Shalini Nagarajan

FTX’s new management, led by CEO John Ray III, disclosed more findings about the company in an interim report, published on April 9. The document detailed some of the exchange’s inner workings, and revealed practices that seem to indicate it was ill-equipped to deal with large amounts of customer funds.



The parties claim to have reviewed over one million documents, including Slack and Signal communication, Google Drive and QuickBooks, some laptops and other electronic devices, and conducted 19 interviews with employees.



FTX was managed by a small group of individuals, who the <a href="https://www.courtlistener.com/docket/65748821/1242/1/ftx-trading-ltd/">report</a> claimed “stifled dissent, commingled and misused corporate and customer funds, lied to third parties about their business, joked internally about their tendency to lose track of millions of dollars in assets, and thereby caused the FTX Group to collapse as swiftly as it had grown.”



<h2 class="wp-block-heading">Rejecting advice to improve controls</h2>



Certain employees had unrestricted power over things like transfers of fiat money and cryptocurrency, and making hiring or firing decisions.



Former FTX CEO Sam Bankman-Fried disregarded advice to improve FTX’s oversight practices, ultimately exposing employees to bad practices and misconduct.&nbsp;



<h2 class="wp-block-heading">Inexperienced key personnel</h2>



Bankman-Fried, co-lead engineer Nishad Singh and co-founder Gary Wang — who allegedly held the most power — had limited experience in risk management or running a business. Yet they controlled “nearly every significant aspect” of FTX, according to the interim filing.



“The FTX Group lacked independent or experienced finance, accounting, human resources, information security, or cybersecurity personnel or leadership, and lacked any internal audit function whatsoever. Board oversight, moreover, was also effectively non-existent,” the report said.



<h2 class="wp-block-heading">Barely any role for regular employees</h2>



Most decisions were taken by executive-level employees, even if other employees were hired to do the same job. One executive said: “if Nishad [Singh] got hit by a bus, the whole company would be done. Same issue with Gary [Wang].”



<h2 class="wp-block-heading">FTX.US president resignation</h2>



Brett Harrison, president of FTX’s US operations, resigned after a “protracted disagreement” with Bankman-Fried and Singh over unorganized delegation of authority, the management structure and key hires at the company. Harrison’s bonus was reduced significantly and he was asked to apologize to Bankman-Fried for bringing up his concerns.&nbsp;



<h2 class="wp-block-heading">No records</h2>



FTX wasn’t aware of employees on payroll as it didn’t have a complete list of all names. It also appears the company did not track finances or accounts, and didn’t fill key positions like a chief financial officer, chief risk officer, global controller, or chief internal auditor.



It also didn’t have important internal subdivisions, like financial risk, audit or treasury departments.&nbsp;



Several entities used QuickBooks (which is software designed for small and mid-sized businesses, not multi-billion dollar financial corporations) for their accounts and reportedly “relied on a hodgepodge” of Google documents, Slack, shared drives and Excel to manage assets and liabilities.



&#8220;Normally&#8230; there are readily identifiable records, data sources, and processes that can be used to identify and safeguard assets of the estate. Not so with the FTX Group,” the report said.



<h2 class="wp-block-heading">“Alameda is unauditable”</h2>



Those were the words of FTX’s disgraced boss, who didn’t seem too bothered that funds weren’t being tracked.



“We sometimes find $50m of assets lying around that we lost track of; such is life,” he said in an internal communication.



<h2 class="wp-block-heading">Alameda funded insiders’ personal expenses</h2>



There were no formal processes established for internal transfers. Alameda, which was given “extraordinary privileges,” routinely transferred funds to insiders for personal investment, political contributions and other expenses marked as personal loans.



<h2 class="wp-block-heading">Insufficient security</h2>



FTX failed to implement basic security controls to protect its networks despite handling significant funds. It didn’t enforce multi-factor authentication despite Bankman-Fried publicly stressing the importance of two-factor authentication.&nbsp;



Computer infrastructure and IT services were commonly shared between<a href="http://ftx.com/"> </a>FTX.com, FTX.US and Alameda, greatly exposing the entities to the risk of a security breach or misuse.&nbsp;



Bankman-Fried currently faces 12 criminal charges. He is currently on bail, living with his parents in California as he awaits a trial scheduled for October.



The FTX interim report indicates just how deep the rot pervaded SBF’s empire, said Sigal Baran Nagar, vice president marketing at self-custody platform GK8.



“I sincerely hope that the information and evidence described in the report will be used against SBF,” he told Blockworks.



Maia Benzimra, head of institutional marketing at SpoolDAO, said the discovery of Bankman-Fried’s failures is bound to be used as a basis in driving home the charges brought forward against him.



