The collapse of the FTX cryptocurrency exchange has left 80,000 UK crypto traders facing painful losses.
One million creditors around the world with have been left with funds locked on the exchange or lost in the revolving doors of fund transfers between FTX and its trading arm Alameda Research.
There are at least $1bn (£840.56m) in investor assets missing after the collapse of the Bahamas-based exchange.
Bankruptcy hearings have now begun in Delaware in the US. They have revealed that 8% of the creditors are British, amounting to approximately 80,000 UK citizens.
FTX was not regulated in the UK and was not authorised to offer services under the Financial Conduct Authority’s (FCA) crypto asset rules.
The FCA said in a statement: "In the UK, regulation of crypto assets is limited to registering of UK-based crypto-asset exchanges for anti-money laundering purposes. As a result, FTX was not authorised, regulated or registered by the FCA."
The FCA warned in September that FTX was “providing financial services or products in the UK without our authorisation” and appeared to be “targeting people in the UK”.
The regulatory body added that investors will not get their money back “if things go wrong".
At the company’s first bankruptcy hearing, James Bromley, a US restructuring lawyer at Sullivan and Cromwell, accused FTX CEO Sam Bankman-Fried of running the exchange as a “personal fiefdom”.
The company was under the “control of a small group of inexperienced or unsophisticated individuals, and the evidence suggests some or all of them were compromised individuals”, Bromley told the Delaware court.
FTX filed for protection in the US after a bank run on the trading platform, which was stoked by a tweet from Changpeng 'CZ' Zhao, CEO of rival crypto-exchange Binance.
Read more: Crypto tanks after FTX implosion
On Sunday 6 November, Zhao tweeted that Binance would liquidate its holdings in FTX's native FTT (FTT-USD) token.
Zhao tweeted: "Liquidating our FTT is just post-exit risk management, learning from LUNA.
"We gave support before, but we won't pretend to make love after divorce. We are not against anyone. But we won't support people who lobby against other industry players behind their backs. Onwards."
Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won't pretend to make love after divorce. We are not against anyone. But we won't support people who lobby against other industry players behind their backs. Onwards.
— CZ 🔶 Binance (@cz_binance) November 6, 2022
This caused an early week bank run where traders pulled $6bn from the platform in under three days.
The scale of redemption requests could not be met and FTX's reserves were found to be inadequate.
Insolvency followed, administrators were called in, and now the collapse is threatening to bring down the entanglement of crypto-firms that borrowed or lent to FTX in the wake of Terra's UST collapse (LUNA1-USD) in May of this year.