FTX loses financial service license in South Africa

Adeniyi Odukoya

South African cryptocurrency market maker Ovex has cancelled and removed FTX as a juristic representative, cutting off its access to its local Financial Service Provider (FSP) licence.

Many brands have denied solidarity with the embattled exchange because wary customers are shifting their attention away from firms with a cordial relationship with FTX before its crash. 

FTX was the second largest crypto exchange before a bank run, and the collapse of its cryptocurrency token FTT sent the walls crashing. Rumours emerged that the exchange was insolvent, and a report disclosed that almost 40% of Alameda’s assets were FTT.

Alameda Research CEO Caroline Ellison tried to address concerns about Alameda’s balance sheet on Twitter but effectively confirmed that — at best — 20% of their assets were FTT.

Cofounder and CEO of rival exchange Binance, Changpeng “CZ” Zhao, tweeted on 6 November that they would liquidate their whole stack of FTT — worth $585 million at the time. This announcement sent the price and value of FTT down the drain, with many token holders seeking to dump the asset.

Read also: Binance vs FTX war: Here is all you need to know

On 8 November, the CEO of Binance, CZ, disclosed that FTX had asked Binance for a bailout. Binance said it would buy the non-US exchange arm of the platform, provided it passed due diligence.

A few days later, Binance disclosed that it would pull out of the deal because of facts revealed during the due diligence.

“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition,” Binance said.

On 11 November, Bankman-Fried confirmed the exchange had applied for Chapter 11 bankruptcy. In the US, Chapter 11 is not necessarily a total liquidation.

According to the US government: “This chapter of the Bankruptcy Code generally provides for reorganization, usually involving a corporation or partnership. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time.”

Read also: FTX appoints 5 new directors as bankruptcy proceeding starts


Ovex Cancels and Remove FTX

The community manager for Ovex told MyBroadband that the international exchange is not licensed in South Africa while advising people to stay away from FTX or any of its offerings at this time.

“FTX is now unlicensed to market its services in South Africa,” Ovex community manager Nick Bergonzoli told MyBroadband. “People should avoid using FTX.”

Read also: Nigerian startup Nestcoin lays off staff, declares FTX held assets

FTX’s connection with South Africa

Bankman’s FTX and Alameda Research invested in cryptocurrency and blockchain development globally. This includes numerous cryptocurrency exchanges in South Africa.  This extends to VALR— the biggest cryptocurrency exchange in Africa and Ovex, a market maker that records trading volumes of more than $500 million per month.

VALR generated $50 million (R863 million) in a Series B funding round overseed by Pantera Capital, with help from Alameda Research, Cadenza, Coinbase Ventures, and Avon Ventures.

VALR founder and CEO, Farzam Ehsani has assured users that this is not a risk and that they have no exposure to the international exchange or its native token, FTT.

“If you own Apple shares, and then you die, it doesn’t affect Apple. Same story for VALR,” Ehsani stated.

In April 2021, FTX bought a stake in Ovex. Jonathan Ovadia, the Ovex CEO, informed MyBroadband last week that the exchange owns a minority stake of around 8%, and there are ongoing talks to purchase the equity back.

He also assured that they have no exposure to FTX and moved any operations they had on the exchange off by 7 November.

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