“What will now be so interesting to watch is how the prosecutors draw on these failures to build their case and set a precedent that will place other crypto founders on their toes and likely help prevent similar re-occurrences in the near future,” she said.



Updated April 13, 2023 at 9:25 am ET: A previous version of this article cited Lior Lamesh, CEO at GK8, but should have cited Sigal Baran Nagar, vice president marketing at self-custody platform GK8.



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8 New Findings About FTX From Exchange’s New Management

Bessie Liu

<div id="highlights-block_6333258a5f323" class="highlights">
 <ul>
 <li>FTX has been actively acquiring crypto startups during the bear market</li>
 <li>Harrison plans to remain in the cryptocurrency space, working to remove barriers of entry to the industry</li>
 </ul>
 
</div>



Brett Harrison is stepping down from his position as president of FTX US, he <a href="https://twitter.com/BrettHarrison88/status/1574782901748727809" target="_blank" rel="noreferrer noopener">announced</a> on Twitter Tuesday.


<div class="wp-block-image">
<figure class="alignright size-thumbnail"><img decoding="async" loading="lazy" width="150" height="150" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited-150x150.jpeg" alt="Brett Harrison, FTX.US President, on the US GAAP audit" class="wp-image-11023" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited-150x150.jpeg?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited-150x150.jpeg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited-150x150.jpeg?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited-150x150.jpeg?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited-150x150.jpeg?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited-150x150.jpeg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited-150x150.jpeg?w=408 408w" sizes="(max-width: 150px) 100vw, 150px" /><figcaption>Brett Harrison, former president of FTX US</figcaption></figure></div>


Founded by billionaire Sam Bankman-Fried, FTX is one of the largest centralized cryptocurrency exchanges.



Over the past year, FTX’s growth <a href="https://cms.blockworks.co/ftx-revenue-exploded-1000-to-beyond-1b-last-year-report/" target="_blank" rel="noreferrer noopener">surged by 1,000%</a>, with revenue reportedly jumping from $89 million to $1.02 billion in 2021.&nbsp;



It is no surprise that the company has been actively acquiring crypto startups that have been under threat in the beat market — scoring discounted deals, including acquiring crypto lender BlockFi for a maximum of <a href="https://cms.blockworks.co/ftx-reaches-deal-to-acquire-blockfi-for-up-to-240m/" target="_blank" rel="noreferrer noopener">$240 million</a> in July, and Voyager Digital’s assets <a href="https://cms.blockworks.co/ftx-us-wins-voyager-digital-asset-auction-for-1-4b/" target="_blank" rel="noreferrer noopener">for $1.4 billion</a> on Monday.&nbsp;



“I have deep gratitude for my experiences at FTX in the last year and a half,” Harrison <a href="https://twitter.com/Brett_FTX/status/1574782901748727809?s=20&amp;t=09gF3LzRHZxu04o5xjyBzg" target="_blank" rel="noreferrer noopener">tweeted</a>. “I don’t doubt my experiences in this role will be among the most cherished of my career.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1/ An announcement: I’m stepping down as President of <a href="https://twitter.com/FTX_Official?ref_src=twsrc%5Etfw">@FTX_Official</a>. Over the next few months I’ll be transferring my responsibilities and moving into an advisory role at the company.&mdash; Brett Harrison (@BrettHarrison88) <a href="https://twitter.com/BrettHarrison88/status/1574782901748727809?ref_src=twsrc%5Etfw">September 27, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Harrison joined FTX in May 2021 after serving as the head of semi-systematic technology at Citadel Securities for almost two years.



“This industry is at a number of crossroads. The one that matters most to me, as a financial technologist, is the intersection of the arrival of larger market participants, and the increasing fragmentation and technological complexity of the market’s landscape,” Harrison tweeted.



“The technological frictions that will occur at that intersection, and how effectively they’re reduced, will be a critical factor in determining the future growth and stability of crypto markets: their liquidity, their capitalization, their resilience, their utility,” he said.



Harrison will remain in the crypto space and work to make the industry more accessible, removing barriers in both centralized and decentralized markets.



According to Bankman-Fried’s latest tweet, Harrison will be moving to an advisory role in the industry.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Really grateful to work with <a href="https://twitter.com/zachdex?ref_src=twsrc%5Etfw">@zachdex</a>, <a href="https://twitter.com/_Ryne_Miller?ref_src=twsrc%5Etfw">@_Ryne_Miller</a>, and others to push forward in the US; and a heartfelt goodbye to @Brett_FTX as he transitions to an advisor and FTX US transitions to its Miami HQ! Being agile and coordinated is a core value&#8211;it&#39;ll be great to be together.&mdash; SBF (@SBF_FTX) <a href="https://twitter.com/SBF_FTX/status/1574795975474008067?ref_src=twsrc%5Etfw">September 27, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“I can’t wait to share more about what I’m doing next. Until then, I’ll be assisting Sam and the team with this transition to ensure FTX ends the year with all its characteristic momentum,” he tweeted.



