FTX equity tokens may be a scam? No evidence proves the stocks you buy actually exist!

During the FTX liquidity crisis, there were rumors that buying FTX equity tokens could be a "way out," but venture capitalist Adam Cochran later discovered that the stocks represented by these equity tokens may not even exist.

Court Documents Do Not Show Stock Assets, Original Broker Terminated Early

FTX launched its tokenized stocks market in October 2020 in collaboration with Swiss investment company Digital Assets AG DAAG and German investment company CM Equity. FTX claims that the tokens can be redeemed for dividends of the underlying stocks but do not confer governance rights.

According to their rules, tokenized stocks represent the publicly listed stocks held by the broker, which were once thought to provide effective redemptions amidst FTX liquidity concerns by having most of the crypto assets invested in this asset.

Adam Cochran stated that there should be a significant amount of tokenized stock assets, but they are not reflected in any financial reports from FTX or Alameda. Note: Users' crypto assets were also not reflected.

Furthermore, CM Equity announced publicly that they had terminated their partnership with Alameda at the end of 2021. However, stock token trading was still available until FTX shut down in 2022. The continuation of fractional shares services is managed by a Swiss company called Canco GmbH, which was acquired by FTX and became FTX Switzerland in April 2022.

FTX Switzerland: These Tokens Are Not Real Stocks

FTX Switzerland states in their agreement that these fractional share tokens can only be traded with cash or crypto assets, cannot be transferred, and can only be sold back to them. The value of the fractional share tokens is a combination of the stock and dividend values.

"Buyers do not have the right to claim actual stock ownership or shareholder rights."

FTX Still Claims to Redeem Stocks

Alarmingly, FTX's website states that holders of fractional share tokens can redeem the custodied stocks with FTX Switzerland:

The Question Arises!

Adam Cochran questions why FTX would claim this if the transactions are not based on actual stocks. Where do the dividends come from? If there are indeed stocks being custodied, why are they not found in the bankruptcy proceedings?

Even if stocks do exist, users cannot redeem them according to FTX Switzerland's terms.

Adam Cochran believes that FTX is being dishonest, suggesting that the stock tokens provided by FTX US are all; or that there are significant undisclosed stock assets. If true, this could have implications for the US market, although the actual number of stocks in existence has not been calculated.