FTX’s Small Investors Biggest Losers in Fallout: Former FDIC Chairman Bair

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The collapse of crypto exchange FTX continues to send shockwaves through the market as more details emerge about the house of cards built by founder Sam Bankman-Fried, leaving analysts scratching their heads over how so many sophisticated investors could be duped into the scheme.

Sam Bankman-Fried speaks at the annual membership meeting of the Institute of International Finance in Washington, DC, on Oct. 13, 2022.

While some of FTX’s larger creditors could get some of their money back as part of the ongoing bankruptcy proceedings, the added tragedy is that the vast majority of smaller investors are unlikely to see anything, according to former Federal Deposit Insurance Corporation (FDIC) chair Sheila Bair .

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Bair told TSTIME Business that there’s been a lot of focus on the top 50 FTX investors looking for refunds, but the tragedy is that there are “potentially a million much smaller investors — and proportionately, they’re the ones who will really get hurt .”

Sheila Bair FDIC

Sheila Bair, former FDIC chair, says smaller FTX investors will be disproportionately affected by the crypto exchange’s collapse.

The former FDIC chief further noted that FTX and the crypto industry are very much aimed at young people, saying it “saddens” her that so many who bought into the company’s allure are unlikely to see a redress.

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Bair says that to prevent this from happening in the future, crypto exchanges should be required to show proof of reserves and be overseen.

FTX logo cryptocurrency declining stock

In this illustration taken on November 10, 2022, images of cryptocurrencies can be seen in front of the featured FTX logo and declining stock chart.

In the meantime, she said, the good news is that the broader economy is unlikely to be affected by the volatility going on with crypto, unlike the market crash of 2008 when regulated industries were compromised.

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Bair explained, “The economy won’t be hurt by this, but a lot of people will be – and that’s very sad.”

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