By
Anisha Pandey
June 28th, 2024
The company said it arrived at this decision after suffering significant losses resulting from third-party hedge fund managers who held Yield App assets in custody on the collapsed exchange FTX.
The downfall of FTX continues to leave its mark on the crypto industry, with Yield App being the latest casualty. The crypto investment platform announced its decision to shut down operations, citing significant losses tied to the collapse of the exchange.
In a statement released on June 28, the Seychelles-based company disclosed that the financial turmoil caused by FTX’s implosion had severely impacted its liquidity and overall business operations.
As a result, the firm is suspending all activities on the platform as it prepares to enter liquidation proceedings with immediate effect. The company stated that this step was necessary to ensure fair and equal treatment for all its users and stakeholders.
Losses Tied to FTX Collapse
The company said it arrived at this decision after suffering significant losses resulting from third-party hedge fund managers who held Yield App assets in custody on the collapsed exchange FTX.
“This follows the realization of portfolio losses incurred through third-party hedge fund managers that held Yield App assets in custody on the collapsed cryptocurrency exchange FTX, and who are subject to ongoing litigation,” said Yield App.
The firm said its community channels on Discord and other social media platforms will no longer be accessible to users. However, Yield App said it will leave a support channel open for those that wish to reach out to the firm through its official website.
Transparency Concerns
The latest developments come as a surprise, as the company had initially told users in November 2022 that it had minimal exposure to FTX. At the time, Yield App’s Tim Frost assured customers that their funds were safe and that the firm had “no significant exposure to FTX”.
The contractual statement now raises concerns about the company’s transparency and its treatment of customers concerning their exposure limit to FTX. Despite these concerns, Yield App is not alone in feeling the aftershocks of FTX’s collapse.
Impact of FTX Collapse on Crypto Firms
FTX officially went bankrupt in November 2022, along with its associated entities, due to poor management and misappropriation of customer funds. However, the ripple effects continue to impact other companies.
Earlier this year, OPNX, a crypto exchange for trading bankruptcy claims launched by the founders of Three Arrows Capital (3AC), also wound up its operations as FTX’s bankruptcy proceedings reached their final stages. Although OPNX was not directly affected by FTX, its parent company 3AC suffered a massive liquidity crisis during the 2022 bear market caused by the exchange and Terra blockchain collapse.
Last year, Galois Capital, a hedge fund founded by Kevin Zhou, shut down its flagship fund due to significant exposure to FTX. The company announced that it lost nearly half of the fund’s capital when FTX collapsed.