FTX Bankruptcy Leaves Millions of Customers Stranded
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Millions of FTX customers, particularly in the UK, have been left stranded since the crypto exchange collapsed.
Slim Chance of Restitution Confirming
Earlier this week, the British Broadcasting Corporation (BBC) shared a report confirming that millions of Brits appeared to have been caught up in the FTX bankruptcy and insolvency saga.
The BBC report analyzed the failed exchange’s bankruptcy filings, which were released late last week. As the news source found, FTX owes over a million people, most of whom are small retail investors who had trusted the platform with their crypto holdings. Now, with FTX gone and its top brass also nowhere to be found, the chances of most of these people getting their money back are slim to none.
The report pointed out a warning about FTX released by the Financial Conduct Authority (FCA) back in September. At the time, the financial watchdog claimed that the exchange appeared to have provided financial services in the UK without appropriate authorization. If FTX went bust, investors wouldn’t find much in terms of help.
FTX’s investors slowly realized these warnings were accurate. The FCA has created a page to assist those who invested in FTX with its liquidation, but those who invested in the exchange wouldn’t get much assistance.
Gavin Brown, an Associate Professor of Financial Technology at the University of Liverpool, spoke with the news medium and explained that cases like this tend to leave investors on the hook for losses.
He further disclosed that even though the remains of FTX’s business can be divvied up among creditors, most small retail investors with funds with the exchange would be the last to get any share.
The FTX saga has been one of the most consequential events in the crypto market’s history. The exchange, once second only to Binance in size and trading volumes, experienced an unprecedented bank run last week that led to billions being withdrawn in a single day. This was after reports surfaced outlining the company’s debt and financial misappropriation in relation to Alameda Research, a quant trading firm started by FTX’s founder Sam Bankman-Fried. With investors scared of a possible liquidity crisis, they fled from the exchange, further exacerbating its financial woes.
Days later, FTX filed for bankruptcy protection, with Bankman-Fried and top officials from both the exchange and Alameda essentially going underground. And to make matters worse, the exchange experienced a hack over the weekend in which about $500 million vanished from its wallets.
A Market-Wide Debacle
There have been several fallouts since then. In addition to the effect of coins on the crypto market, information regarding investors involved in the FTX saga is now emerging.
Several companies in the market have also been directly affected by the events. Galois Capital, a crypto-focused hedge fund, announced that it had a significant portion of its funds stuck in FTX. A report from the Financial Times claimed that the stuck funds were in the range of $50 million.
For the record, yes we did have significant funds stuck on FTX. No, we did not use any Bahamian method to move funds out.
— Galois Capital (@Galois_Capital) November 11, 2022
New Huo Technology, a holding company that controls Hong Kong-based crypto platform Hbit Limited, also reported that it could not withdraw $18.1 million worth of crypto from FTX before the exchange put a hold on processing withdrawals.
About $13 million were assets owned by Hbit users. The company has said that it would keep working on processing the withdrawals if possible, although it admitted the seeming impossibility of the task.
