NEW YORK – For a little while, it appeared that some of FTX’s American customers might escape the worst-case scenario confronting the beleaguered crypto platform.

FTX US, a separate entity from Mr Sam Bankman-Fried’s FTX.com, tweeted on Thursday that it was still operational and withdrawals were being processed as normal, even as the rest of the company came crashing down.

But after Mr Bankman-Fried’s empire filed for Chapter 11, or bankruptcy protection, on Friday, FTX US customers were ensnared in a swift financial collapse that has rattled the broader industry, shocked investors and left retail traders facing a long slog to get any of their money back.

Investors with crypto on the FTX platform – who numbered more than five million worldwide at the peak – will be closely watching the bankruptcy proceedings for any hope they might be refunded. However, many are resigning themselves to the fact that their holdings may be gone forever.

“The company and Sam Bankman-Fried seemed trustworthy,” said Mr Justin Zhang, a 34-year-old engineer in Los Angeles. “I thought FTX US was different because of all the regulations put in place, but it is not.”

While the FTX app said his withdrawal has been processed, Mr Zhang said his bank told him it has not received the notification or the funds. He fears that all his assets in FTX US, which include Bitcoin, Ether and Golden Warrior non-fungible tokens worth US$11,000 (S$15,000), may be lost for good.

CoinDesk reported that FTX US stopped processing withdrawals on Friday after the bankruptcy filing.

Bankruptcy process

FTX customers likely have a frustrating time ahead of them now that the exchange is in bankruptcy protection. Customers of Voyager Digital and Celsius Network, two crypto platforms that went bust earlier this year, are still mostly locked out of their accounts and unsure of how much money they will recover.

In general, the larger and more complex a company is, the longer it takes for insolvency proceedings to play out – and the bankruptcy of FTX appears to be the largest corporate failure so far this year.

FTX has so far said little about how it intends to repay creditors. Initial court filings offer almost no hint of a plan, and a statement from the company’s new chief executive made clear that advisers have been hired only very recently.

That is one reason why Mr Christ Keuchkerian in Quebec is resigning himself to the fact that his money is lost. He had approximately C$4,500 (S$4,660) invested on FTX.com in tokens like Bitcoin and Ether.

“I hope I am wrong, but I have come to accept that it is just all gone,” the 36-year-old said. “I am not getting one cent back.”

Failed withdrawals

Mr Garv Thakur, a 22-year-old in India who has been using FTX.com for more than a year, said he has around US$40,000 stuck on the exchange – about 80 per cent of his savings. He withdrew about US$1,000 on Tuesday at the advice of his friends, but he did not take their warnings seriously and left most of his money on the platform. Now, it is in limbo – and Mr Thakur said he is basically writing it down to zero.

Mr Thakur has not been turned off crypto entirely, but for now, he has withdrawn from all other exchanges and plans to use Binance for future crypto investing. FTX, he had thought, was a “top tier” exchange.

“I never expected this from Sam,” he said.

Still trying

Some customers are still attempting to take their money out, with little luck. FTX.com user John Pederson has about €9,000 (S$12,800) worth of crypto stuck in the now-bankrupt exchange.

The 26-year-old, who is based in Dublin, began moving his holdings in small increments to other exchanges on Nov 6. But by Tuesday morning, a request to withdraw €2,000 worth of Bitcoin failed to go through, and subsequent withdrawal requests have been stalled.

On Thursday, FTX announced it would allow users to withdraw funds by buying select tokens from the Tron network, which they could then swap to external wallets.

Mr Pederson bought TRX tokens shortly after the announcement, which were trading at an inflated price on FTX compared with other major crypto exchanges. He said his requests to transfer the TRX tokens to an external wallet have yet to be processed.

Now, about one-third of his total crypto holdings are stuck in limbo.

“I don’t think I will ever see the whole amount of it,” he said. “This was a pretty expensive lesson.” BLOOMBERG