How FTX Fell From Glory to Bankruptcy... And Why You Need to Understand It

[Inside Wall Street with Nomi Prins]( Welcome to Inside Wall Street with Nomi Prins! It’s the only daily newsletter featuring the insights of renowned author and former Wall Street insider, Nomi Prins. Every day, Nomi shines a light on a massive wealth transfer she calls The Great Distortion. That’s the true cause of the permanent disconnect she sees between the markets and the real economy. And she shares ways you can come out ahead, if you know where the money is flowing. You’ll find all Nomi’s Inside Wall Street issues [here](. If you have questions or comments, send Nomi a note anytime [here]( or at feedback@rogueeconomics.com. How FTX Fell From Glory to Bankruptcy… And Why You Need to Understand It By Nomi Prins, Editor, Inside Wall Street with Nomi Prins Over a trillion dollars. That’s how much value has evaporated because of the collapse of the FTX crypto exchange. I first put that story on your radar [last week](. Since then, there has been all sorts of FTX-related craziness in the headlines – including a multibillion-dollar hack. And just this morning, another major crypto player, Genesis Global Trading, halted withdrawals. But there’s one development above all that might have you feeling fearful about crypto… Reports came out that, indirectly, FTX used customers’ money to fund risky bets. It did this through its affiliated trading firm, Alameda Research. FTX reportedly lent more than half of its clients' funds to Alameda. Alameda then used those funds to trade cryptocurrencies. It’s a classic case of “too big to fail” firms getting greedy with other people’s money. We’ve seen it before in traditional finance. And unfortunately, it’s not the last time we’ll see it. That said, this revelation has many people worried about what it means for the crypto industry. So today, I’m going to look beyond the headlines. And I’ll show you what the FTX story means for your money. Recommended Link [Why do 5 billionaires think this strange liquid can rival what Elon Musk is building at Tesla…]( [image]( And send the stock price of one tiny $4 company soaring? It all circles back to a $130 trillion energy transition away from fossil fuels like coal, oil, and gas… To renewable sources like hydro, geothermal, solar, and wind power. But there’s one problem… Renewables can’t deliver energy on demand. And that’s the real reason why 5 of the world’s richest men are betting against Elon Musk and Tesla… And investing in one tiny $4 company behind “Liquid Energy.” [Click here to learn more.]( -- FTX Broke More Than Just Trust Last week, questions started swirling about FTX’s solvency. On November 7, FTX founder and CEO Sam Bankman-Fried (aka SBF) said in a tweet: FTX has enough to cover all client holdings. We don’t invest client assets (even in treasuries). In its own terms of service, FTX said transfers to its crypto trading arm were explicitly forbidden. But as it turns out, Alameda had used FTX customer funds for trading. SBF later reportedly described the decision as a poor judgment call (after deleting the tweet above). But reports also suggest that SBF had built a back door to siphon customer funds to Alameda. [Featured: Do Recession-Proof Stocks Exist???]( The trading firm owed $10 billion to FTX before both filed for bankruptcy last Friday. And while there’s already a civil bankruptcy case, all the above raises the probability that there will be a criminal fraud case, too. As I write, authorities of the Bahamas, where the company is based, are seizing whatever FTX assets they can get their hands on. U.S. enforcement agencies are also investigating FTX. FTX was once seen as a leader in a struggling market. But its fall has sent shockwaves through the cryptocurrency industry. This is why Bitcoin and other cryptos have crashed over the past week. Recommended Link [This "advice" is why you're not rich]( [image]( When it comes to life and investing, most people follow the wrong advice... Go to school, Get a decent job, Work hard, Buy a home… And if you want to have something to retire on, Buy and hold stocks… But if this year has shown us anything, It's this... Most working class Americans have been left with the scraps! Living from paycheck to paycheck... Credit cards they never pay off... And retirement accounts that have cratered. Well, if you're fed up with all that stress and uncertainty... There's an approach I'd like to share with you... It can help you generate hundreds... even thousands of dollars in a matter of weeks. And I used this approach as a former money manager to generate millions of dollars for my wealthiest clients... I call it the "Money Multiplier." [Check it out here.]( -- No, FTX Has Not Doomed Crypto At this point, you might be thinking that the entire crypto space is one big Ponzi scheme. FTX certainly is the most shocking insolvency of a custodian since [Mt. Gox](. But the FTX incident isn’t a reason to lose confidence in Bitcoin and the [New Money]( paradigm. One thing I learned on Wall Street is that it’s important to separate the bad apples from the orchard. In this case, FTX is an example of a bad apple that was dishonest and gambled with other people’s money. But this isn’t unique to crypto. And it also doesn’t mean that the entire crypto industry is doomed. This is what happened with many firms in the traditional finance space during the 2008 crisis. Lehman Brothers and Bear Stearns, my former employers, went under because of it. But the strongest players survived. That includes