Meet The Everyday Crypto Investors Caught Up In The FTX Implosion : Consider This from NPR Jake Thacker of Portland, Ore. says he had $70,000 trapped in FTX when the the cryptocurrency exchange collapsed this month. That money may be gone.

And he's not the only one. The company's bankruptcy filing says it could owe money to more than a million people.

NPR's Chris Arnold reports on how the FTX implosion is affecting everyday investors.

And NPR's David Gura looks at whether it could spur Congress to pass new regulations on the crypto industry.

In participating regions, you'll also hear a local news segment to help you make sense of what's going on in your community.

Email us at considerthis@npr.org.

Meet The Everyday Crypto Investors Caught Up In The FTX Implosion

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MARY LOUISE KELLY, HOST:

The last 18 months have been a wild ride for cryptocurrencies, and Terri Smith has been strapped in for all of it.

TERRI SMITH: Proceed with caution if you plan on investing in crypto, for sure. It's not for the faint of heart.

KELLY: Smith lives in the Seattle area. She's semi-retired, works part-time as an architect. She had been interested in crypto for a while and got serious in the summer of 2021. She started learning more about it.

SMITH: And it was fascinating. I loved it. I loved the technology.

KELLY: So she decided to put a chunk of her investment portfolio into cryptocurrencies. She split her money across a number of crypto exchanges. These are sort of like a website, like E-Trade. But instead of stocks and bonds, you buy and sell cryptocurrencies. And a lot of her money ended up on one of the biggest exchanges - one called FTX.

SMITH: It was not just the easiest, but it was the fastest. It just was a really convenient platform to use.

KELLY: At first, her crypto investments were crushing it.

SMITH: I had seen it increase basically 100% in less than six months. It was about five months that my investments doubled.

KELLY: But 2022 has been a rough year for cryptocurrencies. Big ones like bitcoin have lost well more than half their value. Others collapsed entirely. But Terri Smith wasn't fazed. She was careful about the currencies she invested in. She was focused on the long term. Then, this month...

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VICKY NGUYEN: A massive meltdown is sinking the cryptocurrency world. FTX, one of the largest crypto exchanges, is now facing extinction.

KELLY: The company, recently valued at $32 billion, unraveled in a matter of days and quickly filed for bankruptcy. Terri Smith was out of town when she first got word that FTX had started freezing some accounts. She managed to get some assets out, but she says she may have lost about $30,000 in the implosion.

SMITH: I was devastated, really. That's a huge chunk of money for me.

KELLY: She says she felt blindsided.

SMITH: It feels like someone's stealing your money. I mean, it feels like - yeah, it feels like theft.

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KELLY: CONSIDER THIS - more than a million people may have lost their money in the FTX collapse. Could this meltdown finally tip the scale towards tighter regulation of the cryptocurrency industry?

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KELLY: From NPR, I'm Mary Louise Kelly. It's Monday, November 21.

It's CONSIDER THIS FROM NPR. FTX spent big money to make trading crypto popular - to gain people's trust. You've probably seen the commercials with superstars like Tom Brady and Steph Curry.

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STEPH CURRY: I'm not an expert, and I don't need to be. With FTX, I have everything I need to buy, sell and trade crypto safely.

KELLY: The company paid to have its logo on the uniforms of Major League Baseball's umpires, as if to say everything is fair and square here. And the now-former CEO, Sam Bankman-Fried, built a reputation as an honest broker in an industry that was seen as a Wild West, rife with scams. He advocated for greater regulation and transparency. He met with lawmakers. He donated tens of millions to mostly Democratic campaigns - even more toward philanthropic causes. Terri Smith, the Seattle-area investor, said his sterling reputation is part of what made her feel so blindsided.

SMITH: He was supposed to be an effective altruist, and the irony is that he ended up - instead of helping the most people he could help, he ended up screwing over the most people.

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KELLY: NPR's Chris Arnold has been talking to people who had their money in FTX. He picks up the story from here.

CHRIS ARNOLD, BYLINE: Investing in crypto is inherently risky, but people didn't lose money this time because bitcoin or some other cryptocurrency plunged in value. It was that the FTX trading platform itself imploded - sort of like if you were investing in stocks using, say, E-Trade or Schwab or Fidelity, and the company said, oops, sorry, we're declaring bankruptcy, and you can't withdraw your money. And for Jake Thacker in Portland, Ore., it's a lot of money.

JAKE THACKER: Roughly $70,000 in FTX when it all came crashing down.

ARNOLD: Thacker is 40 years old and works in the tech industry. He's traded crypto for a couple of years, and he'd managed to make about $200,000 using trading bots and advice from investing groups. He heard the news that FTX was melting down. He tried logging into his account.

THACKER: Went in, looked at some of where my account balances were - didn't seem to be right. Everything was frozen. There was all kinds of error issues. I was definitely in freak-out mode.

ARNOLD: He tried messaging and calling FTX - couldn't find out much of anything.

THACKER: And I got my lawyer involved, and he was kind of like, I don't really know, Jake. I don't know what's going to happen here.

ARNOLD: So what is likely to happen next for all of these investors?

CHARLIE GERSTEIN: It ain't looking good.

