Eswar, a 32-year-old IT worker based in Sydney, invested his family’s life savings with cryptocurrency platform FTX. With the company’s collapse, he has lost up to $60,000 – including $40,000 in Australian dollars and $20,000 in cryptocurrency.
Eswar invests most of his savings into cryptocurrency, he says, because he “believes in the crypto space”.
Even before FTX’s spectacular fall from grace, Eswar had tried to withdraw his funds from the exchange – to no avail.
He is one of about 30,000 Australian FTX customers who will be seeking the return of their funds after local company FTX Australia went into administration earlier this month, just as bankruptcy was filed in the United States.
The administrators in Australia, KordaMentha, have received hundreds of emails from customers who have been left out of pocket by the collapse of the company, with claims of up to $1m to date.
Mary*, who works as a cleaner, says she will struggle to pay rent and with Christmas expenses after losing almost US$5,000 of investments in FTX.
“I hope FTX take action to refund me my money ... I am not a rich person,” she says.
Julian Mark, a self-employed Sydney man, says he started with around $30,000 but that had dropped down to $9,000 before the collapse. While he hasn’t been able to extract any of those funds from FTX, he says he isn’t concerned.
“It’s part and parcel of investing, especially [in] crypto.”
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Eswar had previously invested with FTX’s rival, the cryptocurrency platform Binance, but had shifted to FTX when the company announced it had secured an Australian Financial Services Licence (AFSL). This, he says, led him to believe the company was more secure to invest with.
“I felt like it [was] more secured and covered financially, legally and regulated fully within Australia. So that’s another reason [for] choosing FTX over Binance,” he says.
Guardian Australia reported this week that FTX obtained its licence by taking over another company that already had a licence. While the licence allowed FTX “to deal in, make a market for and provide general advice relating to derivatives and foreign exchange contracts”, the licence has nothing to do with cryptocurrency.
Indeed, there is currently no regulation of cryptocurrency in Australia.
Binance obtained its own AFSL in April through a similar takeover arrangement, not long after FTX obtained its licence.
The Australian Securities and Investment Commission (Asic) has said it is not required to assess a company’s fitness to hold the licence at the point of takeover.
Experts have warned that cryptocurrency exchanges holding themselves out as being regulated through an AFSL could confuse customers into believing cryptocurrency exchanges are regulated when they are not. This appears to be the case for Eswar.
The federal government is expected to introduce legislation to regulate cryptocurrency in 2023. A spokesperson for the treasurer, Jim Chalmers, said this week that the government was closely monitoring the fallout of the FTX collapse in Australia.
KordaMentha said in an affidavit that it had discovered $42m in accounts associated with FTX in Australia. That included $39m in FTX Express’s – a second company established to allow cryptocurrency trading – and a further $3m in FTX Australia’s account.
The first creditors’ meeting will be held on 1 December.
The administrators are currently in the US meeting with those responsible for the bankruptcy filing in an attempt to get more information.
Upon hearing how much money was held in Australian accounts, Eswar was optimistic he would see at least some of his money returned. And despite the collapse of FTX, he says he still has faith in cryptocurrency.
“I haven’t lost my funds because of my bad decisions or investment. This is because of [an] exchange failure,” he says. “So that shouldn’t fundamentally change my thought process to thinking like, ‘OK, crypto is bad’.
“There are a lot of good projects, use cases and things [for] crypto.”
* Name changed as requested