My FTX crypto horror story

Switzerland has made sounds that it wants to be the prime crypto nation. Perhaps it should learn some lessons from the disastrous experience with FTX in The Bahamas. Peter Hulm explains.

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ftx usd daily prices 14 July to 11 November 2022
ftx-usd daily prices 14 July to 11 November 2022

FTX iced me out of its community channel because I showed it was a shambles even last January

FTX penthouse
FTX’s reported penthouse in the Orchid Building, Albany, Nassau. $21K maintenance fees, 1200sq m. listed for sale at $39.9m

Perhaps I should have known FTX was going to end in a meltdown. Back in January 2022 I wrote about my catastrophic experience with the high-flying exchange and was immediately punished for it on FTX’s Telegram social media channel by being excluded from its major community network. Here’s what happened and (more or less, with some updates) what I wrote at the time on medium. I think it still stands:

Climbing to no 2 on the crypto exchanges list in next to no time, Sam Bankman-Fried’s start-up has had lots of very respectable promoters. Guy of CoinBureau describes it as “top-notch”. But it is also a shambles.

ftx site 11 November
ftx web site 11 November 2022

Look at Telegram’s FTX channel yourself. You will see almost nothing but complaints about the difficulty of getting FTX to respond to problems.


It’s even worse than that.


Apart from scoring some kind of record for unresponsiveness to customers compared to my experiences with other exchanges, FTX has been not only slow to respond to my requests but often incomprehensible.

Gobbledygook


For example, see this message about my being shafted on a margin-purchase of IOTA-Perp I did not consciously make but was nevertheless charged for: “Please note the system will not initiate order if it is liquidation related. Referring to your IOTA-Perp, except the last 2 trade ID that it is liquidated due to margin requirement. The rest of ID comes from one open order (referring to https://ftx.com/order-history) which user has inputted a market o[r]der for 12,539 units of IOTA-Perp.”


See what I mean?

So what could I have done to get myself banned when crowd-griping seems to be the standard message on ftx Telegram?

Two months for a refund


Maybe because the failure of FTX was so egregious: it had taken two months to get a refund of a failed transfer to my bank, and I said so on Telegram.

Gaslighting critics is typical behaviour by confidence tricksters rather than a Benthamite vegan that Sam Bankman-Fried* has declared himself to be (the utilitarian philosopher Jeremy Bentham declared as a principle : “It is the greatest happiness of the greatest number that is the measure of right and wrong”).

Sam Bankman-Fried
Sam Bankman-Fried (Photo: wikipedia)

Reading complaints about bureaucratic foul-ups is boring. So I’ll try to be brief. Just read the details for amusement rather than attempting to follow the intricacies.

A Delaware intermediary with no company contacts?

The proceeding itself was simple. Transfer funds from my FTX account to my bank in Switzerland in mid-November 2021. One good reason for using FTX , there should have been no charge for using Swiss francs. I filled out the details and ordered the transfer.
But FTX , I learned, used a company named as North Dimension Inc, which according to bizapedia was based in Delaware and founded in August 2020 with no company contacts (LINK). The transfer was through a California company of the same name. Wouldn’t that raise alarm bells in any sensible customer.


And this did not tell the Swiss bank the money came from me. So the Swiss bank sent it back that month when FTX would not provide me with documents proving the funds came from my account and not a third party (a Swiss regulation to avoid money laundering). The Swiss bank and the ultimate destination (an investment company) even delayed returning the money so that I could get hold of the necessary documents.

Weird wire receipt

Over a month later, after several requests, I received a note from FTX on 20 December indicating a bank wire receipt from 16 November.

On December 24, Christmas Eve, FTX sent me a “To whom it may concern” note confirming that I had made a withdrawal on 17 November

This after FTX told me on 27 November, the day after my bank returned the money, that “We unfortunately cannot provide you with an account statement.”


So when did my money get recredited to my account? On 17 January 2022, according to an email from FTX, exactly two months after the recorded transfer action.

Barred for warning of scammers

By this time I had already been barred without notice from FTX Telegram for my complaints.
I’d said online that FTX might not be a scammer but it sure acted like one.

Why?


On 15 December 2021 FTX had told me on its website ticket: “Your funds will not be lost.”
I tried to show my gratitude with this message: “thanks for this. It’s the most responsive answer I have had for a month.”


