They got their money back. They lost the years in between.

A note on the schedule before we start. The Leak Report is now monthly. The weekly cadence served us well through the spring and summer, but a monthly rhythm gives each issue the room it deserves and gives you the space to actually sit with what we're covering. We think this trade is worth it.

This month I want to walk you through something that isn't news. It's pattern recognition using a well-documented case study.

The pattern is what happens when ordinary investors are drawn into things they shouldn't be in through a familiar face on a screen. It happens in every generation. It has a specific shape. And the version of it that unfolded through FTX in 2022 and its aftermath is one of the clearest examples on record for understanding why the shape matters for anyone whose retirement is in the market.

Missed last month's issue on market concentration?

Dexter Pierce, Founder

In This Issue

• FTX had Tom Brady, Gisele Bündchen, Larry David, Steph Curry and Shaq telling ordinary Americans to trust them with their money. In 2022 the exchange collapsed with an $8 billion hole in customer funds. What happened next is the part almost nobody remembers correctly.

• Customers were technically repaid, in 2024, at 2022 dollar values, on assets that had tripled in the meantime. Getting your money back is not the same as being made whole.

• The pattern isn't over. A retirement principle worth revisiting when the loudest voice in your feed is also the one selling.

This Month's Numbers

$8 billion — The shortfall in customer funds when FTX collapsed in November 2022. Customers who thought they had accounts on a reputable exchange discovered their assets had been used to fund related-party trading and speculative investments.

$650 million — Withdrawn from FTX in a single day before the exchange stopped meeting requests. The speed of the run was matched by the speed of the collapse.

25 years — The prison sentence handed to FTX founder Sam Bankman-Fried in March 2024. Meanwhile his customers waited for word on whether they would see any of their money.

105 vs. 100,000 — Bitcoin tokens actually left on the FTX exchange when new leadership took over, versus customer entitlements to bitcoin. The gap was funded eventually not by finding the missing coins but by rising crypto prices during the bankruptcy.

11x — The increase in the price of Solana tokens between the FTX collapse and when customers were finally repaid. Because customers were repaid in dollars at collapse-day values rather than in the tokens they thought they owned, they missed the entire run.

This Month's Story

They Got Their Money Back. They Lost the Years in Between.

Many people vaguely remember that FTX collapsed and that customers eventually got their money back. That vague memory is worth updating, because the details of what actually happened contain a lesson that applies to far more than cryptocurrency.

In 2021 and 2022 FTX built one of the most effective marketing campaigns in the history of financial services. Tom Brady and Gisele Bündchen appeared in Super Bowl commercials. Larry David starred in a Larry David-style spoof telling viewers not to be like historical skeptics who missed the wheel or the light bulb. Steph Curry, Shaq, Naomi Osaka, David Ortiz. A rotating cast of the most familiar faces in American popular culture explained to their audiences that FTX was the safe, credible, adult version of crypto. The stadium in Miami where the Heat play was called FTX Arena.

The founder was profiled repeatedly as the responsible adult in the room. Politically engaged. Advocating for regulation. Compared in serious publications to J.P. Morgan for stepping in to rescue other troubled crypto firms during the 2022 downturn. Institutional investors — Sequoia, Temasek, SoftBank, Ontario Teachers' Pension Plan — bought stakes in the exchange because it looked like the credible institutional gateway to a new asset class.

In November 2022 the entire structure collapsed inside of a week. The founder is now serving 25 years in federal prison. What FTX had been doing with customer funds turned out to bear no relationship to what the celebrity endorsements had implied. Related-party trading. Borrowing against tokens the exchange itself issued. Treating client assets as house money.

That much many people remember. Here is the part that matters for retirement planning.

FTX's customers were eventually repaid. It took nearly two years and required a bankruptcy proceeding that spanned more than 100 entities with what the lawyers described as "hopelessly mingled" assets. The repayment happened not because FTX had been solvent all along, despite the founder's continued insistence that it had, but because the price of cryptocurrency rose substantially during the bankruptcy. The 105 bitcoins that were actually still on the exchange at the point of collapse could not cover the roughly 100,000 bitcoins customers thought they owned. What made the difference was that Solana tokens rose eleven-fold, Bitcoin tripled, and the administrator was able to sell the appreciated assets he did have to cover the dollar value of what customers were owed.

