As Sam Bankman-Fried's crypto empire collapsed, a 48-year-old software developer lost access to roughly $120,000 of funds on FTX US in early November.Nauman, who asked to be identified by first name only, is a California-based father of three, and planned to use that money for his childrens' college education.He had roughly five bitcoin on his account, as well as a smaller position in Avalanche, adding up to about $120,000 based on November prices. Insider reviewed receipts of his FTX investments, which represented about 25% of his family's nest egg.Cryptocurrencies and risk assets more broadly have endured a bear market through 2022, but that never bothered Nauman, since he believed in his investments and is a 25-year trading veteran. But the implosion of FTX left a particular, personal sting, he explained.
"If funds just evaporate one day, it's crookery," Nauman said in an interview. "Then you realize you're part of a Ponzi scheme. That's what makes me really upset.
A good chunk of my savings are gone because someone tried to defraud me."To be sure, US authorities have accused Bankman-Fried of spearheading a massive, yearslong fraud in diverting billions of dollars in customer funds for his own personal benefit and use in his trading firm, Alameda Research. But Nauman said the failure of FTX hasn't rattled his faith in cryptocurrencies, especially bitcoin. The world's largest token by market capitalization is still a strong long-term investment in his view."My risk profile has to change given the amount of money I've lost," Nauman said. "However, it's not that I'm not a believer in crypto." Still, he plans to diversify more into hard assets, such as real estate and luxury collectibles.
While the rate of returns may be slower than more speculative assets, he said he appreciates investments he can feel and touch in real life.Holding out for a return of fundsMeanwhile, the fate of the $120,000 in assets Nauman had on FTX is in limbo. Bloomberg reported last week that big-name players in distressed debt investing have been eyeing customers whose assets remain stuck on the bankrupt exchange. Some offers are in the range of about 13 cents on the dollar. When asked whether he would accept an offer from a buyer to take over his claim of lost funds at that valuation, Nauman said he'd rather hold out for the chance of being made whole again in the future, although his expectations remain low.Since Bankman-Fried stepped down as CEO and John Ray III has taken over, the new leadership has pointed to FTX's haphazard bookkeeping and suspect financial records, saying it's impossible to recoup all customer losses. Nonetheless, seeing retail investors made whole remains Nauman's primary hope. "If this turns out that Bankman-Fried is locked up in jail, and all the lenders and big creditors get taken care of, but retail customers get left empty, then that doesn't do much," he explained.
"Everyday investors are the bottom of the barrel when it comes to pecking order, but there has to be some type of recourse for unsecured individuals."