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Collapse of crypto exchange FTX to trigger legal battles in the UK

Regrets: FTX founder Sam Bankman-Fried (pictured with model Gisele Bundchen) issued an apology to staff saying he

FTX’s collapse will spark legal battles in the UK as it appears some 80,000 UK customers are suffering losses

FTX’s dramatic collapse could open the door to legal action in the UK after it emerged thousands of Britons lost money.

While US crypto exchange founder Sam Bankman-Fried apologized in an email to staff, saying he “didn’t realize the full extent” of the mess his business was in, lawyers claimed the company could also face legal challenges on British shores. like in the United States.

FTX, which allows users to buy and sell digital “coins” like bitcoin, imploded earlier this month, leaving around 80,000 UK customers out of pocket.

Regrets: FTX founder Sam Bankman-Fried (pictured with model Gisele Bundchen) issued an apology to staff saying he

Regrets: FTX founder Sam Bankman-Fried (pictured with model Gisele Bundchen) apologized to staff saying he ‘didn’t realize the full extent’ of the mess his business was in

Nicola McKinney, partner at Quillon Law, which specializes in complex commercial and cross-border litigation, said: “There are many circumstances in which a claim involving foreign elements or co-defendants could be brought and prosecuted in the UK.”

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A case could be brought in an English court if a breach of contract occurred in the country, or in a negligence case if the injury occurred in Britain, she explained.

McKinney said, “Such examples could provide ‘gateways’ for proceedings to be served on a foreign-based defendant, including potential FTX Group companies or individual wrongdoers.”

“In negligence claims in particular, the residency of the potential plaintiff is often linked to where the damage occurred and can potentially mean that litigation is brought here.”

FTX’s collapse left around 1 million creditors facing losses of billions of pounds – its 50 biggest clients owing more than £52 million on average – and sent shivers down the spine of the crypto world. Some 8% of users were UK-based, suggesting 80,000 Brits lost.

FTX, Bankman-Fried and some of the company’s top brass are already facing lawsuits across the pond. The account holders have filed a lawsuit in Miami claiming that Bankman-Fried and celebrities, including American sportsmen Tom Brady and Shaquille O’Neal, misled customers by promoting “unregistered titles”.

These are stocks and other assets that have not been registered with the US financial watchdog and should only be made available to “sophisticated” investors.

Several lawsuits are already underway to determine whether crypto-assets fit this definition. But the lawyers said a “wave” of litigation could be brought against FTX as investors try every means to get their money back.

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FTX allowed users to borrow money in order to increase their crypto bets. But Bankman-Fried claimed he was borrowing from his own trading firm, Alameda Research, which swayed FTX.

Alameda used FTX’s own “coin,” known as FTT, as collateral against its loan – leaving Bankman-Fried’s entire empire vulnerable when FTT’s value plummeted.

Bankman-Fried told staff, “I deeply regret my oversight failure.” But FTX’s new executives, who are overseeing its bankruptcy, claimed that Bankman-Fried ran FTX as his “personal fief.”

FTX’s collapse has been a source of embarrassment for its backers, which include hedge fund moguls, venture capitalist titans and even celebrities such as model Gisele Bundchen.

McKinney said court cases will likely initially take place in the United States and the Bahamas, where bankruptcy proceedings have already been initiated.

She added: “If it appears that there are any exchange assets that can be recovered in the UK, if there are any legal persons or administrators who are based here, and if the English legal system is perceived as a useful forum for recovery by creditors, it could open the door to potential claims on this side of the Atlantic.

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Nationwide is sounding a crypto alarm

Nationwide has become the latest lender to tighten cryptocurrency precautions following the FTX implosion.

The construction company said customers will now have a daily limit placed on their account, dictating how much of their money they can hand over to cryptocurrency providers.

A spokesperson for the group said the measures were intended to “protect our members from cryptocurrency scams.”

Nationwide’s move follows similar measures introduced by rivals Santander, TSB, Virgin Money and Starling Bank.

Digital bank Starling told its customers on Tuesday that it was blocking all card payments to crypto exchanges and restricting all outgoing and incoming bank transfers involving such businesses.

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