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<hr class="wp-block-separator">

Brett Harrison Leaving FTX US, Moving Into Advisory Role

Ben Strack

<div id="highlights-block_62ffd9684598e" class="highlights">
 <ul>
 <li>Harrison tweeted on July 20 that “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names”</li>
 <li>FTX is also falsely identified as an FDIC-insured crypto exchange on SmartAsset.com and CryptoSec.info, according to the agency</li>
 </ul>
 
</div>



The Federal Deposit Insurance Corporation (FDIC) has warned five companies, including crypto exchange FTX US, to stop making false and misleading statements about FDIC deposit insurance, the agency <a href="https://www.fdic.gov/news/press-releases/2022/pr22060.html" target="_blank" rel="noreferrer noopener">revealed Friday</a>.



<a href="https://www.fdic.gov/news/press-releases/2022/ftx-harrison-letter.pdf" target="_blank" rel="noreferrer noopener">In a letter sent to FTX US</a> on Thursday, the FDIC wrote that the firm’s president, Brett Harrison, said in a July 20 tweet that “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names.” The tweet also states that “stocks are held in FDIC-insured and SIPC-insured brokerage accounts.”



“FTX US is not FDIC-insured, the FDIC does not insure any brokerage accounts, and FDIC insurance does not cover stocks or cryptocurrency,” the FDIC said in the letter.&nbsp;



It continued: “The FDIC only insures deposits held in insured banks and savings associations…and FDIC insurance only protects against losses caused by the failure of insured institutions. Accordingly, these statements are likely to mislead, and potentially harm consumers.”



FTX is further identified as an FDIC-insured crypto exchange on SmartAsset.com and CryptoSec.info, according to the FDIC.&nbsp;



Harrison <a href="https://twitter.com/Brett_FTX/status/1560701320717369349" target="_blank" rel="noreferrer noopener">tweeted in response</a> to the letter Friday, saying that he deleted the July 20 tweet, which he noted was written in response to questions regarding whether direct USD deposits from employers were held at insured banks.    



“We really didn’t mean to mislead anyone, and we didn’t suggest that FTX US itself, or that crypto/non-fiat assets, benefit from FDIC insurance,” Harrison added. “I hope this provides clarity on our intentions. Happy to work directly with the FDIC on these important topics.”



In addition to sending cease-and-desist letters to FTX US, CryptoSec.info and SmartAsset.com, the FDIC also issued notices to Cryptonews.com and FDICCrypto.com for similar alleged violations.&nbsp;



This is a developing story.



Updated on Aug. 19, 2022 at 3:01 pm ET.



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<hr class="wp-block-separator">

FDIC Accuses FTX US of Making Misleading Statements

<div id="highlights-block_627ab46b155ca" class="highlights">
 <ul>
 <li>The company will provide $500 per month, financial literacy education, a zero-fee bank account and a Visa debit card to 100 Chicagoans</li>
 <li>As for future programs, FTX.US and the city are exploring how they could support Chicago residents with global remittances</li>
 </ul>
 
</div>



The US affiliate of Bahamas-based crypto exchange FTX has made Chicago its headquarters and is set to pilot a program focused on supporting the city’s underbanked communities.



FTX.US President Brett Harrison told Blockworks some of the largest exchanges, trading firms, hedge funds, fintechs and venture capital firms are based in Chicago, making it an ideal — if competitive — spot for recruiting.&nbsp;



The company is aiming to offer financial relief and economic mobility to residents in the city’s less-affluent Austin, Englewood and West Garfield Park neighborhoods.&nbsp;



FTX.US is partnering with nonprofit organization Equity and Transformation (EAT) in a one-year program to offer $500 per month in supplemental income, financial literacy education, a zero-fee bank account and a Visa debit card to 100 Chicagoans.



The move follows FTX.US’s <a href="https://cms.blockworks.co/ftxus-focusing-on-derivatives/" target="_blank" rel="noreferrer noopener">closing of a $400 million Series A round</a> in January, which valued the company around $8 billion. 



The initiative builds off of the <a href="https://www.chicago.gov/city/en/sites/resilient-communities-pilot/home.html" target="_blank" rel="noreferrer noopener">Chicago Resilient Communities Pilot</a>, a $31.5 million commitment from the city to combat pervasive poverty.



