In early November, as Andrew Gronek learned from YouTubers that FTX, the giant cryptocurrency exchange where he’d deposited his money, was on a downward spiral, he didn’t believe it. After all, the 33-year-old living in Tempe, Arizona, had been told that his cash was as safe in FTX US as it would be in a typical bank.
Furthermore, he saw that FTX’s much-lauded CEO, Sam Bankman-Fried, had tweeted that FTX was “fine.”
But just to be safe on November 9, as FTX’s valuation was plummeting, Gronek decided to withdraw the small amount of what he believed were his riskier crypto investments, as well as the few thousand dollars that he had directly deposited in the exchange to earn interest. He was counting on that cash to help him cover bills when money ran short. All of these investments provided him much-needed income, and he was “fully expecting to put it back on the platform when it was safe to do so.”
He made the withdrawal request via the FTX US app on his phone — and it looked like it had gone through. But as the days passed, his cash never came.
Gronek is one of many FTX investors that doesn’t fit typical narratives being propagated by corporate media in the wake of the exchange collapsing into bankruptcy on November 11, rocking the once-ballyhooed crypto market to its core. He doesn’t fit the definition of a stereotypical “crypto bro,” someone with enough extra money to burn on unsafe bets. Gronek is one of many FTX investors, often in their 20s and 30s, who hadn’t even made enough money to be considered a “mom-and-pop investor.”
About 16 percent of Americans invest in cryptocurrency, and the largest age demographic of those investors are millennials, the generation to which Gronek belongs. Coming of working age in the fallout of the recession and then later the COVID-19 pandemic, many of these younger FTX customers have spent their adult lives working low-wage or gig economy jobs. They often work long hours at multiple jobs and still need additional income to help pay their bills. They were also financially vulnerable. These were the people who were lured into thinking they could use FTX as a bank account earning interest, depositing and withdrawing money as they saw fit with all the protections of a federally insured bank — even though none of this is true.
It wasn’t a fluke that Gronek and his fellow investors believed this fiction. FTX did everything in its power to convince low-income adults to use its platform in the place of a bank. The company even allegedly lied about being insured by the Federal Deposit Insurance Corporation (FDIC), an independent branch of government that guarantees money in U.S. bank accounts.
As FTX CEO Sam Bankman-Fried, who is now facing multiple charges of wire fraud and conspiracy, put it in May 2022 testimony to the U.S. House Committee on Agriculture, FTX was working on “banking the un- and under-banked” by offering them accounts with “no fees and no minimum balances.” FTX sought to target the 70 million Americans he believed fit that category — and give them a banking alternative linked with a “crypto wallet.”
This state of affairs illustrates how lax regulations and the cultural and political lionization of the crypto market allowed hucksters like Bankman-Fried to hoodwink numerous consumers, many of whom had limited means, into putting their savings into incredibly risky crypto markets. Now that FTX and its affiliated U.S. company FTX US have gone belly up, Gronek and many people like him have lost or are in danger of losing everything.
“I Heard It Was Safe”
Gronek is no stranger to adversity. He grew up poor, and money management was always on his mind. He remembers as a child turning down his mother’s offer of a candy bar, because he didn’t think the family could afford to buy it. His mother has struggled with narcotic and alcohol addiction since he was a child. She’s been in prison as well as homeless for a time — and as a young adult, he was expected by certain family members to take care of her.
Starting his senior year of high school, he’d spent well over a decade doing jobs at a grocery chain, from being a cashier and clerk to a manager. He’d come to hate the job, because he felt like they treated him and other employees poorly. He was exhausted from living paycheck to paycheck.
“Then, I got tired,” he says, “and started rebuilding my life.” His journey towards creating a more stable life is how he wound up putting his money in FTX.
In 2018, he returned to community college. At the beginning of the pandemic in 2020, he finally felt appreciated at the grocery store: “For the first time, I was essential” — and he benefited from “COVID bonuses,” which were usually $300 of extra pay and about the same amount in food and gas credits every few months.
But as pandemic restrictions wound down in summer of 2021, his job went south again. He recalled that “after things open back up, people go back to complaining and degrading you for supply chain issues out of my control.” The grocery store Gronek at which worked became understaffed amid an acute, nationwide workforce shortage, which meant he was “always overworked.”
Worst of all, Gronek took a financial hit. No longer considered essential, the COVID bonuses dried up.
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Interested in finance, in October 2021 he started to look into how he could supplement his income. He’d heard of crypto, a new form of digital currency that grew up with the internet, whose popularity has exploded in recent years. People like crypto because, among other reasons, it is cheap to use, easy to get, and in some cases has proven to be a worthwhile investment — as long as crypto can be purchased at low prices and sold at higher ones.