Here is the critical detail. Customers were repaid the dollar value of their accounts at the moment of collapse in November 2022. Not the tokens themselves. Which means that a customer who thought they owned 10 bitcoin at $16,000 apiece got back $160,000. Bitcoin is now trading well above $100,000. That customer missed the entire run because their assets were not, in the end, their assets. They were an unsecured claim in a bankruptcy proceeding.

The "recovery" that many people think closed the FTX story fairly is, when you look at it properly, an enormous loss disguised as a break-even. Customers lost the upside on assets they believed they owned during one of the largest cryptocurrency bull markets in history. Some of them lost life-changing amounts of money not to fraud in the direct sense, since the money technically came back, but to the years and appreciation that were stolen from them by being in the wrong place at the wrong time.

The pattern isn't confined to cryptocurrency. It appears any time a familiar and trusted face recommends a financial product to an audience that isn't equipped to evaluate what is under the recommendation. Meme stock rallies work the same way. Celebrity-fronted NFT collections work the same way. The recent memecoin phenomenon works the same way. Nearly a million buyers of one prominently promoted token have lost a combined $3.8 billion, according to blockchain analytics firm Nansen. The names change. The mechanism does not.

The underlying question for a well-ordered retirement plan is not whether cryptocurrency is legitimate or whether celebrity endorsements should be banned. It is what portion of your retirement is exposed to the possibility that trust in a familiar face is doing work that careful evaluation should be doing. The honest lesson of FTX is not that fraud is possible. It is that even when things technically work out, the cost of being in the wrong place is measured in what you didn't get, not just in what you didn't lose.

The Cook Pierce Perspective

There is a specific instinct that celebrity-endorsed investment products are designed to activate. It's the same instinct that makes us trust a doctor's recommendation, follow a friend's restaurant advice, or believe a colleague when they say a book is worth reading. It's a survival instinct. Life would be exhausting without it, and it works well enough of the time.

This month on our website we walk through why that instinct is a dangerous one to bring into a retirement account, and what a well-ordered plan does with the part of a person that wants to trust a familiar face.

[Read the full Cook Pierce Perspective on our website]

The Long View

FTX wasn't the first version of this pattern and it won't be the last. This month on our website we trace the history, from the Charles Ponzi era through the 1980s savings and loan crisis, from Bernie Madoff to the celebrity NFT collapses of 2022 to the memecoin era now, and identify what all of them share. It isn't fraud in the technical sense. It's something more useful to recognize because it can be avoided in advance.

[Read The Long View on our website]

The Question Worth Asking

What am I actually purchasing when I buy this?

Many people never ask. The answer varies dramatically across products that look similar on the surface, and it is the difference between what you thought you had and what you actually had when things stop going according to plan.

On our website this month, the four categories of financial ownership and what each one means when it matters most.

[Read this month's answer on our website]

The Closer

There is a version of financial planning built to protect you from the things you know you don't understand. That version is straightforward. If you don't understand something, you don't buy it.

There is another version built to protect you from the things you feel like you understand because someone you trust said so. That version is harder. It requires being able to distinguish between a genuine recommendation and a paid endorsement dressed up as one. It requires being suspicious of the exact things that feel safest.

The retirement plan built for the second version isn't built by knowing more about markets or crypto or memecoins or whatever comes next. It's built by putting a foundation underneath the plan that doesn't depend on any of those judgments being correct. Then, if you want to participate in the market above the foundation, you can. And if a familiar face on a screen recommends something to you, the answer isn't "should I buy it?" It's "does this affect my retirement one way or the other?" For many well-ordered plans, the answer to that second question is no.

That is what order looks like when the loudest voice in the room is not on your side.

This month's sources include reporting from The Economist, The New York Times, and data from Nansen, a blockchain analytics firm.