The program, which provides 5,000 Chicagoans with $500 per month for one year, is the largest municipal cash assistance program in the US, according to Samir Mayekar, Chicago’s deputy mayor of economic and neighborhood development. &nbsp;



“To be focusing truly on making their products and services accessible to those in need in Chicago, it’s a very innovative way to feature some of the unique benefits of blockchain technology in a way that can make a difference on the ground here in neighborhoods,” Mayekar told Blockworks.



An academic partner will conduct a research study examining the effect of the monthly $500 payments and financial inclusion services on residents&#8217; financial stability and economic mobility.



“We’ll be studying this program and seeing if this is a viable, scaling program to continue in this city in a larger way,” Harrison said.



<h3 class="wp-block-heading">Phase 2</h3>



Going forward, FTX and the city are looking into an additional program that would focus on how it could support Chicago residents with global remittances, which could launch before year end.&nbsp;



Chicago is an “immigrant friendly” city with many residents sending money to families in other countries, Mayekar said. He added such transactions can carry fees of 20% or more.



“Looking at a remittance pilot and leveraging the kind of power of the FTX platform to have basically no-fee cash transfers across borders where you’re also able to kind of hedge from volatile currencies, this could be incredibly powerful,” Mayekar said.



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<hr class="wp-block-separator">

FTX Rolls Out Program To Support Underbanked Chicago Communities

<div id="highlights-block_622bbb9b36233" class="highlights">
 <ul>
 <li>Crypto companies have privately complained about poor authorization rates and reliability, Stripe spokesperson says</li>
 <li>Stripe helps FTX users buy crypto and helps the exchange weed out potential fraudsters from legitimate customers</li>
 </ul>
 
</div>



Payments company Stripe is delving back into crypto, offering support for the space’s exchanges, on-ramps, wallets and NFT marketplaces, and has partnered with FTX and Blockchain.com.



Stripe became the first major payments company to support bitcoin payments in 2014 but ended its support of the cryptoasset in 2018.&nbsp;



“Crypto is going mainstream,” the company wrote in a Thursday blog post. “To better support our customers and continue to grow the GDP of the internet, we are working to give crypto businesses access to today’s global financial infrastructure.”



Stripe co-founder John Collison <a href="https://twitter.com/collision/status/1501961880289480704" target="_blank" rel="noreferrer noopener">tweeted</a> that the company would offer crypto businesses “not just pay-ins but payouts, KYC and identity verification, fraud prevention and lots more.”



Crypto derivatives exchange FTX and its US affiliate, FTX US, announced Thursday that they will use Stripe to build an onboarding and identity verification flow for users joining the exchange, and to enable payments for users adding funds to their FTX account.



President of FTX US Brett Harrison earlier said integrating with Stripe would provide “greatly increased speed of KYC processing, higher rates of automated approvals and a smoother [user experience] for our customers.”



Stripe allows FTX users to purchase crypto with debit cards and automated clearing house transactions directly from their bank, according to <a href="https://stripe.com/newsroom/stories/ftx" target="_blank" rel="noreferrer noopener">a Thursday statement</a>. Stripe Radar uses machine-learning models and signals, such as customer details and billing information, to weed out potential fraudsters from legitimate customers.



“Crypto companies have been poorly served by other payments providers, with many privately complaining of poor authorization rates and reliability,” a Stripe spokesperson told Blockworks. “We are bringing world-leading payments infrastructure to help crypto companies offer better on-ramps for new and existing users.”



Transacting with crypto has historically been too difficult for the average user or business, according to Matthew Gould, founder and CEO of blockchain company Unstoppable Domains.



“The fear of sending money to the wrong address or paying too much in fees has hindered mainstream adoption, and it’s great to see companies like Stripe working to solve this,” he told Blockworks. “Stripe has already penetrated the payments market, and now its users will have better access to secure crypto transactions through a single integration.”



With headquarters in San Francisco and Dublin, Stripe, founded in 2011, supports millions of companies in 120 countries.



&#8220;It is wonderful to see traditional payment companies starting to integrate digital currency payments for vendors and consumers,” Nina Tannenbaum, head of business operation at blockchain protocol Algorand, said. “We are seeing growing adoption of the payments and remittance sector on Algorand, and can appreciate how organizations like Stripe are helping to drive more mainstream adoption of digital assets.”



