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UK Investor Caught Up In FTX Collapse Loses £1m

by Chris Jerry

FTX Collapse

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FTX Trading Ltd., generally referred to as FTX, was a bankrupt company that formerly operated a cryptocurrency exchange and crypto hedge fund. The exchange was founded in 2019 and, at its peak in July 2021, had over one million users and was the third-largest cryptocurrency exchange by volume. FTX is incorporated in Antigua and Barbuda and headquartered in the Bahamas. FTX is closely associated with FTX.US, a separate exchange available to US residents.

Since November 11, 2022, FTX has been in Chapter 11 bankruptcy proceedings in the US court system. Public concern began when a November 2022 CoinDesk article stated that FTX's partner firm Alameda Research held a significant portion of its assets in FTX's native token (FTT). Following this revelation, rival exchange Binance's CEO Changpeng Zhao announced that Binance would sell its holdings of the token, which was quickly followed by a spike in customer withdrawals from FTX. FTX was unable to meet the demand for customer withdrawals. Binance signed a letter of intent to acquire the firm, with due diligence to follow, to ensure that customers could recover their assets from FTX in a timely manner, but Binance withdrew its offer the next day, citing reports of mishandled customer funds and U.S. agency investigations. On December 12, 2022, founder Sam Bankman-Fried was arrested by the Bahamian authorities for financial offences, at the request of the US government.

Following the recent incident, the United Kingdom (UK) investor community is in shock after an unnamed individual reported lost £1m in the recent collapse of FTX trading platform, the UK investor community has been left reeling. This amount of money is estimated to be 10x what the investor has originally deposited with the company and has caused concern among traders and investors who are worried about their losses. The UK individual investor reportedly suffered the losses from speculating on high-risk derivatives through the online platform, highlighting how exchanges offering complex financial products can leave investors in vulnerable positions.

The news came as a major shock to the UK's financial community, which was led to believe that FTX was a secure investment platform for leading crypto traders. Now, this tragedy shows that even signatories of reputable platforms are not safe from losses due to investor collapses like this one. It is important for investors to remain vigilant and know their rights when it comes to protecting their funds against any possible complications in the future.

The incident is sure to raise questions over the safety of investments made through independent exchange platforms, and whether investors fully understand the risks associated with such platforms. The devastating effects of this loss are certainly a stark reminder that investing large sums through unregulated alternatives should not be taken lightly.

A Freedom of Information (FOI) request reveals that the UK investor told a fraud and cybercrime hotline they had been scammed out of £1m by failed cryptocurrency exchange FTX. The unnamed individual was one of 13 in the UK who complained to Action Fraud about FTX during November. Eight were male, three female, with the gender of two listed as "unknown". One was aged 10-19, another in their 70s. In total, victims claimed losses of £1,162,334.

Many cryptocurrency investors used FTX as a place to store funds. It owes money to more than a million individuals and companies globally, bankruptcy-court filings suggest. Of those, about 80,000 are thought to be in the UK.

The chief executive Simon Jones reveals that many more complaints may have come in subsequently, but those with money in FTX were unlikely to be repaid, cause of the incident that occurred.

He further stated that , "The Financial Conduct Authority has been at pains to warn investors about the dangers of cryptocurrency - so if you're tempted, make sure you don't put all your eggs in one basket".

FTX declared bankruptcy on 11 November but concerns about it had escalated rapidly earlier that month. The former CEO of FTX Sam Bankman-Fried was arrested in December. He has pleaded not guilty to charges of defrauding investors but two close colleagues have admitted offences and are co-operating with the investigation.

The current CEO of FTX is John J. Ray III, who specializes in recovering funds from failed corporations. Speaking of its previous management, Ray stated: "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here." He added that "this situation is unprecedented."

The collapse of FTX just shows how volatile cryptocurrency trading can be and serves as a strong reminder that investors need to be aware of all potential risks they could face when betting on this potentially lucrative yet risky asset class. This is especially pertinent in light of recent losses suffered by UK investors due to collapses like FTX's.

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