It’s November 2022. Do you know where your cryptocurrency is located? Anyone who has crypto should take stock of their assets after the collapse of the exchange FTX.
FTX is now facing allegations that it used customer funds to make risky investments, which left the crypto exchange in a serious hole. The company stopped withdrawing funds amid chaos, but it later resumed them. Now, FTX is entering bankruptcy proceedings. This could raise questions about clients’ assets.
You can take several steps to ensure that your digital assets are safe if you’re directly affected. Even if you don’t have any relationship with FTX, you may find the latest turmoil helpful in helping you assess your risk appetite.
Crypto is regulated in a variety of ways by the United States. Investors don’t always have the options available through traditional financial institutions. These protections include Federal Deposit Insurance Corp. and Securities Investor Protection Corp.
You can begin by gathering records of all your crypto investments to check if any of them have disappeared. Miles Fuller is head of government solutions at TaxBit, the cryptotax firm.
Fuller, an ex-IRS attorney who specializes in virtual currencies, says that the first step is to take stock and document as a customer, as much as possible, what you had on which exchange. These records can be useful later, even if it is not good news.
Check if you are able to withdraw
FTX has resumed withdrawals following a pause last Wednesday, but there are still risks. Some crypto businesses that have financial relationships with FTX could run into problems in the future.
BlockFi was in line to be acquired by FTX. However, it cut off withdrawals last Wednesday and hadn’t resumed them Monday afternoon.
You can withdraw cryptocurrency from an exchange. If this is the case, you will need to find another place to store it. A dedicated crypto wallet is one option that will allow you to keep your assets offline. If your crypto is lost or not found, you might need to contact the judicial system.
Get ready for bankruptcy court
If you are unable to recover your cryptocurrency from the company that holds it, the next step is going to court. FTX has filed bankruptcy. Anyone who can prove that the company owes money to them will need to file a request for repayment.
This is a complicated legal situation. Courts may need to decide how to deal with individual clients. Fuller also discusses where creditors rank relative to their priority.
You might consider adding the federal court system to your news feed if you want to keep up with the latest developments on social media. Fuller suggests that you follow the case closely and review all information received.
Fuller states, “If you aren’t comfortable, talk with a professional to help you.” Fuller says, “Because you don’t want .”
Learn about your crypto storage
Steve Larsen is the founder of DeFi Steward. A company that assists financial advisors to manage crypto, Larsen says that crypto owners would do well to examine how they store their crypto.
You can store crypto in a custodial crypto wallet that is managed by a company such as a crypto exchange. You can also use a noncustodial cryptocurrency wallet to have access to all the information required to send or receive crypto.
Although there are risks in either approach, Larsen stated that recent events in the space provide a strong argument for greater user control.
Larsen states that it is more risky to use a private stock exchange to hold your assets.