ARNOLD: Charlie Gerstein is an attorney who's filed class-action cases against other cryptocurrency companies. The bankruptcy filings state that FTX could owe money to upwards of a million people, and he says the basic facts are pretty grim. FTX told investors it would keep their assets safe. So if it can't give people their money back, he says it probably broke the law by doing something else with it.

GERSTEIN: The company is short $8 billion, and there's only two conceivable categories of explanation for what happened to that $8 billion. The first is they traded it in speculative investments and lost it - in other words, it's gone - or they stole it.

ARNOLD: There is also this. Hackers reportedly may have stolen several hundred million dollars of customers' money as well while all this was going on. Moving forward, the bankruptcy court will eventually try to sort out how much money is left and how it gets divvied up among all of these people. FTX said in a statement, quote, "we are going to conduct this effort with diligence, thoroughness and transparency."

Meanwhile, the sudden collapse of FTX is having some contagion effects, as people lose faith in other crypto trading platforms. Jake Thacker says the question basically is, if FTX collapsed, who's to say another one won't, too?

THACKER: I think that's where - that fear is creeping into the backs of people's minds right now. It's - I could be the best trader. I could get the best returns. Do I trust the system that will allow me to do it? I think is - that's what's rattling through people's brains right now.

ARNOLD: So Thacker says he's pulling some of his money off of other platforms as well.

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KELLY: NPR's Chris Arnold.

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KELLY: The current CEO of FTX is a guy named John Jay Ray III. He took over after Sam Bankman-Fried resigned to see the company through bankruptcy. He did the same for Enron in the 2000s after that company's infamous fraudulent accounting scandal, so it's notable that Ray told a bankruptcy court that, in the case of FTX, he had never seen, quote, "such a complete failure of corporate controls." In a filing, he wrote that company funds were used to purchase homes in the Bahamas and other personal items for FTX employees. He said many company records were missing because executives used chat apps that automatically deleted messages.

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KELLY: This sort of mess is exactly why consumer advocates have been calling for years for tighter, clearer regulations of the cryptocurrency industry. Could the spectacular implosion of one of the biggest names in the business spur Congress to take action? NPR's David Gura looked into it.

DAVID GURA, BYLINE: Crypto companies have collapsed before. Cryptocurrencies have cratered. And by and large, it's been status quo on Capitol Hill. But according to Republican Senator Pat Toomey, the ranking member of the Senate Banking Committee, this moment feels different.

PAT TOOMEY: It's sort of a combination, I think, of the fact that we're deep in a pretty cold crypto winter, and, during this difficult time, we've seen this really unbelievable explosion of this iconic firm.

GURA: Yet to be seen is if Washington's reaction will be different. FTX went from being valued at more than $30 billion to filing for bankruptcy last week, and now hundreds of thousands of customers are desperately trying to recover money that may be gone for good. Unlike banks, there is no government backstop in crypto. There's no deposit insurance. The guardrails that are in place are inadequate, says Toomey, whose investment portfolio includes crypto. He argues lawmakers have to give regulators more guidance.

TOOMEY: I think the inaction of Congress and the inconsistency and confusion of regulators has contributed to this problem.

GURA: The Justice Department is reportedly investigating the company and its now-former CEO, Sam Bankman-Fried. So are the government agencies that oversee digital assets - a familiar alphabet soup of financial regulators. When it comes to crypto and crypto companies, bureaucrats are locked in a turf war over who oversees what. Of course, legislation could put an end to that. During an onstage interview at an industry conference, Rostin Behnam, who regulates the derivatives market, said he has the tools he needs to ensure crypto companies registered with his agency comply with its rules and regulations.

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ROSTIN BEHNAM: And we will use that authority to the full extent of the law.

GURA: Charging companies and individuals and levying fines and other penalties. But plenty of crypto companies are not registered with his agency - the CFTC - or with the other big financial regulator, the SEC. Its chair, Gary Gensler, says the door to his office is open, and he encourages the heads of crypto companies to meet with him and his staff to discuss registering. In fact, Bankman-Fried paid him a visit twice in the past. But during an appearance on CNBC just hours before FTX filed for bankruptcy, Gensler indicated he's getting impatient with companies issuing cryptocurrencies, which he says are securities, like stocks. Gensler wants these companies to provide the public with more information - to be more upfront about risks. Essentially, he wants to put in place more investor protections.

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GARY GENSLER: The laws are clear. And - look, the runway is running out.

GURA: The White House has encouraged regulators to double down on enforcement under existing laws - rules that pre-date crypto - but more enforcement requires more resources, regulators say. So Gensler is not just asking for additional regulatory clarity - he also wants a bigger budget. So far, Congress' response has been familiar. There have been short statements. The relevant committees say they're calling witnesses to testify. But legislation? Republican Senator Cynthia Lummis, who chairs the Financial Innovation Caucus, addressed FTX's collapse.

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CYNTHIA LUMMIS: You know, it's awful, and, simultaneously, not all that surprising.

GURA: Lummis, who owns bitcoin, introduced a bill with Democratic Senator Kirsten Gillibrand in June. They called it the first comprehensive framework for regulating cryptocurrencies and other digital assets. That legislation hasn't made it out of committee, to the Senate floor, for a vote.

KELLY: NPR's David Gura.

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KELLY: It's CONSIDER THIS FROM NPR. I'm Mary Louise Kelly.

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