Gronek googled crypto and found a number of YouTubers who worked together on the Millennial Money podcast. These Youtube stars — Graham Stephan, Kevin Paffrath, Andre Jikh, and Jeremy Lefebvre of the YouTube channel Financial Education — all enthused about FTX, a giant online cryptocurrency trading platform founded in 2019 by Sam Bankman-Fried.
“I heard it was safe and easy to use,” Gronek says of FTX US. Money could be swiftly uploaded to a free FTX account via a phone app using a number of options, including a debit card or wire transfer. All you had to do, he recalls, was “swipe to have your order fulfilled.” Furthermore, FTX offered low fees, free crypto with every trade, and up to an 8 percent yield on money stored on the platform.
In early 2022, he transferred $1,000 into FTX. That was just the beginning.
“A Huge Factor”
Unlike the narrative about crypto bros, Gronek did not wildly invest money in a get-rich-quick scheme. Instead, he took what he believed to be a thoughtful and cautious approach to finances and tried to do his research. He would make a deposit every few weeks, and as he says, “began to trust it.” He even started writing on a WordPress blog about the markets and finances.
All in all, Gronek put $10,000 of his savings into his FTX US account. Roughly $2,000 of that were crypto investments that he considered riskier but could end up earning him a lot of money if they performed well. He stored the majority of this money, $8,000, in U.S. dollars deposited in the account because, for the most part, the funds were gaining 8 percent interest.
Gronek was comfortable with his moves because he believed that cash stored in FTX US was FDIC insured. He recalled that being “a huge factor in my decision.” He needed this money to be safe because it was a lot of money for him — roughly the equivalent to three months of his total living expenses.
Established as an independent branch of government by the Banking Act of 1933, the FDIC currently guarantees that if a federally insured bank fails, its customers can recoup their money up to $250,000. Signed into law by President Franklin Delano Roosevelt during the Great Depression, the legislation is crucial for protecting consumers if a run of customers all try to withdraw their money from a bank at the same time, and the institution doesn’t have enough money to make its customers whole.
It’s hard now for Gronek to say with certainty exactly where he heard that FTX US was FDIC insured, because the videos on Millenial Money and the advertisements that went with them have been scrubbed from the internet. However, he believes that he learned this information from Youtubers he watched and FTX US advertisements.
FTX US, it turns out, is alleged to have repeatedly spread fraudulent claims about being FDIC insured. According to an FDIC cease-and-desist letter sent on August 18, 2022, to top FTX US officials, “FTX US, and its related entities, by and through their officers, directors, and employees… have made false and misleading statements, directly or by implication, concerning FTX US’s deposit insurance status” in violation of the Federal Deposit Insurance Act.
The FDIC cited a tweet from FTX US president Brett Harrison on July 20, 2022, suggesting FTX US was FDIC insured, as well as FTX US identifying itself as FDIC insured on consumer advice websites such as SmartAsset.com and CryptoSec. Harrison also appears to have tweeted another misleading claim on July 27, 2022.
FTX and FTX US did other things to convince people it was incredibly safe to deposit their funds into its exchange and use it like a bank. All of FTX’s public support materials, sports advertising, and stadium sponsorships falsely created what one FTX investor who lost money described to The Lever as a “Too-big-to-fail look.” FTX US offered a Visa debit card that made it seem like a checking account for easy access of funds — and even many of FTX’s own employees used their accounts this way.
Plus, in a section of FTX’s website on cash and interest, the company assured potential investors, “FTX does back the principal generating the yield with its own funds and equity.” In other words, FTX claimed their customers’ original deposits were safe.
What’s more, many of the influencers who had convinced Gronek to invest in crypto had personal deals where they were paid by FTX, according to a MarketWatch report. By sponsoring podcasts like Millennial Money, the company was likely trying to target economically vulnerable millennials and other young adults who were trying to become financially stable.
For instance, Paffrath of the Millennial Money podcast recently admitted to having a deal where he received $2,500 every time he mentioned FTX, which he believes was one of the smaller influencer deals with FTX. In an interview, Paffrath told The Lever he’d been paid about $188,000 by FTX in 2022, but is still owed $70,000. Paffrath’s colleague, Lefebvre of Financial Education, similarly revealed in a recent apology video that he had a six-figure deal with the crypto exchange.
“I personally never said that the platform was FDIC or [Securities Investor Protection Corporation] insured — and I do not believe that other individuals on Millenial Money did, although I don’t know since I have not been there since January,” Paffrath added, saying that he quit the podcast in early 2022, months before FTX US was found to be disseminating claims about being FDIC insured.
