFi Account?
For my subscribed readers, it should not be a surprise that I have a BlockFi Interest Account. BlockFi is where I store Bitcoin that I mined with my computer or profits I made from buying Ethereum in 2020. I don’t have any of my own money in BlockFi, only my ~$2500 in unrealized gains. Even with BlockFi’s statement, I decided to try to withdraw my unrealized gains and move it over to my Coinbase Wallet, where it can stay safe and sound as long as I don’t lose my wallet keys. I was able to initiate the process of sending my crypto to my Coinbase Wallet, however, the transaction got stuck in “pending” status. After one full week of pending, I came to the realization that I may never realize the gains I made in crypto over the last two years.
Will I continue to promote BlockFi?
BlockFi did not do anything wrong in this situation and they are still not owned by FTX.US. Since they are unable to use the $400 million credit given to them by FTX.US, they decided to limit withdrawals & deposits to protect their customers. During this period of uncertainty, I cannot support BlockFi or encourage those to sign up. As of a few weeks ago, I have removed my BlockFi referral links from my webpage. I do hope that BlockFi will get back on their feet and continue to serve their customers. If you have money with a crypto exchange, try to move your crypto to a hot wallet or cold storage wallet as soon as possible. Me? I use Coinbase wallet to keep my crypto secure. Sign up with Coinbase using this link and get $10 in free Bitcoin.
What should this teach you?
More than anything, let this example be a lesson learned. Never put more than what you are willing to sacrifice into any investment, whether it is crypto, real estate, stocks, bonds, ETF’s, collectibles, or any other asset or security. Nothing is really safe or guaranteed. It is important to invest broadly for that reason. Invest a little in crypto, real estate, stocks, and other assets. As the saying goes, don’t put all of your eggs in one basket.
I had very little invested in crypto. Like I mentioned, I kept my unrealized gains in BlockFi and pretended that it did not exist, at least until the next bull run. I did learn an important lesson. Never keep your crypto on the exchange. Keep it stored in a secure hot or cold wallet.
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