17th November 2022 – (Hong Kong) The collapse of the cryptocurrency exchange FTX continues to have knock-on effects throughout the crypto industry, with multiple crypto-focused companies reporting significant amounts of their capital stuck on FTX. Between 11th and 14th November, three crypto companies announced large losses, with one of them having to lay off workers to deal with the crisis. Customers of bankrupt cryptocurrency exchange FTX Trading could have to wait years to get their money back, while many may never recover the funds, experts said. FTX’s creditors will be first in line to receive whatever assets a bankruptcy judge deems appropriate to distribute as the company seeks to restructure as part of its Chapter 11 filing. Investors in the Bahamas-based company, which had raised some US$2 billion in venture capital, will be second in line. That leaves FTX account holders who used the platform to trade bitcoin, solana and other digital currencies at the back of the queue, a bankruptcy expert told CBS MoneyWatch.
According to Decrypt.com, Alameda Research has recently moved US$2.7 million worth of Serum, FTX, and Uniswap tokens into a wallet where the now-bankrupt trading desk has amassed $89 million worth of assets, according to on-chain data. None of the wallets—all labeled as belonging to Sam Bankman-Fried’s crypto trading firm Alameda Research by blockchain analytics firm Nansen—have tried to move the funds since yesterday. The transactions are just the most recent unexplained transfers by wallets belonging to Alameda Research following the Chapter 11 bankruptcy filing of FTX Group, which includes FTX.com, West Realm Shires (the parent company of FTX U.S.), and Alameda Research.
Meanwhile, it was discovered by a local media HK01 that FTX has registered a Hong Kong subsidiary not long ago. Sam Bankman-Fried serves as a director, and even reported to live in a serviced apartment in Wan Chai. The director of the Hong Kong subsidiary is Clement Ip, the co-founder and board member of Genesis Block, another Over The Counter Trading Centre for digital assets. The two companies are suspected of sharing offices. However, before and after the FTX crash, the Hong Kong directors of two FTX affiliated companies registered in Hong Kong immediately resigned. Genesis Blocks once admitted that “a small amount of funds” were deposited in FTX, and appealed to customers not to deposit virtual currency any more, but withdrawals will not be affected.
In 2018, Sam founded the trading platform “FTX” and the hedge fund “Alameda Research” in Hong Kong. They have been operating as offshore companies and have not registered a company with the same name in Hong Kong. In 2020, the Hong Kong government announced plans to regulate virtual currency trading platforms. FTX eventually withdrew from Hong Kong in 2021 and moved its headquarters to the Bahamas. However, in September this year, it opened a Hong Kong registered subsidiary “FTX Hong Kong Limited”. The directors include FTX founder Sam Bankman-Fried, and two other Hong Kong residents Jen Chan Luk-wai and Clement Joshua Ip. Sam even reported to live in a serviced apartment unit in Wan Chai. On 12th November, FTX filed for bankruptcy protection. Semafor, a news website invested by Sam, reported on 13th November that some employees of FTX would relocate from the Bahamas to Hong Kong or other places. At the same time, it was reported that Sam had failed to abscond from Bahamas and attempted to flee to Dubai. Caroline Ellison, CEO of Alameda Research, an affiliated company founded by SBF, was also accused of being in Hong Kong and she also has plans to abscond. Ellison, a graduate of Stanford University who grew up in Boston, became co-CEOs of Alameda with Sam Trabucco in October 2021, according to a press release put out by the company at the time. In August of this year, Trabucco announced on Twitter he was stepping down from the role but would “stay on as an advisor.” Ellison started at Alameda in 2018, working as a trader. She previously worked at Jane Street – the market maker where she and Bankman-Fried met, according to an Alameda press release. She was rumoured to be a girlfriend of Sam at one point.
When FTX and Alameda Research were established, they had already registered in Hong Kong a company known as Cottonwood Grove Limited, which was wholly owned by Alameda Research registered in the British Virgin Islands (BVI). The directors were Sam, Jen Chan Luk-wai, Clement Joshua Ip and Charis Law Wing-man. Ip Tak-yan also joined as a director in January this year. Jen Chan Luk-wai is also the sole shareholder and director of the company “Salameda Limited” registered in Hong Kong. Jen Chan was also the CFO of FTX. The Financial Times reported that Salameda is an affiliate of Cottonwood Grove Ltd with a “start-up service agreement”. On 9th November 2022, the same day that Binance announced the cancellation of the acquisition of FTX, Chan, Ip Tak-yan and Law Wing-man resigned as directors of Cottonwood Grove Ltd while Chan and Ip Tak-yan also resigned as directors of FTX Hong Kong on 14th November.
The registered addresses of FTX Hong Kong and Salameda are secretarial companies in a commercial building in Sheung Wan. The registered address of Cottonwood Grove Ltd was changed to 42nd Floor, No. 333 Lockhart Road, Wan Chai on 1st November. However, the office space was found to be empty and vacated. Strangely, another company owned by Ip Tak-yan was also found to be registered at the same address. The security guard of the building said that the units on the 42nd and 43rd floors should be rented by the same company while 43rd floor is the office of Genesis Block. A Genesis Block employee told local reporters that the 42nd floor is their new space, but did not disclose the move-in date and also said that he had never heard of Cottonwood Grove. The staff member at the Genesis Block office then said that the founders of the company namely Ip Tak-yan and Wincent Hung were busy and not in the company. The staff member added that he had no knowledge of the relationship between FTX Hong Kong and Genesis Block.
After FTX crashed, Genesis Block co-founder and director Wincent Hung sent a notice to customers, “Due to technical problems, customers are advised not to deposit virtual currency on the platform, and withdrawals will not be affected.” According to Linkedin and startup company database Crunchbase data, some Genesis Block employees have recently updated their positions and transferred to FTX or Alameda with overlapping job titles. According to reports, the transaction funds used by Genesis Block used to mainly come from Alameda Research. Client funds for over-the-counter transactions (OTC) were also in FTX. When interviewed by Ming Pao earler, Hung admitted that Genesis Block “had a small amount of assets” deposited in FTX, but did not comment on whether the transaction funds came from Alameda, and also denied sharing an office with FTX.
