Is FTX The New Enron? | 667

MORI 667 | FTX

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Is FTX The New Enron?

Those of you that work hard for your money and you watch your money start working harder for you, you want that freedom and cash today, not 30 or 40 years from now so you can live that life that you love with those that you love. It’s not about getting rich. It’s about living a rich life because as you are blessed financially, you have a greater capacity to bless the lives of others. Thank you for reading. I appreciate you have been binging through these episodes like crazy. I know you got over 600-some odd episodes to get through. Good luck with that. I appreciate you binging on it. Most importantly, I appreciate you doing something about it.

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The real question is, “Is FTX the new Enron?” For those of you too young to know what Enron was, it was from the day when I was in my twenties. For some of you, maybe you were a much older adult than I was, when I was a financial advisor, I came on the scene right about at the very beginning of 2002. It’s January to be exact. Right after the new year, I became a financial advisor, and already we’ve seen the market get hit.

Do you remember 9/11? It was a couple of months before this. Funny enough, the stock market was starting to recover after 9/11. Things were getting better in the stock market, but then big news starts hitting with Enron, WorldCom and all these companies coming out that said, “We’re broke. Sorry, we didn’t tell you. We lied about it. We cooked our books.” 2002 ended up being one of the worst stock market years ever. That was the perfect time for me to become a financial advisor. Remember when the stock market was tanking fast?

I remember I reached out to a few friends. I was young and fresh at college. Most of the people I was talking to at that time were my age. They were in their 20s or 30s, newly married or in young families. I remember one of my friends said, “You should talk to my brother. He was at Enron, but got laid off because the whole company went under.” I call up his brother. I was surprised to hear when I said, “My friend, your brother told me to give you a call. I’m a financial advisor. I love to talk to you about your situation and see how we can help you.”

The guy said, “I don’t know if you heard or not, but I was with Enron and got laid off. On top of that, my stocks are now worth nothing. I had over $1 million of stocks there. I am flat broke. I don’t want to talk about money to anybody right now at all that.” That was the first and last time I spoke with that guy.” I fell for him. He didn’t just lose his stock money, but he lost his job and what he thought was this beautiful nest egg was gone almost overnight.

When I ask, “Is FTX the next Enron?” which had been run by a 30-year-old kid, or if you had come more recent, is that the next Bear Stearns that creates this next collapse? I’m not going to say it is or it isn’t, but it’s great to know that this always happens in every market cycle. Things get greedy, especially in the markets. Everybody gets overinflated.

This guy’s net worth was $23 billion. He was one of the wealthiest men in the world. Now he’s completely off the radar. The guy is flat broke. He’s worth almost nothing. He went through bankruptcy filings. The guy took over. I’ll share this little interesting article here that I found on time, where the new CEO says, “It’s unprecedented.” It’s a bigger mess than even Enron. FTX is even worse.

Enron sparked a whole bunch of uncertainty in the market. The reason why the stock market tanked wasn’t because the economy was worse. The economy was no different. It’s because investors could no longer trust what the companies were saying about their profits. They didn’t know whether they were profitable or not because they were cooking their books. They started going and all the regulars started going in and hammering down on them, making sure everybody was doing it right. A small percentage had cooked their books.

Because of FTX, investors can no longer trust what companies say about their profits because they always cook their books. Click To Tweet

I don’t remember the exact number. Let’s say, 3% of companies were cooking their books or weren’t exactly honest in their books. That was enough to tank the overall stock market by about 22% that year. You got everybody to question everything. They say, “Are these stocks worthwhile or not?” We don’t know. The same thing here with FTX. People thought there was plenty of money here. It was safe, “I have my money stored here. My account says it has this balance.” Next thing you know, it is completely gone.

Another article I saw is about the person that was convicted, Elizabeth Holmes. She’s the Founder and CEO of Theranos, the health company that does blood testing. She got fined a $400 million special assessment. She is supposed to have eleven and a quarter years in prison starting in April 2023. It’s the same thing. She lost over $121 million of investors’ money. She raised $900 million from people that thought something was worthwhile and it was a great startup.

Even people that were in favor of her said, “Investors know they’re going to lose 90% of the time.” That doesn’t matter. The fact remains that even in her own words, she said once she is giving her a little forgiveness speech before she got convicted, “Looking back, there are many things I would do differently. I tried to realize my dream too quickly.” She tried to realize her dream too quickly. It bit her in the butt. It didn’t just bite her. It bit her investors too.

When we’re looking at FTX, the same thing happens. The reason why the guy that took over here was John Ray III. He’s the new CEO of FTX. As he’s going through, here’s what he says, “It’s a complete failure of corporate control.” Not to mention they were buying luxury items, houses and stuff for their employees. He said, “Never in my career have I seen such a complete failure of corporate controls and absence of trustworthy financial information as it occurred here from compromised systems integrity and faulty regulatory oversight abroad to the concentration of control in the hands of a very small group of inexperienced, unsophisticated, and potentially compromised individuals. This situation is unprecedented.”