Come 15 January, this month-old assurance was sounding like a typical scammer’s device to stop you questioning the process, as happened to me at just that time with some solar panels I ordered through Facebook (I received two cards of stick-on finger nails to compensate for delays in fulfilling the order. I have not used the fingernails).

As all the crypto gurus tell you, you are on your own if something goes wrong in the cryptoverse.


Something like a minute after my FTX posting, the channel vanished from my Telegram list. I could not get access again and was told “this group is not accessible”.

I’d been scammed before

I was hyper-alert to confidence tricksters because of my experience with ordering the solar panels. I bought them using my Paypal account. When I complained to Paypal about the scam. it repaid me immediately.


So when the FTX funds reappeared, I immediately made a withdrawal once more. This time I confirmed with the bank that the two documents I received too late from FTX would be acceptable for a transfer to take place. And so the funds were transferred, and at no charge in Swiss francs, as promised.

FTX finally came through but I could not tell their customers


This time FTX also gave me full wire details on the same day via Silvergate, a Federal Reserve member bank.


I suggested to FTX they stick to Silvergate for their transfers in future. But because I am barred from posting in the Telegram channel, I can’t tell all those frustrated FTX users about the happy ending.

One result: after that I only used FTX for same-day transfers and withdrawals, leaving a couple of hundred francs in the Swiss account to cover unforeseen expenses and FTT tokens (FTX’s funny money) to reduce costs on such transactions. OK, it was like holding Starbucks special deal tickets on the belief that the coffee bar chain would never shut down and you could always trade your Starbucks coupon for a Subway tuna sandwich ticket. Until you couldn’t.

Postscript

On 10 November, befoe FTX’s filing for Chapter XI bankruptcy pro, I tried to move some of my Swiss franc funds off the exchange. This was recorded as OK but was still pending on the next day.

So I cancelled the order to avoid extra fees on cashing out more than once in a week and added the remainder to what would become my first transfer. FTX again approved it.

But by 12 November the site no longer let me in, or simply churned when I tried to hook up. Sam Bankman-Ried’s apologies on Twitter for having f*cked up didn’t cut it.

By my reckoning, the transfer should have been off FTX ‘s books already, and ready for crediting to my bank account. Dream on, eh? My Starbucks-like coupon got me a Subway ticket but nothing happened after that, except gurus told me I was at the back of the queue, behind lenders and investors. I was just a customer.

FTX later that day warned customers not to use its apps, I read: “FTX has been hacked. FTX apps are malware. Delete them. Chat is open. Don’t go on FTX site as it might download Trojans.”

But that alert came via its Telegram channel, the one it had frozen me out of nine months before.

* wikipedia records: “Bankman-Fried’s net worth peaked at $26 billion. In October 2022, he had an estimated net worth of $10.5 billion; however, following FTX’s liquidity crisis, on 8 November 2022, his net worth was estimated to have dropped 94% in a day to $991.5 million according to the Bloomberg Billionaires Index. By November 11, 2022 Bloomberg estimated Bankman-Fried’s net worth to be $1.”

FTX’s More shots of the Nassau penthouse SBF reportedly shares/shared with nine other young nerdy staff, though it is said to have emptied through flights to Dubai and HongKong which have no extradition treaty with the US. I am in no position to confirm any of this, and most of FTX’s activities were designadly conducted offshore. So U.S. official pursuit of wrongdoers is likely to take some time. Think Mt Gox and its debacle in 2014 that still has to be finally settled with investors.

Links

marketwatch: John Ray, the new chief executive of FTX, says he’s never seen such a total failure of controls in more than 40 years. 17 November 2022 (LINK)

coindesk: 4 Key Takeaways from the FTX Fiasco. 16 November 2022 (LINK)

bitcoin: Bahamian Liquidators Say FTX Wasn’t Authorized to File for Bankruptcy in the US. 16 November 2022 (LINK)

swissinfo: the future of Crypto Nation Switzerland. 2 November 2022 (LINK , video)

coindesk: Bankman-Fried’s Cabal of Roommates in the Bahamas Ran His Crypto Empire – and Dated. Other Employees Have Lots of Questions. 10 November 2022 (LINK)

News about crypto-currencies at nusefile.com (LINK): FTX Hack: Almost $600 Million Transferred Out Of FTX Wallets. 12 November 2022. FTX only.

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