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<hr class="wp-block-separator">

Stripe Jumps Back Into Crypto, Providing New Payment Options for Consumers and Companies

Macauley Peterson

<div id="highlights-block_62260641d58c4" class="highlights">
 <ul>
 <li>FTX’s global expansion gains regulatory approval with a Europe-wide license</li>
 <li>Founder and CEO Sam Bankman-Fried turned 30-years-old on Sunday and carries a net worth of about $22 billion, Forbes estimates</li>
 </ul>
 
</div>



Global crypto spot and derivatives exchange FTX is bringing its European operations under a new corporate umbrella. FTX Europe will allow the firm’s products and services to cater to European clients via a licensed investment firm overseen by the Cyprus Financial Market Regulator (CySEC), according to a statement released Monday.



Cyprus is a member of the European Union, so licenses granted there are passportable, meaning they apply across the European economic area — which includes Iceland, Liechtenstein and Norway, but excludes Switzerland.



FTX Europe is currently headquartered in Switzerland, the statement notes, but has a regional headquarters in Cyprus, which has been a member of the EU since 2004 and completed entry into the Economic and Monetary Union in 2008.



Head of FTX Europe Patrick Gruhn was previously the chief legal officer for Digital Assets AG, a German company that handled the tokenization process for CM-Equity, a German-based securities bank that helped bring traditional stock trading to FTX customers outside the US.



European customers are currently served by the international FTX.com, but the new operation will allow FTX to align itself more closely with Europe’s regulatory apparatus. Clients who wish to move their accounts over to the new entity may do so, but it will not be mandatory.



&#8220;FTX EU has a different product offering than FTX.com — for example, we do not offer lending currently in Europe,&#8221; Gruhn told Blockworks.



<blockquote class="wp-block-quote">&#8220;This is extremely important. Crypto Derivatives are Financial Instruments in many jurisdictions (in Europe they fall under MiFID II), in order to operate in those markets you must have the proper license or you can&#8217;t be active in those markets.&#8220;</blockquote>



MiFID II refers to the <a href="https://www.esma.europa.eu/policy-rules/mifid-ii-and-mifir">Markets in Financial Instruments Directive</a>, which became the law of the land in the EU in November 2007, a key financial market regulation enabling a single market for investment services and activities across Europe.



<h3 class="wp-block-heading">FTX founder enters fourth decade</h3>



Sam Bankman-Fried, who <a href="https://www.forbes.com/sites/stevenehrlich/2021/10/06/the-richest-under-30-in-the-world-all-thanks-to-crypto/?sh=275374753f4d" target="_blank" rel="noreferrer noopener">Forbes called</a> “the world’s richest 29-year-old” last year, estimating his wealth at $22.5 billion, celebrated his 30th birthday on Sunday.



In a TV appearance on CNBC, he commented on the use of crypto to help citizens of countries with unstable currencies.



<blockquote class="wp-block-quote">&#8220;We often see a spike in digital asset activity coming when there is economic unrest in an area. I think Russia itself is almost an exception to that because of the sanctions in place have made it difficult for people to access digital assets as well as everything else.&#8221;</blockquote>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">The past few weeks have seen huge spikes in <a href="https://twitter.com/search?q=%24BTC&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$BTC</a> &amp; <a href="https://twitter.com/hashtag/crypto?src=hash&amp;ref_src=twsrc%5Etfw">#crypto</a> activity in <a href="https://twitter.com/hashtag/Russia?src=hash&amp;ref_src=twsrc%5Etfw">#Russia</a>, <a href="https://twitter.com/hashtag/Ukraine?src=hash&amp;ref_src=twsrc%5Etfw">#Ukraine</a> &amp; other countries seeing massive devaluation of fiat currencies as <a href="https://twitter.com/hashtag/war?src=hash&amp;ref_src=twsrc%5Etfw">#war</a> rages&#8230;. <a href="https://twitter.com/FTX_Official?ref_src=twsrc%5Etfw">@FTX_Official</a>&#39;s <a href="https://twitter.com/SBF_FTX?ref_src=twsrc%5Etfw">@SBF_FTX</a> games out on <a href="https://twitter.com/CNBCi?ref_src=twsrc%5Etfw">@cnbci</a> the situation, and how <a href="https://twitter.com/hashtag/sanctions?src=hash&amp;ref_src=twsrc%5Etfw">#sanctions</a> might work on <a href="https://twitter.com/hashtag/DeFi?src=hash&amp;ref_src=twsrc%5Etfw">#DeFi</a> <a href="https://twitter.com/hashtag/ausbiz?src=hash&amp;ref_src=twsrc%5Etfw">#ausbiz</a> <a href="https://t.co/ojVwLeCqh2">pic.twitter.com/ojVwLeCqh2</a>&mdash; Will Koulouris (@WillKoulouris) <a href="https://twitter.com/WillKoulouris/status/1500631289094803463?ref_src=twsrc%5Etfw">March 7, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The <a href="https://cms.blockworks.co/?s=sanctions" target="_blank" rel="noreferrer noopener">potential use</a> of cryptoassets to evade sanctions has been a hot political topic, particularly in Washington.