In other words, he said, “The way they ran their company, they were like a bunch of kids and i****. I can’t even believe they did this. There were no corporate controls. They weren’t even doing their meeting minutes or anything that a company should be doing. They were completely reckless with their books and that’s why they’re gone under.” That’s the kind of crap we’re talking about here and what it leads up to.

MORI 667 | FTX
FTX: FTX ran their company like a bunch of kids. There were no corporate controls. They were not doing their meeting minutes. They weren’t doing anything that a company should be doing.


This is just the beginning. There’s going to be a wave of more companies and news like this and more investors losing money. Whenever this happens, this is when the regulars start cracking down some more, start punishing people, throwing people in prison, and every market cycle happens. If you’re invested in companies like this and you even got money involved in companies like this, your money is at risk. Especially now, even in the alternative investment space or in real estate, you got to be extra cautious because if a company’s not doing right by their books or they don’t have their financials in order, you are going to lose money.

Even if they have the best properties in the world, if they can’t run their numbers and books right, you’re going to lose. I remember the last recession. There was a guy I knew that real estate investor here in Utah who had over a $100 million “empire” and bought lots of properties. He would use investors’ credit and money to buy his properties, paying them very high returns on their hard money loans. Yet at the end of the day, he wasn’t cashflowing these properties. They were turning them quickly because they could flip them.

It was in a good bull type of real estate market where things were hot like they were for us in 2021. He was moving and flipping properties left and right. He could be sloppy. When they did the books later, about 97% of the properties had no renters. A lot of times the weeds were growing. The lawn wasn’t maintained. They were empty properties sitting there vacant. No one had anything to do with them. Long story short, he’s now in prison and investors lost tons of money.

Even though when they tried to liquidate the assets, it wasn’t enough, because of course the values dropped during that period of time. The models seemed great. This guy wasn’t trying to defraud investors. He wasn’t knowingly or intentionally doing that, the same thing with Holmes here with her company, Theranos. It’s not like she was probably trying to defraud investors, but you can get caught up in things and become blind when times are good.

This is something I’ve been warned about for a long time. When times are good, people are euphoric or get lazy, especially those that haven’t been through multiple market cycles that understand this, that have seen what happens every time this occurs, they get sloppy and lose money. This could happen to even the most experienced traders. You got to stay humble, knowledgeable, on top and flexible when this stuff happens. My warning is this. Know that there are going to be more companies like this in the stock market. I can think you’re going to see more of a crash like you saw even in 2002.

When times are good and euphoric, that's when people get lazy. Click To Tweet

The economy was strengthening after 9/11, but because no one could trust the numbers of those companies because people were cooking their books, the market suffered the worst during Y2K. You could be caught in that same place, especially if you don’t know what’s going on with your money or who you’re investing with. Does your financial advisor know who they’re investing with? They don’t know who they’re investing with.

If they’re even putting it into a mutual fund, they don’t know the money manager. They don’t know what’s going on. Even if they manage it themselves, they don’t know the company intimately to know if they’re telling the truth or not. They’re completely guessing. They’re completely shooting in the dark. They’re in the blind. No more knowledgeable than you are, yet why would you turn your money over to those people?

Money Ripples exist because of this kind of crap. We exist because we don’t want you blindly putting money in places, especially with people that are blind anyways. It’s the blind leading the blind when you put your money with advisors who don’t know what’s going on. When this stuff starts happening, your money suffers. Financial advisors are fine. They’ll lose a little bit in their assets under management, but do you know what they’re going to tell you? “Put more in. It’s on sale. Buy now,” so that they can keep their commissions up and their fees coming in while you suffer and lose money and could be set back 5, 10, 15, 20 years in your progress because you chose their path. I’m inviting you to choose a different path.

Choose one where it’s been vetted. It doesn’t mean it’s guaranteed, but it means that we’re trying to take as little risk as possible. Manage risk so that you know your control. You know the people you’re investing with. It’s not some random company that you’re investing with. If you’re a business owner and you’re investing in everybody else’s company, why would you invest in somebody else’s company you have no control over and have no knowledge about versus your own company where you can drive up your own stock price, revenues, profits, make more money and get yourself out of the rat race faster.

My challenge to you guys is to question it. Don’t believe that the news has got to be figured out. Don’t believe your financial advisor or even the companies that have these stock prices got it figured out. Your money is at risk and there will be a lot of people that will lose a lot of money here over the next few years because they were not prepared. You need to be prepared and make sure that you’re investing in the right places. If you got questions for us, reach out to us at Make a wonderful prosperous week. We’ll see you later.