FTX collapse sends pain through local crypto and start-up sectors

Australian crypto projects and start-ups are already suffering as a result of FTX’s spectacular downfall.

The collapse of global cryptocurrency platform FTX is beginning to impact local projects and start-ups, which are reporting steep revenue drops in the last week.

The local tech industry was already one of the worst hit by lay-offs this year, and those inside the sector are pessimistic about prospects in the wake of the failure of FTX, the collapse of which has provided an unprecedented view into how poorly it was managed.

At least one local crypto exchange with exposure to FTX, Digital Surge, was forced to suspend withdrawals last week, while almost 30,000 local FTX users remain locked out of their accounts.

Joan Westenberg, who runs Web3 content and publishing agency Studio Self, said she has already lost 80 per cent of revenue as a direct result of the FTX collapse. She said that as the scope and scale of the FTX fallout was revealed, she proactively reached out to the Web3 founders and tech platform she works with and gave them the option to end their marketing and communications contracts without penalty.

Joan Westenberg, who runs Web3 content and publishing agency Studio Self, said she has already lost 80 per cent of revenue as a direct result of the FTX collapse. Picture: Britta Campion

“The result was a loss of 80 per cent of my agency’s revenue, as clients had lost entire treasuries, or their investors were locking down funding and were no longer able to guarantee runway,” she said. “We‘re going to see a wide-reaching impact from this, and it will last for years. (FTX founder Sam Bankman-Fried) and his entities had invested in so many projects, from VC funds to games to accelerators, and the sudden disappearance of capital is being felt hard.

“I do think this is an opportunity for the ecosystem to jettison bad actors and support the builders who are transparent, honest and authentic, who are here to build, not just make money and ride off into a Bahamian sunset.”

Ms Westenberg is a speaker at this week’s NFT Fest event in Melbourne, which is under threat of being overshadowed by the sense of despair enveloping the local crypto sector. Other speakers include Tennis Australia‘s metaverse manager Ridley Plummer and the AFL’s head of NFTs David Elliott. The AFL signed a five-year partnership with Crypto.com – one of the world’s largest exchanges – in January.

Research from tracker CoinGecko provided to The Australian found that Brisbane and Melbourne took the 14th and 15th positions respectively for crypto lay-offs by cities in the year to date, representing a combined 3.3 per cent of the industry’s lay-offs globally this year.

Aaron Hilton, who runs crypto-focused energy retailer PowerPlay, said that while the local sector was experiencing pain and will endure more lay-offs, there was also reason for optimism for those that survived the carnage.

“The FTX firestorm is a sadly familiar tale, one which I had hoped we would move on from Mt Gox days, but as it stands people unfit to run a lemonade stand had access to huge sums of other people’s money to play with as if it were their own,” Mr Hilton said.

FTX founder Sam Bankman-Fried. Picture: AFP

“This is why decentralisation in blockchain is what all the true believers talk about. Hopefully this will be the required push to kill off centralised exchanges which are vulnerable and often are doing things the customer is unaware of.

“People have genuine alternatives now, and this could be the death knell for these ticket clippers preying on the unwary through providing a shade more convenience,” he said.

Daniele Servadei, chief executive of e-commerce platform Sellix, said that the main issue with most crypto companies is that they rely on their owners, like Sam Bankman-Fried, rather than being truly decentralised.

“FTX had an amazing opportunity. It literally only had to rely on earning and making billions from trading fees,” he said.

“What crypto firms should avoid is actually simple: stop using their customers’ money to trade in leverage and instead have a proper profitable business model. Binance has been doing this since the day it launched.”