Bankman-Fried, who <a href="https://cms.blockworks.co/crypto-industry-will-move-offshore-if-congress-doesnt-act-executives-warn/" target="_blank" rel="noreferrer noopener">testified</a> to the House Financial Services Committee in December about crypto regulation broadly, co-authored a policy document <a href="https://www.ftxpolicy.com/sanctions-compliance" target="_blank" rel="noreferrer noopener">published on Friday, March 4</a>, that outlines tools for maintaining compliance with sanctions. In it, he and FTX US President Brett Harrison concluded that crypto cannot be effectively used to avoid sanctions due to the necessity of crypto exchanges as fiat on- and off-ramps.



That conclusion is based not only on exchanges’ KYC and AML regimes, but also on the use of “advanced dynamic on-chain risk-analysis and transaction monitoring tools, such as <a href="https://cms.blockworks.co/?s=Chainalysis" target="_blank" rel="noreferrer noopener">Chainalysis</a> and <a href="https://cms.blockworks.co/?s=TRM+Labs" target="_blank" rel="noreferrer noopener">TRM Labs</a>, that help identify cryptocurrency transfers that originated from any known illicit or sanctioned source,” the policy document says.



Moreover, the pair argue the transparent nature of open, public blockchains rules out their use at the scale that would be required by the Russian government to work around international sanctions.



Harrison and Bankman-Fried closed by marveling at the tens of millions of dollars worth of cryptoassets that <a href="https://cms.blockworks.co/ukraine-cancels-proposed-airdrop-after-receiving-record-donations/" target="_blank" rel="noreferrer noopener">have been donated</a> to the Ukrainian government and relief organizations using crypto rails so far.



Bankman-Fried regularly extols the virtues of philanthropy in interviews and has said he <a href="https://cms.blockworks.co/sbf-explains-ftxs-growth-and-envisions-donating-wealth-to-good-causes/" target="_blank" rel="noreferrer noopener">intends to donate</a> almost all his personal income to good causes.



This story was updated on March 7, 2022 at 11:20 am ET with comments from Head of FTX Europe Patrick Gruhn.



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FTX Europe Launches in Switzerland, Emphasizing Regulatory Compliance

<div id="highlights-block_618d8ed7c83fb" class="highlights">
 <ul>
 <li>FTX US President Brett Harrison attributes successful Q3 in part to sports partnerships and platform usage by institutional investors </li>
 <li>Company’s growth in trading volume and users came as Coinbase reported a quarter-over-quarter decrease in those categories </li>
 </ul>
 
</div>



The average daily trading volume of crypto derivatives exchange FTX US affiliate jumped by 512% during the third quarter as the company capitalized on partnerships and new business lines.&nbsp;



FTX US reported an average daily volume of roughly $360 million in the third quarter, a 512% increase from the prior quarter. Its peak total volume during a 24-hour period, which occurred on Sept. 7, was $807 million.



The business held about 4.5% of the US crypto spot market, as of Sept. 30, which was up from 2% at the start of the third quarter.



FTX US’s user count increased by 52% quarter over quarter, though the company declined to share how many users it has.



Bringing the product suite of Blockfolio, which FTX bought last year, under the FTX umbrella has helped create more awareness for the brand, according to Brett Harrison, the president of FTX US. He also attributed the business’s growth in part to its parent company’s many partnerships, such as with high-profile athletes like Tom Brady and <a href="https://cms.blockworks.co/ftx-names-stephen-curry-a-global-ambassador/" target="_blank" rel="noreferrer noopener">Steph Curry</a>.



<div class="wp-block-image"><figure class="aligncenter is-resized"><img decoding="async" loading="lazy" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited.jpeg" alt="Brett Harrison, FTX.US President, on the US GAAP audit" class="wp-image-11023" width="306" height="306" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited.jpeg?w=408 408w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited.jpeg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited.jpeg?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited.jpeg?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited.jpeg?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited.jpeg?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Brett-Harrison-FTX-US-Headshot-edited.jpeg?w=80 80w" sizes="(max-width: 306px) 100vw, 306px" /><figcaption>Brett Harrison, president, FTX US</figcaption></figure></div>



“The crypto world is still in limbo about whether the traditional world will accept them as legitimate or not, and having a celebrity sign-on is a huge nod of approval that the rest of the world will follow suit,” said Ty Smith, founder and managing director at crypto marketing agency <a href="https://coinbound.io" target="_blank" rel="noreferrer noopener">Coinbound</a>.



