FTX Users Band Together: ‘Had Entire Net Worth On There, Oops’
FTX suspended withdrawals in the midst of a bank run, leaving countless crypto traders anxious about their funds
FTX’s Sam Bankman-Fried | Blockworks exclusive art by axel rangel
FTX was fine until it wasn’t, and fears around its insolvency have sent shockwaves across crypto, hitting users hard.
The crypto exchange paused withdrawals after seeing funds worth around $6 billion leave its platform in the last 72 hours.
US-based platform FTX.US — a separate firm not part of the acquisition offer — remains operational and facilitating withdrawals. But users of FTX’s flagship exchange headquartered in Antigua and Barbuda are locked out of their funds.
Several have taken to Twitter to disclose their entire net worth is tied up on the embattled platform.
FTX began facing heat after Binance CEO Changpeng Zhao smelt a rat and said his exchange would liquidate its stash of FTT tokens, in what he initially urged was not an attack on a direct rival.
Investor panic quickly grew around a Terra-style death spiral. At the time, the platform was processing around $2.6 billion in daily volume but has handled $4.3 billion in the past 24 hours, per Messari, ranking it fourth behind its new prospective owner Binance, Coinbase and Uniswap.
On Tuesday, the exchange attempted to calm fears by tweeting its team was working to reduce a withdrawal backlog. “Queue is decreasing and getting back to more reasonable levels,” it said. There’s been no update since.
FTX users feeling more than financial pain
Prominent crypto investor Cobie described the state of affairs as the worst-ever “exchange rug.” In the crypto world, a “rug” or “rug pull” refers to a crypto project that seems promising but deserts investors by taking off with their funds.
It might be a stretch to consider the FTX situation an exit scam in the classical sense (it’s more appropriate to say it buckled under a bank run). Still, it’s clear that Cobie, like many, didn’t expect FTX to fail its users.
“Every exchange that rugged in the past felt kinda unsafe to use pre-rug,” he tweeted. “I thought there was [probably] sub-1% chance of FTX insolvency.”
Bitcoin trader and self-described Solana maximalist Alex Wice said his entire net worth is on FTX, while another user claimed he lost more than half his own.
FTX founder Sam Bankman-Fried is one of the loudest investors in Solana and its ecosystem, having backed multiple projects built on the platform throughout the years.
Bitazu Capital founding partner Mohit Sorout indicated 95% of his funds were stuck on the trading platform. Early crypto investor Luke Belmar said he lost $120,000.
Others said they were not just hurt financially, but also emotionally since they spent a considerable amount of time learning how to trade and utilizing bots, the fruits of which are currently in limbo.
DeFi influencer @DegenSpartan said he managed to withdraw a significant amount, but “foolishly” left some as he thought the situation wasn’t too bad.
“[In my opinion,] Binance backs out, FTX shuts down, goes into bankruptcy and we see a fraction of our money in a few years,” he tweeted.
Blockworks hasn’t independently verified whether the users’ claims are true. But Twitter is littered with reports from users disclosing large chunks of their net worths stuck on FTX.
A spokesperson for FTX didn’t return Blockworks’ request for comment by press time.
Alexander Tkachenko, CEO of asset tokenisation platform VNX, weighed in on the matter, noting that FTX was objectively known as one of the best exchanges in the space.
“FTX appears to have been the source of liquidity for the various speculative transactions of the founders, which led to this situation. The sale of FTX and fulfilling its obligations to the users is the best option,” Tkachenko told Blockworks.
It would be very damaging to the crypto industry if the Binance deal doesn’t go through, leading to users losing their assets, he added. “Zhao appears to understand this and is acting as the ‘lender of last resort.'”
Chris Bradbury, CEO of DeFi platform Oasis.app, said he wouldn’t describe FTX’s near-collapse as a “rug pull,” but that it did play with fire and get burnt. The value of user deposits still on FTX is currently unclear.
“If the Binance deal goes through, it looks like that will protect users who have funds on the platform and will be able to get their money out, however it’s still a big if regarding the deal going through by the looks of things,” Bradbury said.
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