FTX’s small investors biggest losers in fallout: Former FDIC Chair Bair

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 , leaving analysts scratching their heads over how so many sophisticated investors could have been duped in the scheme.

Sam Bankman-Fried speaks at IIF conference

Yet, while some larger creditors to FTX could see a portion of their money returned as part of the ongoing bankruptcy proceedings, the added tragedy is that the vast majority of smaller investors will likely see nothing, according to former Federal Deposit Insurance Corporation (FDIC) chair Sheila Bair.

Bair told that a great deal of focus has been on the top 50 FTX investors looking for restitution, but the tragedy is there are “potentially a million much smaller investors – and proportionately, they’re the ones that are really going to get hurt.”

Sheila Bair FDIC

The former FDIC chief went on to note that FTX and the crypto industry at large markets heavily to young people, saying it “saddens” her that so many who bought into the company’s allure will likely see no recourse.

Bair says that to prevent this from happening in the future, crypto exchanges should be required to show proof of reserves and that some supervisory enforcement must be put in place.

FTX logo cryptocurrency decreasing stock

In the meantime, she said, the good news is that the likely will not be impacted by the volatility going on with crypto, unlike the 2008 market crash when regulated industries were compromised.

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