UK Banks are blocking payments to and from crypto exchanges after FTX collapse

In the aftermath of the collapse in FTX, which resulted in the loss of 80,000 traders from the UK, banks are blocking payments to and fro crypto exchanges.

Starling Bank tightened its payments controls and has blocked all outgoing and incoming payments from crypto exchanges.

The bank tweeted that crypto activity was “highly risky” and had made the decision to “implement additional restrictions on outgoing or incoming transfers”.

Nationwide has been limiting card payments to the Binance cryptocurrency exchange, and this cannot be lifted at the customer’s request.

This comes as Sam Bankman Fried, disgraced founder and CEO of now-defunct FTX, confesses that he “deeply regretted” the collapse of his crypto empire.

In a letter, he apologized to his staff and described a crash of “collateral” between $60bn (£50.4bn), to $9bn(£7.6bn).

In a message to employees on Tuesday, he said that he didn’t intend for this to happen and would do anything to get it over with me.

He said, “I didn’t realize the full extent and consequences of the margin position nor the severity of the risk associated with a hyper-correlated accident.”

He argued that it could have saved FTX and returned “large value” customers. However, court filings show that the organisation is chaotic with deep problems.

Tens of thousands of British traders were left out of pocket after the collapse of cryptocurrency exchange FTX, US bankruptcy proceedings revealed.

A Delaware court heard that 8% of FTX’s users were based outside the UK. This suggests that 80,000 Britons could have suffered financial losses. FTX had around 1,000,000 creditors, most of them unsecured users.

James Bromley (a US restructuring lawyer at Sullivan and Cromwell) accused Mr Bankman Fried of running FTX like a “personal fiefdom” during the company’s bankruptcy hearing.

According to Mr Bromley, the company was “under the control of a small number of inexperienced and unsophisticated individuals” and evidence suggested that some or all of them were compromised.

FTX was not regulated by the UK and was therefore not authorized to offer services in accordance with the Financial Conduct Authority (FCA) crypto assets rules. In September, the FCA warned that FTX was “providing UK financial services or products without our authorization” and “targeting people in the UK”.

The collapse of FTX, which was the second-largest cryptocurrency exchange in the world and valued at $32bn (£26bn) just months ago, has caused shockwaves across digital currency markets. Customers across the sector are scrambling to withdraw money from exchanges after Bitcoin’s price plunged to a 2-year low.

Founded by Sam Bankman-Fried (30 years old), FTX filed bankruptcy on November 11th after a surge of withdrawals and the discovery of an $8bn hole in its finances.

Bromley stated that the company’s lawyers had witnessed “a lack in corporate controls at levels that none of us has ever seen”.

Mr Bankman-Fried claims that FTX secretly used customer funds in order to support losses at Alameda Research, its sister company, a cryptocurrency hedge firm. According to the court, Mr Bankman-Fried, his parents, and executives, also spent $300m on luxury property, and “vacation homes” in the Bahamas. This is where FTX was based. According to reports, Mr Bankman-Fried’s parents want to return the property.

John Jay Ray is currently running FTX. He is a former restructuring veteran who steered Enron through its 2001 collapse. Ray stated that he saw at FTX something even worse than the collapse. Enron’s chief executive was sentenced to 24 years imprisonment.

According to bankruptcy lawyers, FTX was the victim of a cyberattack on the day it collapsed. Since then, its staff has been trying to steal cryptocurrency.

Bromley said that the US cybercrime officials were now investigating the company.

According to court filings the company’s largest creditors owe at least $3bn. Businesses around the world are facing possible losses.

The collapse of FTX has had a ripple effect on the cryptocurrency industry. As it seeks rescue funding after the collapse of FTX, Genesis, a troubled cryptocurrency lender, was forced to insist that it does not have any “imminent” plans for bankruptcy.

After a surge of customers asking for their money, Genesis’s talks to rescuers in the US stalled and the US cryptocurrency company has stopped withdrawing from key products. Genesis Trading, a sister company in cryptocurrency trading, still has $175m on the exchange FTX.

Last week, Genesis stopped withdrawals from a lending product which paid interest on cryptocurrency deposits. This affected another lending product offered by Gemini, a cryptocurrency company founded by the Winklevoss twins and Harvard rivals to Mark Zuckerberg.

Genesis spokesmen stated that they do not plan to file bankruptcy immediately and continue to have constructive discussions with creditors.

The collapse of FTX also brought to light the growth of amateur trading via smartphone apps in recent years.

The City watchdog has warned investors that trading apps could make them feel like problem gamblers.

Trading apps that provide customers with market news updates and offer bonus points, badges, or celebratory messages to make trades were condemned by the FCA.

According to the regulator, it was found that users who use apps with these features are more likely to lose more or invest in more than they can afford. In some cases, this could lead to problematic gambling behaviour.

Sarah Pritchard is the executive director of markets for the FCA. She stated that “some product design features could contribute to problematic, even gambling-like investor behaviour.”

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