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FTX handled billions monthly in Africa before going bankrupt • CableFree TV

November 14 Nestcoinone of the crypto and web3 startups in Africa announced that it layoffs of several employees. At least 30 employees from various departments were laid off, and those who stayed at the company were cut by as much as 40%, according to people familiar with the matter. The news is partly due to the collapse of the FTX cryptocurrency exchange, according to CEO Yale Bademosi.

Bademosi made the announcement in a letter to investors. tweeted. He acknowledged that Nestcoin owns assets that the Financial Times pegs $4 million on bankrupt crypto exchange platform FTX to manage operating expenses. The majority of FTX clients have been unable to withdraw their funds from the platform as the Bahamas-headquartered company is filing for bankruptcy.

Bademosi also revealed that trading subsidiary FTX Alameda Research, one of the investors in the $6.45 million Nestcoin preliminary round announced in February this year, had less than 1% equity in the startup. Other African companies that have received money from Alameda and FTX include Chipper Cash, Mara, VALR, Jambo and Bitnob.

There has been speculation that FTX and Alameda may have required their portfolio companies to hold their assets on the FTX exchange as part of their investment terms. However, it turns out that if such conditions existed, they did not apply to every company, or some of them may have rejected the offer. VALR, for example, said that he was never asked about the specified conditions. FTX offered to invest in Bitnob through stablecoins to be held on a defunct exchange, but the Nigerian crypto platform refused, according to two people familiar with the matter. Both companies have publicly declared that they had nothing to do with FTX after its collapse.

Mara confirmed to TechCrunch that it has not entered into any such arrangements and does not store its assets on the bankrupt crypto platform. Chipper Cash was also not at risk, according to two people familiar with the company’s relationship with FTX. Jambo has not yet responded to TechCrunch’s requests for comment.

For many crypto companies and retail clients, FTX acted as a bank, offering an 8% annual interest rate on the stablecoin held on the platform. It was the perfect marketing to win over and challenge a few clients in Africa. Binance, the world’s largest cryptocurrency exchange by market share. Sources told TechCrunch that before its demise, FTX managed to acquire more than 100,000 customers in Africa. In addition to trading on the platform, these clients used FTX to convert their local currency into dollars and earn savings income.

Over the past two years, FTX has gained a significant following among the crypto community in Africa, capitalizing on the continent’s unstable access to banking services and the rapid adoption of cryptocurrencies (mostly through remittances). It’s also worth emphasizing that FTX’s Africa business was not just another attempt to increase the platform’s overall volume; instead, it was the focus of the company. Before FTX CEO Sam Bankman-Fried (known as “SBF”) saw his $32 billion crypto giant evaporate this month, FTX was processing billions of dollars every month and planned to open an office in Nigeria, according to two people familiar with company affairs. .

Integral to those numbers, after only a few months in the region, were three full-time employees working remotely and a contract team of approximately 30 campuses and trade ambassadors who preached the SBF gospel at college-wide events to all who cared about them. Listen. However, after the events of the last two weeks that led to the downfall of FTX, many of them, including local celebrities who have signed brand ambassadors, are forced to mourn their decision.

For example, on the day FTX filed for bankruptcy, Harrison Obiful, FTX Africa Public Relations and Marketing Manager, tweeted that he went into hiding and “continuously received threats and calls from celebrities, family, friends and strangers.” Meanwhile, TechCrunch has learned of retail clients who have had various amounts of money blocked on FTX, from $7,000 saved up for a World Cup trip to a celebrity who lost “millions of naira” to a trader who had $2 million on FTX to Sequoia-backed cryptocurrency platform has collapsed.

“All my UK ISAs [Individual Savings Account, an account that allows users to save and invest free from UK tax] I’ve been saving for the last 15 years, that’s what I’ve lost.” Viktor Asmota, a Nigerian tech industry veteran and a vocal supporter of FTX in Africa, told TechCrunch by phone. “You know, in those days, you would laugh at people who lose money in Ponzi schemes. I never knew this could happen to me. This is the biggest Ponzi scheme. This madness is the last thing anyone expected.”

The consequences of the collapse of FTX will be severe. FTX’s bankruptcy filing says it owes money to more than a million people and businesses after SBF used billions of dollars in client money to support Alameda Research. But as FTX and its chief executive are under criminal investigation, this event will help bring regulatory changes to crypto in various markets. In countries like Nigeria, where the government previously prohibited cryptocurrency transactions through licensed banks as well as introduced digital currency to reduce incentives for the use of unregulated cryptocurrencies, repression against the use of cryptocurrencies may increase.

“CBN [Nigeria’s apex bank] and regulators will claim they were right to ban crypto,” said Asemota, who has invested in several crypto upstarts. “Those of us who are in favor of cryptocurrencies look stupid, and now they look right thanks to FTX. I fear for crypto companies in Nigeria.”

Once valued at $32 billion, FTX positioned itself as a platform where people could safely trade cryptocurrencies and make a profit. FTX is now worth nothing and owes at least $8 billion to creditors. His bankruptcy filing also revealed a house that had mixed assets and the ledgers were out of order. In one case FTX erroneously included BTC Africa, the parent company of Kenyan payment and settlement automation platform AZA Finance, and its subsidiaries as legal entities under Chapter 11 bankruptcy filing. FTX, via tweet, later withdrew the application and excluded AZA Finance and its subsidiaries, among other things, from filings.

In April of this year, FTX announced partnership with AZA Finance to roll out African and digital currency pairs and expand trade in non-fungible tokens (they managed to launch fiat rails for Ghana as well as Senegal before the collapse of FTX). This partnership turned into an M&A game, according to some sources, with FTX close to being acquired by AZA Finance pending regulatory approval. However, AZA Finance CEO Elizabeth Rossiello denied the acquisition talks and told TechCrunch that the two were just partners.

“You’re either a shareholder or you’re not, and they weren’t,” the chief executive said. “And if they were shareholders, we would have to apply for a change of control in the UK, where we have a license. It is well known that this never happened. They did not invest in us, they are not shareholders, and there was no acquisition.”

Referring to the new head of FTX company statementRossiello described the FTX bug as “a complete lack of internal controls” as a result resignation of the legal and compliance team. She also stated how unfair it is for small fintech companies, including those with no access to customer deposits, to be heavily regulated, while platforms that hold billions of customer funds, like FTX, are not in front of anyone. are responsible.

“For fintechs like us, who have boards with a lot of information and oversight, it’s even difficult to raise money. But because some people look a certain way or tick a certain box, they get all the funding, no management, no reporting, and no bookkeeping. I mean it’s unfair and just goes back to the question of who gets the funding and I think that’s the real story.”

By Peter Kavinsky

Peter Kavinsky is the Executive Editor at cablefreetv.org