The collapse of the FTX cryptocurrency exchange has had repercussions around the globe, with more than a million clients losing money overnight. In France, some 50,000 to 60,000 people were affected. As they look for legal solutions to get their money back, will the victims continue to invest in cryptocurrency?
Like hundreds of thousands of FTX customers around the world, Hassan, who lives in France, experienced a shock in early November.
“I’m crying,” he tweeted on 8 November, after FTX founder and CEO Sam Bankman-Fried tried to reassure everyone that the company based in the United States and the Bahamas was fine.
The next day, as the exchange started shutting down, Hassan wrote: “In one day I lost everything I had invested in one year. It’s terrible.”
Life savings gone
FTX was one of the largest digital currency exchanges, which allow users to trade cryptocurrencies, like Bitcoin, for conventional money or other digital currencies.
When FTX collapsed, at least a billion dollars of customer funds were frozen, and the company filed for bankruptcy on 11 November.
Overnight, Hassan lost 26,000 euros – his entire savings.
“It’s a very bad memory,” he told RFI.
In December Bankman-Fried was arrested in the Bahamas and extradited to the US, where he was charged with fraud.
“Being cheated is not a good experience,” said Hassan. “I live alone with my 15-year-old son, and it’s difficult. We cancelled holidays, and we now have to be careful about what we spend. I am in the red with my bank.”
One of thousands
Lawyer Ronan Journoud has been advising some of the French victims who joined a support group on Telegram. He estimates there are about 55,000 French customers who lost money with FTX.
“There are all kinds of people,” he told RFI. “There are people who lost 1,000 or 2,000 euros, and it’s not a lot of money for them. And even people who lost much more, and it’s still not a lot. And then there are victims who lost almost everything, because FTX was a very respected company.”
Listen to an interview with lawyer Ronan Journoud in the Spotlight on France podcast:
Some inexperienced investors, or those drawn in by the promises of easy investment, put most – if not all – of their savings in cryptocurrency.
Hassan said he had some holdings in other platforms, but the bulk was in FTX.
“I have a lot of anger and sadness,” he said. Angry at himself, he is ashamed of having lost so much money, and he has not talked about it with many people.
For Journoud, who has a personal and professional interest in cryptocurrency but was not a client of FTX (“I would never put one euro in a company located in Bahamas,” he said), victims like Hassan need support, above anything.
“People first need to talk – to each other, to know they are not alone,” he said. “Some people have been in a very, very bad way. And we talked to them, saying there are a lot of people in your situation. I think that was the most important thing in the beginning.”
But after the talk come the practicalities. FTX was based in the US and the Bahamas, and legal proceedings against Bankman-Fried are happening there.
Any client can file a claim with the claims agent in the US, which Journoud says he encourages all victims to do, as it is a relatively simple form to fill out.
The process will take years, but customers could get back some percentage of their losses, depending on how much money the court recovers from the company.
Finding ways to get the money back
Beyond that process, French victims could also consider joining class action lawsuits against companies that promoted FTX services, but Journoud says an easier way to proceed is to look for indirect investors in FTX and try to get money from them in French or European courts.
“For example if you invested in a French or European company, and this company invested everything in FTX and lost everything, it’s possible to lodge a claim against them,” he explained.
This is what some investors did in the Bernie Madoff case, which saw tens of thousands of people lose investments in what was revealed as a Ponzi scheme in 2008.
Whatever victims decide to do, many are not exiting the world of cryptocurrency altogether.
“Of course there are some who are rejecting it, saying: ‘I will never put money in anymore’,” says Journoud. But they are the minority.
Regulating the future
“Crypto is something that exists, and we should avoid situations like the FTX collapse, but it will not stop the development of the ecosystem,” Journoud believes.
France has become a hub for the cryptocurrency ecosystem, which means tax laws and regulations are following.
For some, including Journoud, the FTX debacle makes a strong case for the need for regulation.
“Of course in the crypto ecosystem, there are people who are against regulating,” said Journoud. “But for me it’s very important to regulate the players who are too big.”
He would like to see these platforms located in Europe, and that they be required to have enough funds and insurance so users will not become victims.
The European Parliament is expected to vote on legislation at the end of the year –the Markets in Crypto Assets (MiCA) bill – that would put in place European-wide regulatory licenses by 2024.
France is preempting it, with a bill introduced in the National Assembly that would require cryptocurrency platforms to get a regulatory license as soon as they start operating in France.
“We need to keep the spirit of the crypto, to send value and money and artwork directly, without an intermediary,” said Journoud. “But if there is an intermediary, like crypto exchanges, we need to regulate them well.”