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While South African cryptocurrency exchanges are reeling from falling digital currency prices following the dramatic collapse of FTX, the majority say they have no connection to the platform.

ITWeb asked several South African-based cryptocurrency exchanges if they had been affected by the crash of FTX, the world’s third-largest crypto trading platform.

This, after local exchange Ovex released a statement yesterday, saying it had cut ties with FTX, which has since gone bankrupt.

According to Ovex, FTX’s marketing activities in South Africa had in the past been regularized by its appointment as Ovex’s legal representative.

“Ovex confirms the cancellation and revocation of FTX as legal representative. The public is warned not to continue doing business with FTX, as FTX is not permitted to market its derivative products offshore in South Africa, at this time,” the company states.

Founded by 30-year-old Sam Bankman-Fried, FTX is a Bahamas-based cryptocurrency exchange. The exchange was founded in 2019 and, at its peak in 2021, had over one million users and was the third largest crypto exchange by volume.

Citing people familiar with the matter, Reuters reports that at least $1 billion in client funds disappeared from the collapsed crypto exchange, which has since filed for bankruptcy.

It says Bankman-Fried secretly transferred $10 billion in client funds from FTX to his trading company Alameda Research, and much of that total has since disappeared.

According to the Reuters report, FTX filed for bankruptcy on Friday after a wave of client withdrawals. A bailout deal with rival exchange Binance fell through, precipitating the most high-profile crash in crypto in recent years.

Bitcoin and Ethereum both fell around 6% after FTX’s Chapter 11 filing on Friday morning.

“Fortunately, AltCoinTrader had no exposure to FTX, Alameda, Gemini or any of the multitudes of companies linked to FTX’s Chapter 11 bankruptcy filing. No client funds were affected and it’s business as usual for us,” says David Porter, Managing Director of AltCoinTrader.

“While we were unable to predict that the world’s third-largest crypto exchange would file for bankruptcy, our broader market analysis and risk management teams highlighted potential issues a while ago. months and AltCoinTrader took prompt and appropriate action to ensure the safety of our clients’ funds.”

Porter notes that the warning signs were there at the time, and AltCoinTrader stopped paying rewards on its Easy Save products for Bitcoin, Tether, and Ethereum nearly four months ago.

“We did this on the back of a risk assessment which determined that AltCoinTrader should not trust third parties with client funds for the purpose of generating returns. than on TRON, ADA, MATIC and BNB.

The reason is simple, he adds. “AltCoinTrader is able to stake these coins but also keep them clean, which means we don’t have to trust a third party and we retain full control of the coins with near zero risk. Essentially, the blockchain associated with each of the pieces would have to collapse completely for the pieces to be in danger.

According to Porter, there are a few lessons to be learned from centralized exchanges in the wake of this collapse.

He notes that the first is that there are degrees of risk associated with yield-generating products. “The risk increases significantly when trust is placed in a third party and the assets have been re-mortgaged. Second, crypto firms should never “artificially” increase their balance sheet by issuing their own token that is not properly backed or collateralized and then pumping out its value.

Essentially, Porter explains, FTX created a cryptocurrency that helped destroy itself. “FTX created the FTT token in 2019 and it reached a value of around $60 last year, with around $250 million in circulation.

“Customers who purchased FTT were able to execute trades on the company’s exchange at a discount. a market determines the price or value of any currency.

“In fact, much of FTT was owned by FTX itself and its affiliates, as well as the CEO’s hedge fund, Alameda Research. Much of the FTT token that was routed to Alameda was used to make speculative bets on other cryptocurrencies and other more complex financial products. When the value of the FTT token dropped, the whole stack of cards collapsed.

Priority to customer safety

Said Marius Reitz, Managing Director for South Africa Luna: “Even before the collapse of FTX, Luno undertook evidence of reserves auditswhich are published quarterly, which confirm that we own all cryptocurrencies on a 1:1 basis.

“Market events have not changed our approach, which has always been to build a secure platform for crypto investing with a full commitment to client security and transparent operations. In fact, recent events have only reinforced the importance of taking a responsible, long-term approach like ours at Luno.

Nevertheless, says Reitz, the collapse of course had repercussions for the market in South Africa and around the world.

“It further underscored the vital importance of prioritizing customer safety and security. Credible crypto exchanges undergo thorough due diligence and crypto holders must also take their own steps to verify that they are dealing with a credible exchange.

Henco Vorstman, CEO of StringEXalso states that the local exchange has had no relationship or exposure to FTX or any of its affiliates or partners.

“ChainEX has not been affected by the FTX collapse, as it does not use user funds for trading, lending or any other activity. We have seen, once again, that companies operating in the dark will be exposed sooner or later, regardless of the size of the operation.

“We also realized that regulation is desperately needed in the centralized space; the crypto industry will be better off for it, especially for customers who are not crypto experts and have no interest in self-custody or cold storage. These clients rely on centralized exchanges and they should be able to do so without fear of a meltdown like this,” says Vorstman.

Similarly, Leon Kowalski, CEO of Cape Cryptoclaims that the platform had no exposure to the collapse of FTX.

“Unlike other exchanges, we don’t re-mortgage client funds,” he notes.

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