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By Leslie Albrecht
People who use GoFundMe to try to recover lost funds may have little success because they aren’t the “perfect victims,” one expert said
People who say they lost money in the collapse of the FTX crypto exchange are turning to strangers to cover their losses by setting up GoFundMe fundraising pages.
Among them is a man who says he lost the money he had been saving to surprise his girlfriend with her “dream” engagement ring. Now, “like many others, my application is frozen and all funds are gone,” he says on his fundraising page, which aims to raise $10,000.
Another Florida man posted what appeared to be a photo of his young daughter with the caption “Stolen Savings.” He describes himself as a “normal guy” with a job who lost “all” his money when FTX crashed. “You can call me stupid or dumb but I didn’t know… It will take time to get my savings together but today I’m asking for any help you can,” he wrote on the GoFundMe page.
The FTX-related GoFundMe pages come as FTX founder Sam Bankman-Fried says he’s trying to run his own fundraising campaign. He told a Vox reporter that he was trying to raise $8 billion in two weeks to save the company and return money to investors and account holders. Bankman-Fried reportedly used FTX client funds to cover losses at its Alameda Research hedge fund, and at this point some FTX clients are trying to get other people to cover their own personal losses.
“I just saw an opportunity”
Those account holders include 33-year-old Joseph Pizzoferrato, who set up a GoFundMe to try to get his engagement ring money back. He started using FTX about a year and a half or two years ago, he told MarketWatch. Crypto looked complicated, but the FTX app was simple and easy to use, so it felt like a good place to start, he said.
Pizzoferrato, who lives in Las Vegas and is a manager at a life insurance company, said he was initially skeptical of the cryptocurrency but took notice when bitcoin hit $60,000. “I just saw an opportunity and a lot of people were making money day trading and it was something that needed to be done during the pandemic,” he said.
He used his credit cards to buy altcoins including Sushi, Tron, Dogecoin and Ethereum. His account had ups and downs along with the broader crypto market, swelling to $20,000 at one point, he said, before crashing to almost zero. In recent weeks, he had built his balance up to $10,000 – his entire life savings – and planned to withdraw it soon. He was hoping one of the engagement rings he was looking at would be on sale on Black Friday.
But when he checked the FTX app during the week of November 7, it wouldn’t let him sell his holdings. He wrote a note complaining to customer service. Two days later, “the app was completely broken” and a quick search on Google (GOOGL) informed him of FTX’s downfall and bankruptcy. “The $10,000 is completely gone and I have no one to turn to,” Pizzoferrato said. “All I can hope for is something with the bankruptcy court.”
He said he had never used GoFundMe before and realized there were other people in much worse positions than his, but thought it was worth a shot. “I thought I’d give it a shot and see if there was anyone who wanted to bless us,” Pizzoferrato said. He cited one obstacle: He hadn’t been able to tell friends or family about the GoFundMe page because he didn’t want to ruin the surprise proposal he was planning for his girlfriend.
Another GoFundMe campaign was started by a man in the UK who says he lost his entire net worth, $12,000, to FTX. “I can no longer pay my rent and will be evicted from my flat at the end of the month unless I receive urgent support,” he wrote. MarketWatch requested an interview, but he said he would only speak to a reporter if he was paid because “I’m obviously struggling financially right now.” (MarketWatch does not pay for interviews.)
One must be the “perfect victim”
Unfortunately, FTX victims who turn to GoFundMe are likely to receive “minimal support,” said Matt Wade, a sociology professor at La Trobe University in Melbourne, Australia, who researches GoFundMe
“In our increasingly uncertain worlds, one has to be the ‘perfect victim’ to raise significant support on a platform like GoFundMe,” Wade told MarketWatch in emailed comments. The “ideal victim” is the “unfortunate soul who has done everything reasonably possible to prevent disaster, but which still befalls him,” he said.
“FTX investors do not meet these criteria because they made a deliberate decision to make a speculative investment,” he added. “Does that mean they deserve to be victims of a potential scam? Of course not. But in hyper-competitive sympathy-seeking markets, the injustices they’ve suffered simply won’t resonate on the platform.”
To be clear, FTX has not been accused of fraud.
GoFundMe declined to comment.
Unlike traditional banks, crypto exchanges are not backed by the Federal Deposit Insurance Corporation, the government agency that insures bank deposits so that account holders don’t lose out if a bank fails.
This left FTX account holders who did not withdraw their money at the right time hopeless. The company had about $16 billion in client assets, but had lent about $10 billion to cover risky bets made by Alameda Research, a crypto-trading subsidiary founded by Bankman-Fried, the Wall Street Journal reported.
The potential number of parties seeking to recover losses from FTX is 1 million and growing, according to the company’s bankruptcy filing. The company is reportedly under investigation by the US Department of Justice, the Securities and Exchange Commission and the Commodity Futures Trading Commission.
— Leslie Albrecht
(END) Dow Jones Newswires
11-22-22 1440ET
Copyright (c) 2022 Dow Jones & Company, Inc.
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