The lessons investors can learn from the FTX debacle are not all that new or even groundbreaking. But, the lessons are important ones for investors to learn who desire to build long-term wealth and achieve financial freedom.
The significant lessons are the importance of investors understanding an asset and doing thorough research on companies in which they intend to invest.
In FTX’s case, here is a company, led by it’s under thirty CEO Sam Bankman-Fried (SBF), that in three years grew from relative nothing to $32B literally overnight. It’s meteoric rise attracted thousands of investors who were more than happy to invest their capital in a young company and its brash CEO.
Yet, by performing just basic research on how the company made its money, on the experience and acumen of the CEO, and on the executive management team, and on the company’s financial profitability would have raised red flag to cause serious investor to pause before investing their capital in the company.
Additionally, SBF, FTX’s thirty-something CEO was consider a “wunder-kid” of sorts and featured by Forbes as its #2 “The Forbes 400” in 2022.
In a relatively short time, SBF took FTX from near zero is capitalization to $32B. His feats caused both seasoned and retail investors to flock to FTX.
Now, at the beginning of the week, FTX possessed a capitalization of $32. By Friday, FTX was at near zero capitalization, SBF had resigned, and the luster and shine of the once high flying company had been completely tarnished.
Thus, this is a classic and stark example why investors must understand and do thorough research, and remain disciplined before investing their capital.
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