Thousands of African crypto investors and businesses were significantly, financially harmed when FTX filed for bankruptcy in November 2022.
Sam Bankman-Fried—like many other crypto exchange CEOs—thought the continent would be a potentially colossal market. Before going under, FTX saturated the region with rigorous marketing campaigns to recruit new customers, all of whose funds are now lost.
The Wall Street Journal reported that out of the $3 billion owed to 1 million investors, Sub-saharan Africa saw a loss of over $500 million in investments, belonging mostly to Nigerians.
As African investors grieve their monetary losses, they are also worried about any potential future collapse of other exchanges.
And it’s led to a reexamination of the motives of exchanges that pushed into African markets, some of which are capitalizing on the absence of FTX to increase their holdings.
The increased concerns have put exchanges on the defensive, as their once-hot commodity is facing questions from people that previously flocked to the product.
“If you get hurt by one bank, you’re going to think all the other banks are bad,” Binance CEO Changpeng Zhao said in an interview with CNN after reports of massive withdrawals from Binance were made in the wake of FTX’s fall. “The fact is just because one bank is bad doesn’t mean all the other banks are bad.”
But Zhao words had the opposite effect on the continent, only serving to reinforce doubts.
In 2021, when African countries struggled to pick themselves up from the aftermath of the pandemic, crypto exchanges positioned their services as safe havens from the turbulent economy.
The constraints Africa faces like currency devaluation, food shortages, inflation, the rising cost of living, lack of education, and inaccessibility to financial institutions are all factors that made it a fertile ground for cryptocurrency exchanges to overpromise.
Out of a population of 1.4 billion, about 798 million people do not own bank accounts.
Crypto marketing targeted the unbanked population and people who had lost trust in the banking systems across Africa, all while promising them a better way to save securely.
In an interview with Vox, Sam Bankman-Fried spoke about the endless possibilities for crypto in Africa.
“One thing that a lot of people miss is the enormous amount of good that you can do in Africa,” Bankman-Fried, whose own altrustic nature has come into question, said. “That’s where the most underserved globally are and where there’s a whole lot of lowest-hanging fruit in terms of being able to make people’s lives better.”
That same year, FTX spearheaded campaigns that brought in over 100,000 investors on the continent.
One of FTX’s grassroots efforts was hiring dozens of university ambassadors in Nigeria who would get referral commissions based on the turnout at events that they hosted.
“To be paid, you must have hosted a successful event,” Godson Joseph, an FTX campus ambassador in Nigeria, told New York Magazine.
But FTX was not the only one.
Over the years, Binance has engaged in numerous Africa-targeted advertising blitzes to develop its African user base.
Its biggest was its exclusive sponsorship of the African Cup Of Nations, one of the largest sporting event in Africa, broadcast across 160 countries around the world. The deal made Binance the only crypto exchange for the tournament and the official partner of the Assist of the Day.
Binance said that with Africa’s 1.2 billion people, the region would lead the future of the blockchain industry.
It was a tantalizing pitch. And now, after FTX’s collapse, Binance is currently the biggest cryptocurrency exchange in West Africa.
Binance’s 2022 roundup report showed that its African market was fast developing and that its marketing efforts and campaigns were yielding success. In the report, the company currently engages with a community of 400,000 members, four times the number of African traders FTX had before its collapse.
Now, these investors are wary, especially given how misleading crypto CEOs have been to African investors.
Two days before FTX filed for bankruptcy, Sam Bankman-Fried said his company’s assets were “fine” and a just day later, he tweeted that a new currency was now available for trading in West Africa. “Hello, West Africa. XOF deposits are now live,” he said.
The now-bankrupt Celsius acted similarly, assuring customers that all was okay before abruptly halting withdrawals and filing for bankruptcy after.
Efforts by exchanges like Binance, Luno, Crypto.com, and more to pacify angsty customers—especially an Africa that was badly affected by FTX—seem almost impossible.
Africans are especially looking askance at Binance, wondering if they should still trade with it. The exchange has a history of illegally locking up trading accounts owned by Nigerians.
Zirachukwu, a Nigerian product manager who withdrew her savings from Binance after losing over $5,000 to FTX said she doesn’t trust Binance with her finances.
“If he could have that kind of power over the market after his tweet and antics, I didn’t see my money remaining safe in Binance,” she told the Daily Dot.
Elisha Owusu Akyaw, one of FTX’s former influencers who lost around $200, said the money didn’t count for much for him, but that the exchanges have lost his confidence.
“It’s the impact it has had on the reputation of the crypto industry … it’s about trust in a space I’ve dedicated most of my life to,” he told Context.
“I have reconciled myself with losing the money with FTX but the most painful thing wasn’t the money,” Victor Osaretin, a Growth Partner at Alta Global Ventures, said on Twitter. “It was the faith that was shattered.”
Other exchanges have faced similar collapses that left African investors scarred.
South African cryptocurrency exchange, Luno, was founded in 2013 to solely cater to Africa’s crypto market. Even after it was bought by U.K.-based Digital Currency Group (DCG), it still retained roots in Africa.
In November 2022, Luno announced that it wasn’t affected by the FTX fiasco, even though its sister company, Genesis had lost $175 million and faced bankruptcy concerns.
It told South Africans and other regions it served that their funds were safe as investors scampered to withdraw their money.
When Genesis tweeted about temporarily suspending its redemptions and new loan originations which would halt customer withdrawals, the general manager of Luno Africa, Marius Reitz, dismissed any worries and claimed that the exchange was “business as usual.”
However, Luno later announced the sudden shutdown of its Savings Wallet product, leaving investors with less than 12 hours’ notice.
In a last resort to save its company and protect customer funds, Luno sid it will lay off 35% of its workforce, including its South African staff.
It’s left an environment where Africans have no one to trust.
Binance, though, seems to be amplifying its marketing campaigns in Africa.
It started the year with a series of Meetups, hosting events in more than seven countries with thousands of cumulative attendees, including many more watching online, it claims.
It also seems set on infiltrating various campuses across Africa and has already started work across Ghana’s universities.
The parallel to FTX’s successful, then cataclysmic, push is hard to miss.
But Binance wants Africans to still trust it. It’s got a long way to go.