ISLAMABAD/WASHINGTON: Insurers have started denying or limiting coverage to clients and crypto firms linked to the bankrupt FTX exchange.
The denial has left several digital currency traders and exchange companies uninsured for any losses from hacks, lawsuits and theft.
FTX crypto exchange chief arrested
Earlier, Bahamas authorities arrested former FTX Chief Executive Officer Sam Bankman-Fried for defrauding the crypto exchange’s customers by defrauding their deposits to pay for debts and expenses to make investments on behalf of his own crypto hedge fund, Alameda Research LLC.
Several market participants told Reuters that insurance companies had already been reluctant to guarantee assets and directors and officers protection policies for crypto companies because of slight and scant market-related regulations and the volatile prices of Bitcoin and other cryptocurrencies since the arrest of Sam Bankman-Fried .
Watchers of Lloyd’s of London and Bermuda insurance markets were requiring more transparency from crypto firms about their exposure to crypto exchange. The insurers were also proposing broader policy exclusions for any claims arising from the FTX’s collapse. Sam Bankman-Fried was arrested a day before he testified before US Congress about the abrupt failure of the largest cryptocurrency exchange company last month.
The arrest marked a stunning fall from grace for Sam Bankman-Fried, the 30-year-old entrepreneur, who rode a boom in bitcoin and other digital assets to become a billionaire for three years until FTX’s rapid demise.
The Bahamas-based FTX, launched in 2019, filed for bankruptcy on November 11, 2022, after it struggled to raise money to fend off downfall as traders rushed to withdraw around $6 billion from the platform within just 72 hours.