FTX US has also been actively utilizing its alliances with <a href="https://www.mlb.com/press-release/press-release-mlb-ftx-cryptocurrency-partnership" target="_blank" rel="noreferrer noopener">Major League Baseball</a> and the <a href="https://cms.blockworks.co/ftx-inks-135m-sponsorship-deal-for-miami-heat-arena/" target="_blank" rel="noreferrer noopener">Miami Heat</a>.&nbsp;



The company, for example, offered fans at the Heat’s first game a free NFT commemorating the opening night upon signing up for an FTX account. FTX also made a $10,000 donation for each home run of at least 425 feet hit during the MLB postseason. The player with the longest homer was able to donate the full total to a charity of his choice.&nbsp;



“We’re now really being able to activate those partnerships and use them to advertise for our brand, to run promotions, to run giveaways and get people excited about signing up for our product,” Harrison told Blockworks.&nbsp;



The recent growth garnered by FTX US contradicted Coinbase’s reported user base and trading volume, <a href="https://cms.blockworks.co/coinbase-reports-q3-net-revenue-dropped-39-to-1-234b/" target="_blank" rel="noreferrer noopener">which fell in the third quarter</a>.



The largest cryptocurrency exchange platform in the US saw its monthly transacting users drop about 16% from 8.8 million in Q2 to 7.4 million in Q3. Though total assets on the platform increased, trading volume fell 29.2% from $462 billion to $327 billion during that span.



Harrison noted that unlike Coinbase, which primarily makes its revenue off of retail volume, about 60% of FTX US’s volume comes from institutions, such as proprietary trading firms, high-frequency trading firms and hedge funds.



“They continue to make markets and trade and go long or short in different environments regardless of what’s happening with crypto prices,” he explained.



<h3 class="wp-block-heading">Focuses moving forward</h3>



FTX US increased its headcount by 30% during the third quarter, primarily in areas of compliance, know-your-customer (KYC) and anti-money-laundering (AML), Harrison said. It will continue building out its team in these departments, he added, as well as in marketing, legal, social media and customer support.&nbsp;



<a href="https://cms.blockworks.co/ftx-us-brings-crypto-derivatives-to-users-with-ledgerx-acquisition/" target="_blank" rel="noreferrer noopener">The acquisition of LedgerX</a>, which has since been rebranded as FTX US Derivatives, will allow the company to offer licensed crypto futures and options to its retail and institutional customers.



FTX US saw an influx of Institutional demand after the purchase in anticipation of the new offerings, Harrison said.



The company most recently <a href="https://cms.blockworks.co/ftx-us-hires-former-cftc-commissioner-to-lead-policy-and-regulatory-strategy/" target="_blank" rel="noreferrer noopener">added Mark Wetjen</a>, a former commissioner of the Commodity Futures Trading Commission, as head of policy and regulatory strategy.



He will lead the company’s communications with the CFTC, the Securities and Exchange Commission (SEC) and various House and Senate Committees. He will also advise the company on its compliance standards and reporting operations and will continue to serve on FTX US Derivatives’ board of directors.



“It starts now — the hard work of getting the right product approved with the CFTC to be able to offer it to institutional and retail customers,” Harrison explained. “Our goal is to be able to offer margins, bitcoin, Ethereum, futures and options, likely cash-settled, to our customers and integrated with the FTX US platform.”



FTX US is also focused on rapidly expanding into the NFT space. The business saw a “huge bump” in users after <a href="https://cms.blockworks.co/ftx-launches-marketplace-for-solana-nfts-ethereum-next/" target="_blank" rel="noreferrer noopener">launching its NFT platform</a> for Solana-based NFTs.



It will now work on adding support for Ethereum-based NFTs, and look to continue making it easier for people to trade them.



“Many of our partnerships with these athletes involve NFTs and intellectual property that can be used for NFTs in some way,” Harrison said. “To really be able to activate those and bring exclusive NFTs to the FTX marketplace that no one else has, we really want to improve our offering there.”







Editor&#8217;s note: Average daily trading volume for the third quarter was about $360 million. An earlier version of this story reported it as $360 billion. We regret the error. 



<hr class="wp-block-separator"/>



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<hr class="wp-block-separator"/>

FTX US Reports 512% Increase in Average Daily Volume in Q3

<div id="highlights-block_745669edbce069409888d7015248807e" class="highlights">
 <ul>
 <li>LedgerX has cleared more than 10 million crypto options and swap contracts since its launch in 2017</li>
 <li>Other FTX.US expansion plans include applying for BitLicense to offer spot products in New York and enhancing NFT marketplace</li>
 </ul>
 
</div>



<a href="https://ftx.us" target="_blank" rel="noreferrer noopener">FTX.US</a> is set to acquire the parent company of digital currency futures and options exchange <a href="https://www.ledgerx.com">LedgerX</a>, the company announced Tuesday.



