Startups FTX processed billions monthly in Africa before going bankrupt...

FTX processed billions monthly in Africa before going bankrupt • ukbusinessupdates.com

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On November 14, Nestcoin, one of the startups leading crypto and web3 efforts in Africa, announced it would lay off several employees. At least 30 employees from various departments were laid off, while those who remained with the company had their salaries cut by as much as 40%, according to people familiar with the matter. The news is partly related to the demise of crypto exchange FTX, according to CEO Yele Bademosi.

Bademosi announced the news in a letter to investors enclosed in a tweet. He acknowledged that Nestcoin held assets, which the Financial Times reported pins for $4 million, into bankrupt crypto exchange platform FTX to manage operating costs. Most FTX clients have not been able to withdraw their funds from the platform as the Bahamas-headquartered company is going through bankruptcy proceedings.

Bademosi also disclosed that FTX’s trading-focused sister entity, Alameda Research, one of the investors in Nestcoin’s $6.45 million pre-seed round announced in February, 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 seems that if such terms existed, they did not apply to every company, or some may have declined the offer. VALR, for example, said those terms were never asked for. FTX offered to invest in Bitnob via stablecoins, to be held in custody on the defunct exchange, but the Nigerian crypto platform declined, according to two people familiar with the matter. Both companies have declared public that they had zero exposure to FTX in the aftermath of the crash.

Mara confirmed to ukbusinessupdates.com that it has not entered into such an agreement and that its assets are not on the bankrupt crypto platform. Chipper Cash was also not disclosed, according to two people familiar with the company’s dealings with FTX. Jambo has yet to respond to ukbusinessupdates.com’s requests for comment.

For many crypto companies and retail customers, FTX acted as a bank, offering an annual interest rate of 8% on the stablecoin stored on the platform. It was the perfect marketing needed to onboard several clients in Africa and challenge Binance, the largest crypto exchange in the world by volume, for market share. Before its demise, FTX managed to acquire more than 100,000 customers in Africa, sources told ukbusinessupdates.com. In addition to trading on the platform, these clients used FTX to convert their local currency to dollars and earn returns on their savings.

Over the past two years, FTX has built a significant following among the crypto community in Africa by taking advantage of the continent’s unstable banking access and rapid adoption of cryptocurrency (usually through remittances). It’s also worth emphasizing that FTX’s business in Africa wasn’t just another attempt to add to the platform’s overall volume; it was instead an area of ​​focus for the company. Before FTX CEO Sam Bankman-Fried (known as “SBF”) saw his $32 billion crypto behemoth evaporate this month, FTX was processing billions of dollars monthly and was planning to set up an office in Nigeria, according to two people who be familiar with the activities of the company. .

Integral to bringing in these numbers, after just a few months in the region, three full-time employees working remotely and a contract team of about 30 campus and trade ambassadors preached the SBF gospel at university-wide events for all who cared to listen . After the events of the past two weeks that caused the fall of FTX, many of them, including local celebrities signed as brand ambassadors, continued to complain about their decision.

On the day FTX went bankrupt, for example, Harrison Obieful, the PR and marketing manager for FTX in Africa, tweeted that he was in hiding and “getting non-stop threats and calls from celebrities, family and friends, and strangers.” Meanwhile, ukbusinessupdates.com learned about retail customers who had various amounts of money locked up on FTX, ranging from $7,000 saved for a World Cup trip to a celebrity who lost “millions of naira,” and a trader who had $2 million on FTX for the Sequoia-backed crypto platform. imploded.

“All my British ISA [Individual Savings Account, an account that allows users to save and invest free from UK tax] I saved for the last 15 years, that’s what I lost’ Victor Asemota, a veteran of the Nigerian tech industry and strong supporter of FTX in Africa, told ukbusinessupdates.com during a phone call. “You know, those days you used to laugh at people who lose money in Ponzi schemes. I never knew it could happen to me. This is the biggest Ponzi scheme ever. It’s crazy – it’s the last thing anyone expected.

The consequences for the collapse of FTX are serious. FTX’s bankruptcy filings say it owes money to more than a million people and businesses after SBF used billions of dollars of client money to support Alameda Research. But as FTX and its CEO face a criminal investigation, this event will spur regulatory changes for crypto in several markets. In countries like Nigeria where the government previously prohibited cryptocurrency transactions through licensed banks and introduced a digital currency to reduce incentives to use unregulated crypto could increase the crackdown on crypto use.

“The CBN [Nigeria’s apex bank] and regulators will argue they were right in banning crypto,” said Asemota, who has invested in several crypto startups. “Those of us advocating for crypto all look stupid and they look good now because of FTX. I fear for crypto companies in Nigeria.”

Once valued at $32 billion, FTX marketed itself as a platform where people could safely trade crypto and earn returns. Now valued at nothing, FTX owes creditors at least $8 billion. The bankruptcy filing also revealed a home that mixed assets and did not have its books in order. In one case FTX wrongly included BTC Africa, the parent company of Kenya-based payment automation and settlement platform AZA Finance, and its subsidiaries as entities under Chapter 11 bankruptcy filings. FTX, via a tweet, later retracted the statement and removed AZA Finance and its subsidiaries from the filings, among others.

In April, FTX announced a partnership with AZA Finance to roll out African and digital currency pairs and expand non-fungible token trading (they managed to get the fiatrails for Ghana and Senegal before the collapse of FTX). That partnership, according to some sources, turned into an M&A game with FTX poised to acquire AZA Finance pending regulatory approval. However, AZA Finance CEO Elizabeth Rossiello has denied the acquisition talks, telling ukbusinessupdates.com that both were merely partners.

“You’re either a shareholder or you’re not, and they weren’t,” the CEO said. “And if they had been shareholders, we would have had to file a change of control in the UK, where we are licensed. It’s public that it never happened. They have not invested in us, they are not shareholders and there was no takeover.”

While referring to the new chief of FTX statement about the companyRossiello described FTX’s flaw as “a complete lack of internal controls” as a consequence of the resignation of the legal and compliance team. She also explained how unfair it was for small fintechs, including those with no access to client deposits, to be highly regulated, while platforms that held billions in client funds, such as FTX, are accountable to no one.

“Fintechs like us, who have boards with a lot of information and oversight, even find it difficult to raise money. But because some people look a certain way or tick a certain box, they get all the funding, no governance, no reporting, and no accounting department. I mean it’s unfair and just goes back to the question of who gets funding, which I think is the real story here.


Shreya Christinahttps://ukbusinessupdates.com
Shreya has been with ukbusinessupdates.com for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider ukbusinessupdates.com team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

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