FTX and the Dangers of Betting on the Next Big Thing

“So, did you hear about the collapse of FTX?” I asked a friend.

“What’s FTX?”

“FTX is a major cryptocurrency trading platform.”

“What’s that?”

Perhaps some background is needed about FTX, and its founder, Sam Bankman-Fried, a once high-flying billionaire who has now been arrested and indicted for wire fraud and conspiracy to defraud the U.S.

Cryptocurrency, a way to transfer funds using digital code without banks or government oversight, was conceived in the 1970s and 1980s and moved into the mainstream with the creation of Bitcoin in 2009.

The value of a Bitcoin has varied widely—from about a penny in 2010 to a 2021 high of $66,974. It has since settled at a much lower value.

Millions of people have invested in crypto, believing that it’s the next big thing and that it will quickly make them rich. But while some investors have prospered, many have lost. Some have lost big.

FTX debuted in 2019 as an exchange where people could trade cryptocurrency. By early 2022 FTX was valued at $32 billion. By November, it declared bankruptcy.

Hundreds of thousands of people have lost their investments, including celebrity athletes (Tom Brady, Stephen Curry, Shaquille O’Neal) and a shark who should have known better (Kevin O’Leary).

FTX owes creditors—including the Ottawa, Canada Teachers Pension Plan—some $8 billion that it doesn’t have.

And the many charities that received money from FTX’s “effective altruism” may have to return these tainted funds.

An executive brought in to clean up the mess declared that FTX’s failure were worse than those that sank Enron, the energy giant that went belly-up in 2001 and lost investors some $74 billion

So, what went wrong at FTX?

Even though FTX uses shiny new technologies, its colossal failure illustrates timeless human weaknesses including greed, pride, and the incompetence of FTX’s 30-year-old founder, Sam Bankman-Fried, who was briefly one of the richest people in the world, with a net worth of $26 billion.

Bottom line: Too many people were swept up in the hype. Believing they could get rich quick by banking on the next big thing, they failed to investigate before they invested. That’s never a good recipe for success.

It will take time for investigators to find out exactly what happened within FTX. It appears that Bankman-Fried used funds people had invested in FTX to fund other companies and investments that went sour.

So, why did so many people jump on to this troubled, risky, and unregulated bandwagon? The answer is found in the wisdom of scripture:

Do not wear yourself out to get rich;
    do not trust your own cleverness.
Cast but a glance at riches, and they are gone,
    for they will surely sprout wings
    and fly off to the sky like an eagle (Proverbs 23:4-5).

For people who are retired or are approaching retirement, it’s natural for you to want your assets to grow as much as possible. But as FTX shows, the pressure to make their assets grow quickly in the face of inflation and other economic challenges can lead some to seek out short cuts to the slow and boring process of asset growth.

But don’t let that happen to you.

Don’t let the desire for more blind you to the risks in entrusting your wealth to the latest in a series of questionable next big things.

Don’t invest in what you do not understand, and approach with caution each new “next big thing.”

God’s plan for our lives includes a commitment to care for us and to make his wisdom available to guide us in our decision making. Those sources of this wisdom include the Bible, a wise community of believers, the experiences of others, and the wisdom available through the work of the Holy Spirit within us through prayer and quiet time.

The crowd will seldom lead you to the wisest answer. Be part of the Retirement Reformation and find community and resources to inform your future.

This message is brought to you by The Retirement Reformation, which seeks to encourage and empower the 40 million Christians approaching or in retirement to embrace the calling God has been preparing them for. Find out more here.