- In an interview with Insider, Daniil Pemberton said the collapse of FTX has rattled his trust in companies within crypto sector.
- The 26-year-old lost access to about $14,000 in his FTX account, which included bitcoin and ether.
- Moving forward, he plans to stick to stocks and index funds.
On November 8, when Daniil Pemberton saw headlines on the collapse of Sam Bankman-Fried’s crypto exchange, he tried to transfer funds out of his FTX account. He soon realized that wouldn’t be possible.
Based in the Netherlands, the 26-year-old graduate student said he had 1.25 ether and 0.64 bitcoin saved on his account, which at the time were worth about $13,825 all together.
When he tried to initiate a withdrawal, the app showed the transaction was pending, but nothing happened beyond that. When Pemberton checked the cryptocurrency wallet addresses he tried to send the money to, his balance remained at zero. Insider has reviewed these documents.
“The tech itself, the crypto, seems fine, but the problem is the institutions around it,” Pemberton told Insider. “They are the ones who undermine the trust, because at any point a platform could make a bad decision, which leads them to becoming bankrupt, and everyone loses. There’s no safety net.”
FTX filed for bankruptcy on November 11, and Bankman-Fried stepped down as CEO. The Securities and Exchange Commission has since alleged that he orchestrated a years-long scheme to defraud investors.
The new chief executive, John Ray III, has said that FTX had haphazard accounting and that there was “no record keeping whatsoever.” FTX also reportedly transferred billions of dollars in customer funds to Bankman-Fried’s Alameda crypto hedge fund.
“I lost faith in the companies within crypto,” Pemberton said. “I’m skeptical on who to trust with my funds.”
While it’s possible FTX users can recoup some of their funds during bankruptcy proceedings, experts warn it could months or years — if at all.
Pemberton said one of the main reasons he chose FTX to store his cryptocurrency was that everyone seemed to praise it, including many finance influencers on YouTube that he followed.
“The New York Times had written about Sam Bankman-Fried, and so did other prestigious publications and individuals. I thought surely they did their research and wouldn’t praise him without due diligence,” Pemberton noted.
He also found the promise of FTX’s high interest-rate payments appealing, and that they remained high during a time when other platforms were giving lower yields on investments. “In retrospect it was a dumb decision. I had gotten greedy.”
Pivoting to traditional investments
In the implosion of FTX, Pemberton said he lost approximately 60% of his total portfolio, including stocks and holdings across other exchanges, including Binance. Moving forward, he plans to put more weight in traditional equities.
“I’m going to pivot more to stocks,” he said. “Stocks have more policies in place in case something goes wrong.”
Johnson & Johnson, Coca-Cola, and the Vanguard S&P 500 ETF are all on his list as stable, long-term investments, Pemberton said.
“This whole thing shocked me so much that I don’t want any more volatility. I’ll invest in more index funds and bonds too.”