Australian investors have been left unable to withdraw their funds following the spectacular collapse this week of cryptocurrency exchange FTX.
- High-profile cryptocurrency exchange FTX filed for bankruptcy and its CEO stepped down
- Australian investors have not been able to withdraw money from the platform
- FTX’s local arm went into voluntary administration on Friday
The company’s Australian units have now gone into voluntary administration and customers have been advised not to deposit money or trade on the platform.
One of the world’s largest exchanges, FTX’s downward spiral this week has been dramatic even by the standards of the notoriously treacherous cryptocurrency industry.
Its high profile is due in part to founder Sam Bankman-Fried’s shabby celebrity – as well as its sponsorship of events such as the men’s T20 World Cup, currently taking place in Australia, and stunts such as buying the naming rights to the Miami Heat’s stadium.
But the latest development has been removed
Last week, cryptocurrency news coverage CoinDesk reported on a leaked financial document that claims Mr Bankman-Fried’s trading firm Alameda Research was backed by a significant amount of a cryptocurrency known as FTT, sold by his own FTX exchange.
The founder of rival exchange Binance, Changpeng Zhao – who has denied any “master plan” involvement in the collapse – then announced that his company would be selling its FTT tokens.
This was the equivalent of a bank run and investors bailed out, reportedly pulling out of FTX worth more than $6 billion in 72 hours.
As FTX began to collapse, Mr Zhao announced that his own company had entered into a deal to buy FTX.com – FTX’s non-US arm. But on Thursday he announced that the deal was no longer on the table.
Binance later posted on Twitter that the purchase would not go through due to “corporate due diligence”, putting the FTX investors’ money at risk.
Lisa Wade, chief executive of investment firm DigitalX, said her team had sold off the company’s holdings of FTT tokens earlier this week after seeing some worrying signals about Mr Bankman-Fried’s empire.
At this point, she sees the story as the downfall of a young entrepreneur who began to “believe their own hype.
“If you were to pick someone who was the darling of the market, it would be him,” she said, referring to Mr Bankman-Fried.
“I would call it a ‘Madoff moment’ more than a ‘Lehman’ [Brothers]’moment.
“Young entrepreneurs have blind spots and blow up their startups every day.”
Australian investors in the dark
Australians who have money tied up in the stock market have told the ABC their situation seems dire.
A red banner at the top of the website on Friday told customers the site was unable to process withdrawals and “strongly” advised against making deposits.
An investor in Melbourne said he had tried to withdraw a small amount of another cryptocurrency called AVAX from FTX earlier this week, but was told the transaction would take 24 hours. It never came.
Iggy, a trader in Perth, said he could see his balance of about $50,000 on the site but could not get it out.
“It’s a fair amount that I can’t access right now,” he said.
“As a trader, I just move on from it and write it off.
“But for someone else, this would be the end of the line for them.”
In Australia, the company operates under the umbrella of FTX Express Pty Ltd and FTX Australia Pty Ltd, which is now in voluntary administration. Australia’s financial regulator ASIC is also monitoring the situation.
There are reports that the Department of Justice and the Securities and Exchange Commission in the United States are also investigating FTX.
It remains unclear when or even if Australians with money tied up in Mr Bankman-Fried’s businesses will be able to get their money back.
It’s just the latest in a series of problems for locals looking to put money into the cryptocurrency markets: Australians who had money invested in the so-called cryptocurrency “bank” Celsius, which collapsed in July, are still waiting for a U.S. bankruptcy court. to find out if they will be able to recover assets.
In a lengthy Twitter thread on Friday, Mr Bankman-Fried tweeted an apology to FTX customers.
He has now stepped down as FTX’s CEO, and the company has filed for American bankruptcy.
But his options appear to be limited unless another company steps in to rescue him.
Ms Wade of CyberX said at this stage she did not believe customers would get their money back.
“I don’t rule out someone saving the day… If I had deep pockets, there are a lot of people you can help, there are a lot of customers.”
Iggy said he had been trading on FTX for about six months, but the situation had now made him think twice about trading cryptocurrency.
“We put our money into a company we thought we had done due diligence on,” he said.
“There should be some form of oversight to ensure Australian investors are protected.
“You can make money in the meantime, but will you be able to access money when you want?
“It just seems like nobody is really safe. If your bitcoin isn’t in your own wallet, it doesn’t belong to you.”
The ABC tried to contact one of the local directors listed on their business documents via LinkedIn, but the man appeared to have deleted his account on Friday.
Questions sent to FTX went unanswered.