The US affiliate of Sam Bankman-Fried’s crypto exchange FTX will buy the exchange — regulated by the Commodity Futures Trading Commission (CFTC) — as a way to bring crypto derivatives to its US user base.



The acquisition is expected to close in October. The financial terms of the deal have not been disclosed.



LedgerX, which launched in 2017, offers physical settlement of all contracts, block trading and algorithmic trading opportunities for institutional investors. It has cleared more than 10 million crypto options and swap contracts and pioneered the bitcoin mini contracts that enable granular trading.&nbsp;



The combined company will look to create products for retail and institutional traders and will put resources toward developing a strong working relationship with the US regulatory community, specifically with the CFTC.



Hong Kong-based FTX in May 2020 launched its US business, which currently only offers spot trading in coins such as bitcoin, ether, bitcoin cash, litecoin, paxos gold token and tether.&nbsp;



More volume trades globally in crypto derivatives than in spot crypto, as the market is more attractive to many investors from an efficiency and hedging perspective, explained FTX.US president Brett Harrison.



“It’s only natural to want to engage the largest capital market in the world inside the US with that same product through all of our existing institutional and retail customers who want to trade these products,” he told Blockworks.



Instead of spending what could have been years applying for and receiving licenses in this space, Harrison added, FTX.US decided to acquire. LedgerX is classified as a Designated Contract Market (DCM), a Swap Execution Facility (SEF), and a Derivatives Clearing Organization (DCO).



<blockquote class="wp-block-quote">
“They have the relationship with the CFTC, they have a number of licenses, they have an excellent team,” Harrison said. “We have the capital, we have the technological expertise and we have a great platform as well, so it was kind of a perfect fit.”
</blockquote>



FTX.US will first look to offer bitcoin and Ethereum futures and options, which LedgerX currently provides, the executive said. Over time, the two teams will work with the CFTC to bring more products to its platform under the FTX.US brand.&nbsp;&nbsp;



“US crypto derivatives is an incredibly underserved market, and it took time and resources for us to become a regulated entity under the existing frameworks,” LedgerX CEO Zach Dexter said in a statement. “FTX.US has taken the view, which we share, that US regulators are ready and willing to partner on innovative products, and it&#8217;s the responsibility of the industry as a whole to step up and work with agencies like the CFTC.”



FTX.US <a href="https://www.prnewswire.com/news-releases/ftxus-reports-mid-year-trading-results-and-provides-operational-update-301344071.html" target="_blank" rel="noreferrer noopener">reported in July</a> that its average daily volume grew 150 times from June 2020 to June 2021, peaking at $993 million during a 24-hour period on April 22.



Amid the growth, FTX.US has focused on its brand exposure in recent months, <a href="https://www.mlb.com/news/mlb-ftx-cryptocurrency-exchange-partnership" target="_blank" rel="noreferrer noopener">partnering with the MLB</a> and making Shark Tank’s Kevin O’Leary <a href="https://cms.blockworks.co/ftx-partners-with-shark-tanks-kevin-oleary/" target="_blank" rel="noreferrer noopener">an ambassador</a>.&nbsp;



FTX <a href="https://cms.blockworks.co/ftx-closes-900m-series-b-round-valuing-exchange-at-18b/" target="_blank" rel="noreferrer noopener">raised $900 million</a> for its Series B round, valuing the company at $18 billion. Bankman-Fried has said publicly that FTX.US is looking to get licensed where it can, noting that the fundraise would be used to ensure regulatory compliance.



As for further plans to expand FTX.US, Harrison told Blockworks that the business is focused on increasing its retail users and plans to apply for a <a href="https://www.dfs.ny.gov/apps_and_licensing/virtual_currency_businesses/bitlicense_faqs" target="_blank" rel="noreferrer noopener">BitLicense</a> to offer spot products to New York customers.



FTX.US is also working to enhance its marketplace for non-fungible tokens, he added. The exchange <a href="https://cms.blockworks.co/ftx-launches-nft-marketplace/" target="_blank" rel="noreferrer noopener">launched its NFT marketplace</a> about three months ago, and the market has boomed. OpenSea, the largest marketplace in the space, just <a href="https://cms.blockworks.co/opensea-hits-3b-in-monthly-nft-volume/" target="_blank" rel="noreferrer noopener">hit $3 billion in monthly volume</a>.&nbsp;