| Posted in Security & Fraud
By: Scott Willman, Fraud Squad Captain
You’ve likely heard about the meltdown at FTX, the now-bankrupt cryptocurrency exchange that defrauded their investors out of billions. Perhaps you noticed the castle that Sam Bankman-Fried hid in for weeks after the massive fraud was discovered. Do not kid yourself, what happened with FTX could happen with any crypto exchange. How so?
Cryptocurrency accounts are not backed by a government, and these crypto exchanges seem to operate without any regulatory oversight whatsoever. Crypto is not insured by a government; not like the money earning interest in your Iowa State Bank account which is insured by the FDIC. Conversely, crypto exchanges like FTX are commonly under-insured, which means when the company tanks, the average investor may never see a dime.
If something happens to your account or crypto funds — for example, the company that provides storage for your wallet gets hacked— the government has no obligation to step in and help get your money back. Nobody from that exchange is going to try to save you from the damages caused by identity theft. A successful hack will decimate the exchange’s appeal and market value. Your crypto will become effectively worthless, assuming it wasn’t stolen during the hack.
Let’s not forget about human error! Something as simple as forgetting your password is all it takes to lock you out and permanently separate you from your crypto. There is no “forgot password” button to click that will unlock that wallet; nobody to call on for help.
Despite the intangible and unseen nature of crypto, the market often fails miserably in the areas of care, custody, and control. The number of high-profile crypto heists suggests that information security protocol on these exchanges is lax, at best. There is nobody to hold these exchanges accountable for your monetary losses, or your identity theft. These exchanges don’t have any incentive to help you, certainly not like a member of Iowa State Bank’s Fraud Squad does.
Does anything I’ve stated sound like a commonsense approach to investing during a time of economic uncertainty? No. Invest your time and money in people and places that care about your success. Come talk with us about putting money in a safe, insured account that earns you interest. Let us tell you how we leverage our resources and get more of your dollars insured by the FDIC. There’s never been a better time to explore a savings account or certificate of deposit, we’ve got fantastic rates right now. Our bank and its team do not invest in castles or line the pockets of corporate executives, we invest in the well-being of our local communities.