What’s next for the French victims of the FTX cryptocurrency exchange collapse?

The collapse of the FTX cryptocurrency exchange has had repercussions around the world, with more than a million customers losing money overnight. In France, between 50,000 and 60,000 people were affected. While looking for legal solutions to recover their money, will the victims continue to invest in cryptocurrencies?

Like hundreds of thousands of FTX customers around the world, Hassan, who lives in France, experienced a shock in early November.

“I’m crying,” he tweeted on Nov. 8, after FTX founder and CEO Sam Bankman-Fried tried to reassure everyone that the US-Bahamas-based company was doing well.

The next day, as the exchange started to shut down, Hassan wrote: “In one day I lost everything I had invested in a year. It’s terrible.”

Life savings are gone

FTX was one of the largest digital currency exchanges, allowing users to exchange cryptocurrencies, such as Bitcoin, for conventional money or other digital currencies.

When FTX collapsed, at least $1 billion in client funds were frozen and the company filed for bankruptcy on November 11.

Overnight, Hassan lost 26,000 euros, all his savings.

“It’s a very bad memory,” he told RFI.

In December Bankman-Fried was arrested in the Bahamas and extradited to the United States, where he was charged with fraud.

“Being cheated on is not a good experience,” Hassan said. “I live alone with my 15-year-old son and it is difficult. We canceled the holidays and now we have to be careful with what we spend. I am in red numbers with my bank”.

FTX founder Sam Bankman-Fried leaves federal court in New York on January 3, 2023, after pleading not guilty to charges of defrauding investors and looting customer deposits on his cryptocurrency platform. © Craig Ruttle/AP

one of thousands

Lawyer Ronan Journoud has been advising some of the French victims who joined a support group on Telegram. He estimates that there are some 55,000 French clients who have lost money with FTX.

“There are all kinds of people,” he told RFI. “There are people who have lost 1,000 or 2,000 euros and it is not a lot of money for them. And even people who lost a lot more, and it’s still not a lot. And then there are the victims who lost almost everything, because FTX was a highly respected company.”

Listen to an interview with lawyer Ronan Journoud on the Spotlight on France podcast:

Spotlight on France, episode 87
Spotlight on France, episode 87 ©RFI

Some inexperienced investors, or those lured by promises of easy investment, put most, if not all, of their savings into cryptocurrency.

Hassan said he had some holdings in other platforms, but most of it was in FTX.

“I have a lot of anger and sadness,” he said. Angry with himself, he is ashamed of losing so much money, and he hasn’t talked about it with many people.

Moral support

For Journoud, who has a personal and professional interest in cryptocurrency but was not an FTX client (“I would never put a euro into a company located in the Bahamas,” he said), victims like Hassan need support, above all else.

“People first need to talk, among themselves, to know that they are not alone,” he said. “Some people have been very, very bad. And we talked to them, saying that there are a lot of people in your situation. I think that was the most important thing in the beginning.”

But after the talk comes the practicalities. FTX was based in the US and the Bahamas, and legal proceedings against Bankman-Fried are ongoing there.

Any customer can file a claim with the claims agent in the US, which Journoud says she encourages all victims to do as it’s a relatively simple form to fill out.

The process will take years, but clients could recover a percentage of their losses, depending on how much money the court recovers from the company.

Find ways to get the money back

Beyond that process, French victims could also consider joining class action lawsuits against companies that promoted FTX’s services, but Journoud says an easier way to proceed is to look for indirect investors in FTX and try to get money from them in court. French or European

“For example, if you invested in a French or European company, and this company invested everything in FTX and lost everything, it is possible to file a lawsuit against them,” he explained.

This is what some investors did in the Bernie Madoff case, in which tens of thousands of people lost investments in what was revealed to be a Ponzi scheme in 2008.

Regardless of what victims decide to do, many are not exiting the cryptocurrency world entirely.

“Of course there are some who reject it and say: ‘I’ll never put money in again,’” says Journoud. But they are the minority.

regulating the future

“Crypto is something that exists, and we must avoid situations like the collapse of FTX, but it will not stop the development of the ecosystem,” Journoud believes.

France has become a hub for the cryptocurrency ecosystem, which means tax laws and regulations are being followed.

For some, including Journoud, the FTX debacle is a strong argument for the need for regulation.

“Of course, in the crypto ecosystem, there are people who are against regulation,” Journoud said. “But for me it’s very important to regulate players who are too big.”

He would like to see these platforms located in Europe, and required to have sufficient funds and insurance so that users do not become victims.

The European Parliament is expected to vote on legislation at the end of the year, the Markets in Crypto Assets (MiCA) bill, which would establish regulatory licensing across Europe by 2024.

France is getting ahead of itself, with a bill introduced in the National Assembly that would require cryptocurrency platforms to obtain a regulatory license as soon as they start operating in France.

“We need to keep the spirit of cryptocurrencies, send value, money and art directly, without intermediaries,” Journoud said. “But if there is an intermediary, like cryptocurrency exchanges, we need to regulate them well.”

Listen to an interview with lawyer Ronan Journoud about the French victims of the FTX collapse on the Spotlight on France podcast here.

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