Exclusive | Chinese FTX investors scramble to recoup losses, but Beijing’s anti-cryptocurrency stance leaves little hope

Crypto investors with thousands of dollars stuck in FTX are left with little chance for remedy in a country that has banned the digital assets

China was the third-largest market for FTX, which continued accepting Chinese passports for verification after Beijing suggested serving citizens was illegal

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Published: 6:30pm, 6 Dec 2022

Mainland Chinese FTX customers are seeking remedy to lost funds after losing thousands of dollars in unprotected investments on the now-bankrupt cryptocurrency exchange, which had 8 per cent of its users in the country despite local laws banning the trade.

One investor, who declined to be named, said he joined three WeChat groups last month, each consisting of more than 400 Chinese victims desperately in search of possible remedies, but all the groups were dissolved within days, as discussions of cryptocurrency-related topics are strictly censored on Chinese social media platform.

Another FTX user turned to uncensored platforms like Telegram, which is blocked in China, but he found only one group with just eight members, and the conversation was inactive. He currently has US$15,000 stuck in FTX, he said, and he does not expect to see his money again.

Both investors have long engaged in cryptocurrency trades on their own because letting others know could result in legal investigations or even charges under Chinese regulations. For these reasons, they asked for anonymity.

FTX suspended withdrawals last month following a liquidity crisis, and the platform declared bankruptcy on November 11. A bankruptcy filing noted that founder and former CEO Sam Bankman-Fried had put the exchange’s user base at 1 million as of August this year. With 8 per cent in mainland China, as specified in a separate filing, that would mean 80,000 FTX customers were in the country.

Beijing cracked down on cryptocurrency to varying degrees for years before intensifying efforts last year. In September 2021, China’s central bank suggested that foreign exchanges serving mainland citizens were engaging in illegal activity. The bank reiterated that individuals and organisations trading crypto shall “bear the losses themselves”.

Harsher regulations have made investment more difficult for mainland Chinese traders, who use various tools like virtual private networks to connect to foreign exchanges for buying and selling crypto. Mainland China was the third-largest market for FTX by user base, tied with the UK, after the Cayman Islands and Virgin Islands, according to a bankruptcy filing. It was also more than twice as large as the 3 per cent of users in Hong Kong and four times the 2 per cent in the US.

.css-sioo19{color:#c79a00;}Exclusive | Chinese FTX investors scramble to recoup losses, but Beijing’s anti-cryptocurrency stance leaves little hope

Exclusive | Chinese FTX investors scramble to recoup losses, but Beijing’s anti-cryptocurrency stance leaves little hope