Big institutional investors were behind most of the money on bankrupt exchange FTX, crypto industry insiders say
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- Institutional investors owned most of the crypto funds on FTX, experts told UK lawmakers Monday.
- The exchange's collapse is likely to hit them hardest, with Galaxy Digital losing $77 million.
- Billions of dollars in customer funds has disappeared in the implosion of bankrupt FTX.
Institutional investors are likely to be the most at risk of losing money from FTX's collapse, crypto industry insiders have told British lawmakers.
The bulk of the funds on the crypto exchange weren't from individual holders, but from some of the biggest and most knowledgable investors in the world, the experts said Monday.
"What we're hearing — and this is speculation, I'm just giving my view — the majority of the funds in that platform were from institutional investors," Ian Taylor, head of trade body CryptoUK, told the Treasury Select Committee.
FTX filed for Chapter 11 bankruptcy Friday, saying its CEO Sam Bankman-Fried had resigned. The exchange's collapse has vaporized between $1 billion and $2 billion of customers' funds, media reports said.
"We've lost $77 million at this point," Tim Grant, EMEA head for major crypto investor Galaxy Digital, told the lawmakers. "And we don't feel good about that."
"Primarily, the users were institutional. But also the cap table of equity investors were among the most sophisticated and largest investors in the world," he added.
"So there were a lot of very experienced eyes on this, and what it tells us is that this was a bad actor who was doing things behind very closed doors that we had no view into as a broader group."
"That's the same as Bernie Madoff and other instances like that, and they were in regulated industries."
CryptoUK's Taylor called for more regulation, such as audits, given the problems at FTX.
"Perhaps if we'd had some regulation, some of these recent events may not have taken place, where we've seen some pretty poor business practices, and perhaps over the forthcoming weeks we might see some criminal behavior," he said.
In the UK, the losses will likely be limited to large institutions because the Financial Conduct Authority has refused to grant a license to Bankman-Fried's company. In the UK, 10% of people hold crypto as an investment, according to Taylor.
Financial services regulator FCA warned Monday that it would be unable to help FTX customers recover their money because the exchange was not "authorized, regulated or registered" in the UK.
Read more: Billions of dollars seem to have disappeared with the collapse of FTX. How does that even happen?