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OVEX terminates relationship with collapsed crypto exchange FTX

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Crypto prime broker OVEX announced on Wednesday (16 November) that it has effectively terminated its relationship with global crypto exchange FTX, which last week placed itself in bankruptcy after questions were asked about the reliability of its financial statements.

This follows a run on the company by panicked customers trying to withdraw funds. The company says it was forced to suspend all withdrawals.

Read:

In a statement, OVEX says it has withdrawn FTX’s authority to market offshore derivatives products in South Africa, effective from 9 November 2022.

FTX was offering derivative products such as bitcoin futures in SA until OVEX terminated the relationship.

“FTX’s marketing activities in South Africa had in the past been regularised through its appointment as juristic representative of Ovex Fsp (Pty) Ltd, FSP no. 50776,” says the statement from OVEX.

“Ovex Fsp (Pty) Ltd confirms the cancellation and removal of FTX as juristic representative. The public is cautioned from doing further business with FTX, as FTX is not permitted to market its offshore derivatives products in South Africa, at this time.”

On Wednesday OVEX CEO Jon Ovadia said on the Moneyweb Crypto podcast that FTX owned 8% of the company, and that no client funds were at risk as FTX now embarks on bankruptcy proceedings.

Listen to the interview here:

“We’re in discussion to buy the equity back and have zero customer funds on FTX. We have a small amount, less than 5% of owner’s equity, on the exchange, and we hope we’re successful in recalling those funds,” said Ovadia.

How FTX collapsed

The collapse of FTX, amid accusations of fraud and mismanagement, has shaved hundreds of billions of dollars in market cap from cryptos and prompted calls for tighter regulations over the management of crypto funds.

Read:

“FTX was a mammoth money-printing machine. We didn’t see it [the collapse] coming. it was making north of $200 million a month in profit. [Sister company] Alameda was making billions.

“Everyone was under the impression that [FTX and Alameda] had well over $10 billion in net equity. It’s just astonishing that they managed to mess that up,” Ovadia told Moneyweb.

FTX founder and CEO Sam Bankman-Fried originally got into crypto by arbitraging the difference in the bitcoin (BTC) price between crypto exchanges. Back in 2017, those price differences were as much as 60%, he told CNBC, but today prices are virtually identical across exchanges.

In 2019 he launched the FTX exchange and bankrolled a $2 billion venture fund that bought up interests in other crypto firms – OVEX included.

Bankman-Fried set up another company called Alameda Research that borrowed money, and then appears to have leveraged it, which was its ultimate undoing.

A leaked version of the Alameda balance sheet revealed that 90% of its funds comprised its own house currency, the FTT token, and that set the alarm bells ringing.

First to start dumping FTT was rival exchange Binance, which was an early investor in FTX. Thousands of others rushed for the exit door, trying to sell their FTT token and withdraw funds from FTX.

Read/listen: Crypto markets stumble after Binance backs out of FTX deal

Last week FTX filed for Chapter 11 bankruptcy in the US.

The FTT token has fallen from $50 in March to $1.50.

Read: FTX’s balance sheet, hack paint dim picture for user recovery

Here is the full statement from OVEX:

Source: OVEX

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