A Former FTX Exec is Launching a New Crypto Exchange

What could possibly go wrong?

From Ashes Rise

Some of FTX's ex-employees, including an executive who testified against Sam Bankman-Fried, are starting a new crypto exchange.

As the Wall Street Journal reports, former FTX general counsel Can Sun and Armani Ferrante, the founder of a crypto token company that the exchange invested in, are starting a new venture — and claim they're using FTX's mistakes as their foundational ethos.

Last month, Dubai's crypto regulator gave Sun a license to operate a crypto exchange under his startup holding company Trek Labs. Ferrante, meanwhile, is listed as the CEO of the crypto wallet tech company Backpack in filings from the British Virgin Islands, the WSJ reports.

Backpack Exchange, which the pair plan to do business under, plans to let users hold their crypto in what they're calling "self-custody" wallets, which they say means the company itself won't have access to their funds.

The self-custody part of the pitch appears to be most directly inspired by the FTX debacle, when the exchange pilfered user funds to pay back debts. Tens of millions of those stolen dollars belonged to Ferrante, whose crypto company, Coral, kept all its money on FTX's exchange.

Claire Zhang, Ferrante's wife and Sun's former legal deputy at FTX, is also part of Backpack's foundational team, though she says that she plans to help out until the company raises the $100 million in seed funding it's looking for, the WSJ reports. She's also, per her comments to the newspaper, working without pay as she helps "bootstrap the exchange."

Ethical Disclosures

The past few months, it seems, have been busy for FTX's former general counsel between testifying against SBF and now starting the new firm.

Sun maintains that he was unaware of Alameda Research, FTX's insolvent sister firm, using the exchange as a slush fund, and that when Bankman-Fried asked him for legal cover, he resigned. The attorney went on to cooperate with federal prosecutors in exchange for his own non-prosecution agreement, though to hear him put it, he also did so because it was the right thing to do.

"This went against everything that I stood for and was represented to me by [SBF]," Sun told jurors during his testimony at Bankman-Fried's trial in October.

Though it's certainly eyebrow-raising that FTX alums are starting a new crypto venture  — and that they registered their paired business entities offshore — the Backpack founders talk a big talk, at least when it comes to the kind of ethical exchange they hope to build.

"In a post-FTX world," Sun told the WSJ, "you need trust and transparency to create a true alternative to the other players."

More on crypto: SEC Chair Says Fine, Go Ahead and Start FTX Up Again