FTX and the Shiny New Toy
FTX seems to be all over the news these days. Once one of the largest crypto exchanges, the company has recently fallen from grace. They have halted customer withdrawals and declared bankruptcy after what feels like an endless stream of new information showing mismanagement of funds, excessive risk, lack of reserves, and general poor judgement. It remains to be seen just how much investors and customers will lose through bankruptcy.
FTX seemed poised to become the next big, successful tech story. They were led by a young founder compared to Warren Buffet by Fortune, had celebrities like Tom Brady and Larry David in high-profile advertisements, and even held the Miami Heat’s arena naming rights. This has all changed in the last few weeks. They’ve hired the CEO that led Enron after their collapse who has since said “in his 40 years of legal and restructuring experience,” he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” The Heat and Miami-Dade County are cutting ties with FTX while looking for a new partner. They have even seen Tom Brady remove the “laser eyes” associated with crypto bulls from his Twitter profile picture.
The point of this isn’t to pile on what’s already well-documented across major news outlets but rather to stress the importance of not getting caught up in the latest “next great thing” or fad. We often say that good investing for most people should seem boring. By building long-term, low-cost, and broadly diversified portfolios, we believe we are best positioning our clients for success. Sometimes the shiny new toy on the shelf ends up being made of cheap plastic.
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