“ … Financial history has shown that, if you leave them to their own devices, they won’t respect client money” a CEO of a global online investment platform said, warning that the murky lines between regulations in the crypto industry mean that customers must be extremely cautious about where they stash their money. When we deposited some money onto some crypto exchange, we expected that we could withdraw it when we wanted and if not, those funds could be held in our name as an investment , but the truth is not always as we imagine.
The FTX scandals
Let’s take FTX – a former biggest crypto exchange as an example, the CEO/Founder of FTX Sam Backman-Fried right now is charged with seven counts of wire fraud, securities fraud and money laundering. The CEO of FTX allegedly treated customer funds as if they were his own, tipping billions into a company named Alameda Research, which was a sister company of FTX. He also used FTX’s user money to purchase lots of luxury real estate in Bahamas, which the most expensive one was thirty five million dollars and, at the time when this crypto exchange collapsed, the CEO of FTX allowed Alameda Research to withdraw $8 billion from FTX
What do other crypto exchanges actually do with our money?
There are thousands of crypto exchanges across the globe but not all the crypto exchanges are frauds, a true exchange usually keeps its customers’ assets directly in its own storage, this means they can’t really use those assets to make extra profit for themselves. When we trade directly with users on crypto exchanges, The assets stay within the exchange but the money goes straight to the person we are trading with. And with the frauds exchange, they will take those assets to make their own profits.
How to use crypto exchanges wisely
Before investing or depositing funds on any crypto exchanges, we always have to research carefully and not expect someone will do that for us. We should look to see if the crypto exchange actually has a physical address, licenses about crypto and their databases of registered entities. We also should not flock to an exchange just because some famous athletes and sport teams or some “KOL” is promoting it. Back to the FTX story, this crypto exchange had paid millions of dollars for influencers to promote services of this exchange.
Of Course how we invest or use money on crypto exchanges is our right, but think carefully about the risks that crypto currency and crypto exchanges could bring. We may be in an area where cryptocurrency regulations are not really developed, and if there are any consequences, we will have to bear them by ourselves.