Over a million are owed money by failed crypto exchange

Over a million people and businesses could be owed money following the collapse of the crypto exchange FTX, according to bankruptcy filings.

There have also been reports that FTX suffered a hack, taking millions of dollars of crypto from the firm.

It's a worrying time for individuals who have money in the business.

In the UK, crypto assets are largely unregulated, and experts and financial watchdogs warn there's little protection for consumers.

Despite strong warnings from watchdogs about the risk of crypto investments, around 6.7 million people in the UK own or have bought crypto assets - close to one-tenth of the population.

In September, financial watchdog the Financial Conduct Authority (FCA) warned that FTX may be providing financial services or products in the UK without its authorisation. It said bluntly: "You are unlikely to get your money back if things go wrong."

It now has a page dealing with the FTX liquidation. Again, the message is that options for those who've invested in it are limited.

There is at least a liquidation process in the case of FTX, which will divide up the remains of the firm among those to whom it owes money. But the bankruptcy may not provide much comfort.

Gavin Brown, Associate Professor in Financial Technology at the University of Liverpool, pointed to a recent report which suggested that "42% of exchanges which failed simply disappeared without a trace".

Prof Brown told the BBC: "In the event of exchange failure, or even bankruptcy, it is the investors who are on the hook for losses."

He and other experts warned that often small investors will go to the back of the queue when what remains of a crypto business is divided up among creditors.

Experts doubt much money will be coming back. "The unfortunate news is that the money's all gone. It's just not there any more. Investors should expect pennies on the dollar," said crypto blogger and author David Gerard.

Mr Gerard argued that in many of these failures there are "real liabilities but imaginary assets" and that a huge proportion of the assets are in exchanges' own tokens - such as FTX's FTT token - to which "they've assigned a spurious value in the billions".

The FCA says people worried about their finances should go to a government-backed organisation, Moneyhelper. But Moneyhelper is an advice service, and can only offer guidance on how to survive when your savings vanish.

With some mainstream investments it's possible to receive compensation if an institution collapses - for example a bank or building society - through the Financial Services Compensation Scheme (FSCS)

But the FSCS says it doesn't protect crypto assets, as they are not a regulated financial product in the UK - all it can do is warn consumers of the risks, and provide tools to check if their investment is protected by the scheme.

The organisation says crypto currency is something that consumers ask about every week, either via its customer service team, social media or searching for information on its website.

It says "crypto" is one of the most popular words searched for on its website.

Daniel Seely, financial services associate for law firm Freeths, told the BBC: "The short answer is that there isn't much recourse available."

With a few exceptions, crypto assets fall largely outside the scope of regulators and watchdogs - for example, the Financial Ombudsman Service - and so consumers "don't have a clear right to recourse in the same way they may with other products".

Consumers, argued Mr Seely, could consider pursuing civil claims against parties involved in an investment, such as brokers or financial advisers if they were used, "but realistically if it is just a case that the investments didn't go as planned, there is currently little they can do to recoup losses".

The Financial Services and Markets Bill currently being scrutinised by parliament will begin to bring in some additional regulation for crypto, but in the meantime Mr Seely said it remained a "very risky area for consumers looking to invest".

Haider Rafique - from OKX, a crypto exchange - said there were some steps consumers could take to protect themselves against similar losses in the future, in particular by thinking carefully about where they stored their assets.

"Unless they are active traders, we encourage our customers to store their crypto currencies on a non-custodial decentralised wallet,"he said.

"In the industry we say: 'Not your keys, not your crypto.' Recent events prove it has never been truer."

Benjamin Dean, director of WisdomTree Investments, an asset management firm, urged people to think about investments in blockchain-related technology the same way they would more conventional assets, like stocks, shares or gold.

"Do not invest more money than you can afford to lose, and never invest your money with companies which operate unregulated, off-shore exchanges", he advised.

"If you do not research where you are investing your money, then you are running a very high risk of losing all your investment."

Rocio Concha, director of policy and advocacy for consumer group Which? warned: "Crypto assets are very high-risk and speculative. Investors face losing all their money if they decide to buy them, as they often come with limited consumer protections."