JPMorgan Chase and Goldman Sachs, where I also worked during my 15 years on Wall Street. [Featured: Dr. Nomi Prins: “Musk spent $10 billion on these. This is bigger…”]( So, when all is said and done, Bitcoin will survive the FTX “black swan,” just like it survived Mt. Gox. Even in the crypto space, most exchanges and lending platforms today don’t play the FTX game. Some have to undergo rigorous SEC evaluations of their books. So in this case, I’d say that the SEC was also asleep at the wheel. That said, there’s one big difference. The moment people lose faith in a crypto player, there’s no one coming to bail them out. But that’s not a bad thing in the long run, as my colleague Teeka Tiwari also pointed out [in Monday’s guest edition](. It allows the crypto industry to weed out the bad apples. And it forces other companies or projects to learn from their mistakes. Recommended Link Market Wizard Reveals: [The One Ticker Retirement Plan]( [image]( Introducing the “One Ticker Retirement Plan”… It’s a way to trade just one ticker… And potentially make all the money you need – no matter what happens in the stock market. Sounds too good to be true? [Larry reveals everything in this interview – including the name of the ticker you need to get started.]( -- What This Means for Your Money Will the FTX fiasco set back trust and confidence in crypto for some people? It may. But the crypto industry’s most transparent players and prevalent currencies (such as Bitcoin) will eventually bounce back. Plus, it could force U.S. regulators to create better regulation that protects customers. And that would be a good thing. As I saw during my years on Wall Street, many sectors and industries came back even stronger after the initial fallout from some of the mistakes made by specific actors. And we’re already seeing that happen in crypto. Since the FTX collapse, at least nine prominent crypto exchanges have already pledged to provide proof of their reserves. It’s a good step in the right direction. That said, there is still so much uncertainty in the market. It will continue to be choppy for some time. So if you hold Bitcoin, my advice to you is to stay patient and ride out this volatility. And if you’re considering buying Bitcoin, I’d wait out this turmoil. In the meantime, steer clear of private companies like FTX when it comes to storing your crypto. Whenever possible, choose companies that are transparent about their reserves. As well as public companies with a longer track record of success. At the top of that list for me is Block (formerly Square), one of our model portfolio holdings at Distortion Report. It launched its first trading platform in 2010, and added Bitcoin trading in 2018. And, compared to other companies with ties to crypto, it has been relatively unscathed by FTX. Regards, [signature] Nomi Prins Editor, Inside Wall Street with Nomi Prins P.S. Block (SQ) is already up 18.9% since I added it to the Distortion Report model portfolio in July. And I expect more upside for it ahead as the New Money paradigm takes hold, in the U.S. and around the world. Earlier this year, I put together a video presentation with more details. [You can watch it right here](. --------------------------------------------------------------- Like what you’re reading? Send your thoughts to [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=Inside Wall Street Feedback). --------------------------------------------------------------- MAILBAG In Monday’s mailbag, a reader compared the thieves in the crypto space to thieves in the monetary system. So we posed the question: “Are you with Jim, and believe that the thieves in the crypto market are no different than the thieves in the U.S. monetary system?” One reader responded, agreeing with Jim… and others are still weighing in on the FTX collapse (catch up [here]( and [here]( and their view on crypto… Jim O. is 100% correct. Crypto thieves in the situation explained in regards to FTX are guilty of nothing more than what the Federal Reserve has been doing forever, even more now with the stimulus money pumped into the economic situation. – Christopher T. Yes, the Federal Reserve is corrupt. Get rid of them and go back to the gold standard. – Kevin K. Who needs cryptos, when there are plenty of real assets available for cheap? – Jon J. Information about how Sam Bankman-“Fraud” got from $0 to $15 billion is a far more interesting story. No information available. How can this goofy guy who can't offer any answers relative to instant wealth accumulation be allowed to escape unscathed for so long? Reckon the answer is forthcoming, but the truth is far, far away. Hope you guys make an effort to figure this out as FTX and relationships with DNC run wide and deep. Thanks for updates. – James F. I never liked cryptocurrency; I like to hold my money in my hand. – Lawrence C. Are you a crypto skeptic like Jon and Lawrence? What kind of real assets do you put your money behind? Write us at [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=RE: How FTX Fell From Glory to Bankruptcy… And Why You Need to Understand It). IN CASE YOU MISSED IT… Millionaire Investor Reveals: [“How I Made My Second Fortune… By Avoiding 99% of Stocks”]( Buy this small group of unique stocks… never sell them… and make all the money you need… No matter what happens in the market. [Revealed here: the name and ticker of the #1 stock.]( [image]( Get Instant Access Click to read these free reports and automatically sign up for daily research. 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