Troubled FTT investors are turning to NFTs as a way to get their money back. Decoding…

A prominent cipher voice on Twitter, @ 0xfoobar, revealed that many FTX users have purchased non-fungible tokens (NFTs). These users purchased NFTs from Bahamian holders to save themselves from the FTX crisis.

FTX compliance with regulators in the Bahamas has allowed desperate FTX users to get their locked in cash by buying nearly worthless NFTs.

FTX declared bankruptcy on November 11. FTT investors will likely have to wait months, or even years, to get their deposit back, assuming they can at all. Since FTX had blocked transactions, customers realized that it would be a better option to purchase NFTs from Bahamian holders after paying a fee.

How NFT Transactions Happen on FTX

A user from the Bahamas can exploit the loophole by buying NFT for $1 and then listing it with the amount of the reserved funds plus a fee of, say, $10 million. If an FTX customer purchases $10 million worth of NFTs, the money will be transferred to the Bahamas seller’s account and can then be redeemed from the exchange.

The Bahamian will list the NFT (which he already owned or could have purchased at the time) and the person with whom he had a deal would buy it.

Twitter user @0xfoobar also noted that the FTX Crypto Cup 2022 Key NFT suite was purchased for $2.5 million and $999,999. In addition, “Great Ape” recently sold several paintings worth hundreds of thousands of dollars, including “Monkey Art No. 312” for 10 million dollars.

Since FTX charged a fee of 2% every time an NFT transaction was made, the company likely made hundreds of thousands of dollars from these sales.

Possible federal crime?

Twitter handler @Loopifyyy also indicated that the vulnerability was resolved in the early hours of November 11, but not before the FTX market saw a trading volume of $50 million.

Matthew Gould, partner and bankruptcy attorney at Kleinberg Kaplan, told Fortune that clients who exploited this loophole may have violated federal law. It was because they had taken assets from a bankrupt estate on false pretenses. However, whether merchants who exploited the loophole are penalized may also depend on whether or not they are based in the United States.

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