Primum non nocere

First, do no harm.

This is the maxim physicians live by and I think a good starting point when for thinking about dealing with your personal finances.

Why so philosophical, you ask?

Earlier this month, on or around Nov 7, FTX suspended customer withdrawals and then filed for bankruptcy on Nov 11. Based on the news reports so far, it seems highly likely that customers who have funds stuck in FTX now will lose all (or nearly all) of their money.

From what I have read, the FTX collapse looks like the result of a fraud committed by Sam Bankman-Fried, the CEO of FTX and a few other top executives of FTX. It also looks like they did not start FTX as a fraud but resorted to fraud once their fund (Alameda) incurred big losses in trading. To be clear this story has had plenty of twists so far and its quite possible that this narrative may also change as more details emerge. But for now that appears to be the case.

FTX was the second crypto exchange I had picked here for users searching for a venue to trade cryptocurrencies. The post was published in February of this year.

Briefly, my view then was that if you’re looking for safety and convenience you should use Gemini while if you want to trade a large number of cryptocurrencies and a low fee you should use FTX.

With hindsight, this was a colossal error of judgment. But should I have had the foresight to avoid this trap?

FTX duped enough people that I can almost convince myself with a “who could’ve known?”. Almost.

As I re-read my posts on crypto exchanges and FTX after the revelations, it quickly became clear to me that even without the benefit of hindsight, I showed poor judgment at the time.

Here is a sample of quotes from the two posts. It will be hard to find them on the website (more on that below) but for now just take my word that I am not quoting them out of context.

• We were also able to find fairly limited information about their security practices on their website, less than most other exchanges we shortlisted.

• We were somewhat disappointed by the customer service experience at FTX. Opening support tickets on the app worked well for basic questions. But we did not get answers to our detailed questions around security practices at all.

• Deal breaker?… Its CEO, Sam Bankman-Fried also runs a fund called Alameda Research, which is a large market maker on FTX, leading to concerns around conflict of interest.

• FTX has the shortest operating history among all the exchanges we reviewed. It was founded only in May 2019.

• FTX is a cryptocurrency exchange headquartered in the Bahamas. Footnote – Relocated from Hong Kong in Sep 2021.

Forget for a second what has happened in the last month.

What is the justification for picking something with these characteristics in a space where billions of dollars have been lost repeatedly to exchange owners stealing money or getting hacked.

What was I thinking?

While it is difficult for me to remember my exact state on mind 10 months ago, I think its not very hard to guess what went down.

I was just starting moolahgeeks, I needed traffic and crypto was the hot space. No matter how good my analysis, no one wants to read a post that says “do nothing”. So I “had to” to choose something.

Why FTX? Why the one that would happily tell me how to give them money but not how they would keep it safe?

Three terrible, horrible, no good, very bad heuristics.

First, look at all the big names funds and traders investing in and on FTX. Surely they got the answers to these questions.

Second, MIT grad, ex-Jane Street, testifying in front of US Congress, sounding genuinely smart AND cynical on TV & podcasts, parents teaching in Stanford. Surely this guy will not steal.

Third, most of the other options were even worse! Visibly scammy pricing and other tactics to rip off retail. No transparency on founders background or other connected parties. Often a history of having been hacked.

Of these, the first two make me wonder if I have developed age related amnesia. I have enough battle scars from the last 15 years to know that if that is your best answer, you almost certainly have the wrong answer.

As for the third one, well, that brings me to the most important question for the future of moolahgeeks.

What am I doing here?

If I am running a content marketing blog, then the next step is simple. Delete the offending posts, pretend they never happened and move on.

But if I want to create a resource that I can trust and use, then the question is harder. Yes, FTX had fewer red flags than other exchanges but did I really need to recommend one?

Wasn’t the right call in the middle of a very visible bubble to just point out that all the options weren’t ready for most of us. The necessary information was all there. Even without the benefit of hindsight, this just seems like a particularly bad lapse of judgement.

What’s next?

This is not the last mistake I will make at moolahgeeks. However I want to make sure that those future errors don’t stem from a confusion about what I am writing and for whom.

I did not start moolahgeeks to write clickbait articles that are optimized for search engines and page views.

I want to create a resource that helps people deal with the complexity of managing their money. Done right, moolahgeeks should be boring, clear and conservative. It should follow the physicians’ maxim – First, do no harm.

None of this was true of my coverage of crypto exchanges. I need to make sure this does not happen again.

I will be leaving all the crypto posts on the website to maintain accountability and avoid white-washing. You can find them by typing “crypto” in the search box at the top of the page.

To make sure that new readers are not misguided by those posts, I have updated them with a statement that they have been withdrawn.

I have also crossed out all the text in each post to remove all ambiguity. This makes them hard (but not impossible) to read.

For users in Singapore, consumer advisories on cryptocurrencies can be found here and I have been advised to point out that all content accessed on the moolahgeeks.com is subject to our disclaimers and terms of use.