Paffrath also stated, “I hope that through the FTX bankruptcy customer assets are recovered, and people are made whole. Sam Bankman-Fried deserves to be in jail. Not at home playing video games and transferring crypto assets through backdoor channels.”
Lefebvre, Jikh, and Stephan, the Millennial Money hosts who stayed on the podcast after Paffrath left, did not respond to requests for comment.
The result of all of these efforts from FTX was that many people deposited all or much of their money into the trading platform and lost it all — particularly those who didn’t have much to begin with. Many thought they had been responsible with their finances — and that included Gronek. Since his cash sitting in the exchange appeared to be getting stable interest, it seemed like he had been safe — even smart — with his money. That changed after November 11.
Contrary to FTX’s promise that it backed an investors’ principal with its own funds and equity, according to federal prosecutors, Bankman-Fried instead used his customers' money to buy real estate, invest in other companies, and make giant political donations. This is why many customers have lost their initial deposits into FTX. Ironically, Gronek was able to withdraw his small amount of crypto as FTX became insolvent — but the supposedly “insured” cash he had deposited on the platform was never returned to him.
Many young FTX customers remain confused about what happened to their money, and many are desperate. Some victims have launched GoFundMe pages where they admitted, for instance, that they are “thousands of dollars in debt, with an insufficient income to pay monthly bills.” One investor, a 30-year-old man in Mumbai, India, wrote on Reddit that, “It’s gone... all that I had. This time it hurts so bad, I have trouble sleeping, lost all confidence in myself, every day is depressing and wishing to end things for good but my parents are the reason I am not doing anything stupid, they have gone through a lot of hardships already.”
There are countless others who also lost all or most of their life savings — often less than $10,000. Some were counting on the money for basic needs like food.
Gronek and his fellow investors might have been better prepared if the FDIC had alerted them to the risks. According to the FDIC’s August 18 letter to FTX US, by that point the agency knew that FTX US was falsely publicizing that it was FDIC insured in ways that were “likely to mislead or potentially harm customers.”
While the FDIC asked in this letter for FTX US to cease and desist from making these statements, the agency didn’t alert or require FTX US to notify anyone who might have already been misled into investing in the exchange.
“Why did [the] FDIC not inform us?” asks Gronek. If it had, he says he would not have kept so much cash in FTX US. He might have even withdrawn all his money before it was too late.
“We Need To All Tell Our Government To Act”
Gronek’s life looks precarious. He met with lawyers, but they told him his claim was too small and would cost him too much money to pursue. He has a small amount of money deposited in a regular U.S. bank, but fears burning through it quickly, given the low pay of his current part-time jobs.
This year, as part of his quest to improve his economic situation, Gronek left the grocery business and took a part-time job leasing for apartment complexes. He also works weekends as a realtor, trying to build his own real estate business.
As someone who’s seen homelessness up close, he has an ideological goal for his job, too. In the Tempe real estate market, he says mortgages can be “so cheap compared to people’s rent. That’s why I went into real estate. I want people to be secure in their homes for when inflation gets out of hand.”
But in making the job move, he took a pay cut, in the hopes of eventually gaining more economic security.
To afford housing, he continues to live with roommates who still work in the retail and service industry but are not making enough to cover rent. They recently started new jobs, but they have had their hours slashed, as Gronek says is typical in their industry. His roommates are now two months behind on rent, and Gronek is doing what he can to cover for them.
Still, Gronek is trying to remain hopeful. He put up a GoFundMe to “not be a victim and take some action.” Having lived through trauma previously, he says he is “blessed to be here today” and wants to publish a novel about those experiences either on his WordPress blog or through Amazon. He says, “I hope that book would be a greater lesson in humanity than the FTX saga.”
In the wake of FTX’s collapse, as major media outlets welcomed former CEO Bankman-Fried to offer up more misleading spin, Gronek reached out to his senators, the FDIC, and the U.S. Securities and Exchange Commission about his experience and concerns. He hasn’t heard back from anyone.
Gronek feels that consumers should have been alerted that FTX US wasn’t FDIC-insured, as many were led to believe. Knowing this information could have protected customers, especially low-income individuals who put their savings into FTX and FTX US, believing they were akin to a bank. It could have stopped them from losing everything.
Gronek says regulators need to take action to ensure what happened at FTX doesn’t happen again — and to try to salvage the lives of those who have been financially decimated.
As he put it, “We need to all tell our government to act on the matter.”