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Inside the breakout crypto exchange, backed by a British millionaire, now fighting for survival



His  wealth  in London real estate isn't But Jonathan Sandelson, a prominent British real estate magnate, was more than an investor in LBX founder Ben Dives'  vision of a digital exchange  for the British masses. He was a friend and mentor first and foremost Having hired Dives straight out of university as his driver in 2001. Seemingly having forgiven Dives for scratching his luxury car in their early days, the two bleeding went into business in 2017, riding the bitcoin wave.

It looked to be another solid investment. The press flocked to LBX after they launched in November 2017 with plans for a crypto Visa debit card, boasting on-shore banking and compliant oversight. They signed up around 10,000 early users within months, promising to “bridge the gap” for those lacking crypto knowledge but wanting to take part. They brought in a former UBS senior manager as Chairman.

Two executives, Adam Lee and John McLeod, have resigned (their wages to be paid in arrears). Their prime product – the Visa Dragoncard – never launched. And a swathe of banking and legal setbacks has left the firm on the brink of extinction.

Following a month-long investigation by The Block and amid an onslaught of online accusations, we go inside the exchange and its strained two-year history. Where did it all go wrong? Where did the funds go? And is there a chance of survival?

At its core, LBX’s woes today are the product of having bitten off more than it could chew. And a serious dose of bad luck.

The remainder of the year saw going-to-market costs spiral. Dives provided an accounting overview of how £2 million disapparated quicker than expected, listing “staff, suppliers, HMRC [tax], tech, advisors, consultants, banking fees [near £20,000 per month], security firms, accountants, lawyers, compliance, branding, advertising, PR.” He added that they had opted to build “an exchange that was [regulatorily] robust, and that was expensive.”

Then, the firm hit every exchange’s worst nightmare. A compliance glitch saw LBX being targeted by a money laundering unit, resulting in several accounts being temporarily frozen at behest of a court order. Asked if LBX cut costs on compliance, Dives argues the opposite happened.

Dives had been acting as chief compliance officer at the time after parting ways with the individual contracted to lead compliance, with whom there is now an ongoing legal dispute. He says a new reporting officer is due to start in May.

The funding issues culminated when their representative law firm, Squire Patton Boggs, issued a public “winding-up petition” for a billing conflict. If successful, the petition forces a company into liquidation to pay back its debtors. Dives says LBX paid a £9,900 bill but were then asked to pay another lump sum, resulting in the dispute.

Squire Patton Boggs could not comment further when approached by CoinDesk. The Royal Court’s cost officer will give a verdict tomorrow.

Operation salvation

“Starting an exchange is either an incredibly brave or stupid thing to do,” he says. “It is a game of risk management…It’s consistently high emotions because it’s high risks and it’s money. It brings out the most extreme aspects of humanity… It’s terrifying.”

Beyond that, the goal is to become the 'Silvergate of the UK.'

Now Dives is projecting LBX Pay will see revenues of over £10 million in the next 5 years, hoping for a lucrative exit strategy. The hope is that a clean sheet will be enough to steady the ship and lure in both clients and investors.

"Look I'm 40, I'm not messing around, I really want to make this work."

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