Lyn Peters, Director of Communications
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Bankruptcy filing of a large cryptocurrency company highlights the need for investors to diversify and be aware of – and prepared for - the volatility in the cryptocurrency market

OLYMPIA – The Washington State Department of Financial Institutions (DFI) reminds Washington investors to diversify investments and be informed when investing in largely unregulated products like cryptocurrency.   

As noted in our Sept. 14 media release (Market Volatility Could Mean Big Losses for Washington Investors Seeking Big Gains in Crypto), recent bankruptcies of cryptocurrency companies have revealed that consumers holding accounts at these types of companies may be considered unsecured creditors.

Some of these companies are registered and licensed with DFI. We have opened multiple investigations in connection with cryptocurrency companies and may take enforcement action in the event that we uncover violations of state law. 

With the recent bankruptcy filing of crypto platform FTX, which acknowledged misuse of client funds and an apparent hack, an estimated 1 million investors are potentially at risk of having lost their funds. According to a recent story in Reuters (Special Report: FTX's Bankman-Fried begged for a rescue even as he revealed huge holes in firm's books | Reuters): “…. FTX filed for bankruptcy on Nov. 11, leaving an estimated 1 million customers and other investors facing total losses in the billions of dollars. The collapse reverberated across the crypto world and sent bitcoin and other digital assets plummeting.”

“Today, more than ever, it’s important for investors to be fully aware of the risks involved with their investments,” DFI Director Charlie Clark said. “No investment is free of risk – this past week's events shine a bright light on the potential for risk within cryptocurrency investments. Understanding what you’re investing in, ensuring you are not investing more than you can afford to lose and diversifying your investments remain the top sound investment practices.”

Investors also should be aware that funds held on cryptocurrency trading platforms are likely not insured by the FDIC. Recently, the FDIC issued a Fact Sheet clarifying when an account is considered FDIC insured.

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