FTX collapse leads to more cryptocurrency admissions • The Register

On Friday, cryptocurrency exchange FTX Trading Ltd. and 134 affiliated companies went into bankruptcy protection, and CEO Sam Bankman-Fried stepped down as CEO, passing control to John Ray III, who also oversaw the liquidation of Enron Corp. supervised.

The collapse of FTX, valued at $32 billion in January according to optimistic calculations, sent shockwaves through the cryptocurrency industry.

Over the weekend, trading platform BlockFi suspended withdrawals, citing “the lack of clarity on the status of FTX.com, FTX US and [Bankman-Fried’s cryptocurrency hedge fund] Alameda.”

AAX, another cryptocurrency exchange, said “withdrawals have been suspended to avoid fraud and exploitation” – the firm said it planned to update its systems to protect against fraud and malicious attacks observed in the wake of the FTX debacle.

And cryptocurrency fund Ikigai said it is lost an unknown amount of investor funds in FTX.

Hong Kong-based crypto platform Hbit Limited, a subsidiary of New Huo Technology, said it was unable to withdraw $18 million in cryptocurrency funds from FTX, of which $13.2 million represented client assets [PDF].

According to Reuters, FTX secretly transferred or loaned up to $10 billion in client funds to Alameda Research and that about $1 or $2 billion of the funds were lost.

Bankman-Fried, apparently in the Bahamas, denied Reuter’s characterization that the funds were secretly transferred, but offered no alternative explanation or explanation for the allegedly missing funds.

The connection between FTX and Alameda Research came to light on Nov. 2 when Coindesk reported that Alameda held a large amount of FTT tokens, suggesting that the two Bankman Fried-led companies were not being operated as separately as claimed became.

Changpeng Zhao, CEO of competitor Binance, said on Nov. 6 that it was planning to sell its FTT tokens, alluding to this report. This caused the price of FTT tokens to drop, and other holders of these tokens accelerated the decline by trying to sell their holdings as well. FTX failed to fund an estimated $6 billion withdrawal attempt and became illiquid – not having enough cash on hand to fulfill customer withdrawal requests.

After the crisis Binance said it would buy FTX, only to back down and cite “corporate due diligence and the latest news reports of mishandled client funds and alleged US agency investigations.”

FTX is reportedly under investigation by the US Securities and Exchange Commission and the Department of Justice. The SEC is also said to be looking into Coinbase Global and Binance.

The FTT token, which was around $26 earlier in the month, is now available for around $1.38. The bankruptcy filing of FTX Trading Ltd [PDF] Lists between assets between $10 billion and $50 billion in assets and the same range of liabilities. In the last 12 months, the cryptocurrency market cap has declined by approximately $2 trillion.

Meanwhile, Bankman-Fried, known on Twitter as SBF, has been bashful to tweet the message “WHAT’S HAPPENING…” in a series of one-character posts. We expect the “D” to fall any minute now.

Bankman-Fried was hagiographically profiled in a now-removed post on investment firm Sequoia’s website, and described by author Adam Fisher in terms that, in retrospect, seem strangely obsequious and uncritical—even for a firm that has invested $213 million in FTX. However, the play, titled “Sam Bankman-Fried Has a Savior Complex – And Maybe You Should Too,” managed to be inadvertently accurate about SBF’s ability to cut his own fortune.

“It’s hard to see SBF in a clear light,” Fisher wrote. “The glamor of the self-made billions is dazzling. His intellect is as great as it is intimidating. But when I hacked past the mountains of money and the IQ points, I found something unexpected: impoverishment. …” ®