FTX’s Collapse Troubles African Fintech Firms

The collapse of the once-beloved cryptocurrency exchange, FTX, is having an impact on some fintech companies in Africa. Days after FTX <a href=”https://www.financemagnates.com/cryptocurrency/troubled-ftx-files-for-bankruptcy-as-ceo-bankman-fried-resigns/”>filed for Chapter 11 bankruptcy</a> protection in the United States, Nestcoin, a Nigerian web3 startup announced that it was laying off some of its employees as the firm held its assets (cash and stablecoins) on FTX. This was “to manage our operational expenses,” the startup said. Nestcoin, which was launched in November 2021, explained that it raised capital from a range of investors last year, including Alameda Research, a quantitative trading firm and corporate sibling of FTX. ”For context, Alameda’s equity is less than 1%. We used the closely-associated exchange, FTX, as a custodian to store a significant proportion of the stablecoin investment we raised — i.e. our day-to-day operation budget,” Yele Bademosi, Nestcoin’s Founder explained in a statement shared on Twitter.Nestcoin further clarified that it was not engaged in any trading “but simply custodied our assets on the FTX exchange.”<blockquote class=”twitter-tweet”>An update shared with our investors earlier today on the FTX incident and its impact on <a href=”https://twitter.com/Nestcoin?ref_src=twsrc%5Etfw”>@Nestcoin</a>. <a href=”https://t.co/0Mjo4SYF7R”>pic.twitter.com/0Mjo4SYF7R</a>— YB (25,25) ⏳ (@YeleBademosi) <a href=”https://twitter.com/YeleBademosi/status/1592144271163142145?ref_src=twsrc%5Etfw”>November 14, 2022</a></blockquote>Finance Magnates in February reported that the Nigerian firm, whose portfolio includes a crypto education media, a gaming guild, and a blockchain-based payment gateway, <a href=”https://www.financemagnates.com/cryptocurrency/serena-williams-invests-in-netcoin-to-make-crypto-mainstream-in-africa/” target=”_blank”>raised $6.45 million</a> in a funding round that saw the participation of Alameda Research and tennis star Serena Williams’ Serena Ventures. Other FTX Investments in AfricaHowever, Nestcoin is only one of a handful of African startups that have received funding support from FTX and sister Alameda Research. In November last year, Chipper Cash, an African fintech unicorn and cross-border payments firm, raised $150 million from a Series C extension round led by FTX. Additionally, Alameda Research has also invested in MARA, an Africa-focused crypto exchange startup with bases in Nigeria and Kenya; VALR, a South Africa-based digital asset trading platform; and Jambo, a Congo-based web3 startup. In May 2022, MARA <a href=”https://www.financemagnates.com/cryptocurrency/mara-to-build-pan-african-crypto-exchange-advise-cars-president/”>raised $23 million</a> in equity and token sales from Alameda Research, Coinbase Ventures and Distributed Global. Also, VALR’s US$50 million Series B funding round earlier in March this year enjoyed the participation of Alameda Research and top venture capitalists. Furthermore, in February 2022, Jambo raised $7.5 million from Alameda Research and Coinbase to build the “web3 onboarding portal of Africa.” Although most of these firms have confirmed that they had zero exposure to FTX, eyes are on them, especially <a href=”https://www.financemagnates.com/cryptocurrency/exchange/ftx-fallout-reveals-a-shambolic-operation/” target=”_blank”>as events unfold</a> in the aftermath of FTX’s collapse. Foiled Expansion to Africa?In one of the latest development in Africa with regard to FTX’s collapse, the Bahamas-headquartered crypto exchange lost its Financial Service Provider (FSP) license in South Africa. This is as Ovex, a South Africa-based cryptocurrency marker, removed the digital asset firm as its juristic representative. The market maker in April last year had raised R60 million (about $3.5 million) from FTX.Meanwhile, TechCrunch reports FTX processed billions of dollars monthly in Africa before it crumbled. The crypto exchange was also planning to establish an office in Nigeria, Africa’s most populous nation and largest economy, the outlet reported.In other news, AZA Finance, a Kenya-based payment automation and settlement platform, recently <a href=”https://www.financemagnates.com/cryptocurrency/ftxs-bankruptcy-aza-finance-denounces-listing-of-its-entities-in-filing/”>denounced FTX’s listing</a> of BTC Africa and 22 of its subsidiaries in its Chapter 11 bankruptcy filing. Elizabeth Rossiello, CEO and Founder of AZA Finance, clarified that it only entered into a commercial partnership with FTX Africa to help expand web3 in Africa by building “regulated, safe and low-cost payment rails” for FTX. <blockquote class=”twitter-tweet”><a href=”https://twitter.com/FTX_Official?ref_src=twsrc%5Etfw”>@FTX_Official</a> did NOT acquire <a href=”https://twitter.com/aza_africa?ref_src=twsrc%5Etfw”>@aza_africa</a> or E4F – this list is incorrect. We were partners ONLY and there was no shareholding. We are licensed in multiple jurisdictions and our shareholding is public. Clearly FTX org chart is as messy as the rest of it— Elizabeth Rossiello (@e_rossiello) <a href=”https://twitter.com/e_rossiello/status/1591105632400478208?ref_src=twsrc%5Etfw”>November 11, 2022</a></blockquote><blockquote class=”twitter-tweet”>Notice: AZA Finance & our entities are not affected by the <a href=”https://twitter.com/FTX_Official?ref_src=twsrc%5Etfw”>@FTX_Official</a> bankruptcy, nor by the events of this week. FTX are not shareholders in<a href=”https://twitter.com/aza_africa?ref_src=twsrc%5Etfw”>@aza_africa</a>, E4F or other entities of ours – the circulating list/org chart is incorrect. We remain stable, open, & running normally. <a href=”https://t.co/uvHtXn09pu”>https://t.co/uvHtXn09pu</a>— AZA Finance (@aza_africa) <a href=”https://twitter.com/aza_africa/status/1591116398675521536?ref_src=twsrc%5Etfw”>November 11, 2022</a></blockquote>The FTX later released a statement clarifying that it does not own BTC Africa and its subsidiaries companies. <blockquote class=”twitter-tweet”>Press Release: Clarification on Certain Entities Not Included in Chapter 11 Filings. <a href=”https://t.co/rxmY2f2iTB”>pic.twitter.com/rxmY2f2iTB</a>— FTX (@FTX_Official) <a href=”https://twitter.com/FTX_Official/status/1591268382036602881?ref_src=twsrc%5Etfw”>November 12, 2022</a></blockquote>In April this year, FTX entered a partnership with AZA Finance to roll out its digital asset services in West Africa. The plan, according to a Bloomberg report, was to launch the services in some months’ time, spreading out gradually across the continent over the next two years from that time. However, the collapse of the once-beloved exchange means that this plan for Africa may never materialize.

This article was written by Solomon Oladipupo at www.financemagnates.com.