HELENA — A cryptocurrency exchange currently in bankruptcy proceedings is making waves across the world, and right here in Montana. The Montana Commissioner of Securities and Insurance and State Auditor Troy Downing wants Montanans who lost money due to the collapse of FTX to know some compensation might be available.
FTX was a cryptocurrency exchange. In the financial world, an exchange is a marketplace where commodities and securities are traded. FTX dealt with cryptocurrency, so it served the same function for currencies like Bitcoin and Ethereum.
“It’s completely unregulated,” Downing said. “So, there were no governments, no entities tracking how they were dealing with this.”
Simply put, Downing explained FTX used investors’ money for their own purposes, and it collapsed. The company has now filed for bankruptcy. Billions of dollars were lost, and that has impacted millions of people across the world.
“Here’s the problem, and this is why it’s so widespread, a lot of these other companies used FTX as their platform for doing these trades,” Downing said. “This is going to be a big, big problem.”
Downing said authorities are still sorting through just how many people lost money—they range from big companies to everyday people, and some of them might be right here in Montana.
Due to the small amount of assets compared to the money lost, recouping money from FTX might be difficult, but Downing said Montana has a special fund that can possibly give Montanans some relief. It’s called the Lynne Egan Memorial Securities Restitution Assistance Fund, and it is funded by fees and settlements collected by the Montana CSI.
The fund is meant to help victims of investment fraud recover at least part of what they lost when full restitution is not possible. The amount of assistance victims can get is limited by Montana law. Victims can get up to $25,000 or a quarter of unpaid restitution, whichever is less. If the victim is defined by Montana law as a “vulnerable person,” they can get up to $50,000 or half of their losses, whichever is less.
“A lot of times, even when folks think all is lost, we do have that Lynn Egan Memorial Securities Restitution Assistance Fund, and there might be funds available for restitution,” Downing said.
Going forward, Downing said it is important for potential investors to know exactly where their money is going when it comes to cryptocurrency, and to understand the volatility of the currency.
“We’re very pro-innovation, we want to see Montana as a place where innovators can thrive, but you have to tread with caution,” Downing said. “I’m not telling anyone this is not appropriate for you, but always approach with caution and make sure you’re doing your due diligence.”
Downing said if Montanans can reach out to his office if they have questions about companies, possible investments or cryptocurrency offerings, they can assist in gathering information.
To reach the office of the Montana Commissioner of Securities and Insurance, call 406-444-2040, you can also find more information about Lynn Egan Memorial Securities Restitution Assistance Fund online.