Author: Reuters

By Dietrich Knauth

(Reuters) – The U.S. Department of Justice’s bankruptcy watchdog on Thursday called for an ihttp://content.reuters.com/auth-server/content/tag:reuters.com,2022:newsml_RC26JX9BBGZW:1692162663/tag:reuters.com,2022:binary_RC26JX9BBGZW-BASEIMAGE?action=download&mediatype=picture&mex_media_type=picture&token=%22mwBUp%2BosqWSEU3ejd4TI%2F34aSJDP2atyImvrSv5CoSE%3D%22ndependent investigation into the collapse of crypto exchange FTX, saying customers need a neutral party to investigate allegations of “fraud, dishonesty, incompetence, misconduct, and mismanagement.”

FTX has ousted founder Sam Bankman-Fried, and new CEO John Ray, who was hired to steer the company through bankruptcy, has said investigating FTX’s implosion and recovering customer assets are among his top priorities.

The DOJ’s Office of the U.S. Trustee said in a filing in Delaware bankruptcy court that it did not question Ray’s competence or earnestness, but an independent investigation would carry more weight with FTX customers and allow Ray to devote more energy to stabilizing FTX’s operations.

FTX did not immediately respond to a request for comment.

“The questions at stake here are simply too large and too

important to be left to an internal investigation,” U.S. Trustee Andrew Vara wrote in court papers.

Ray has said the lapses in oversight, security and corporate governance he identified were greater than in any other process he has managed in his 40 years as a bankruptcy specialist.

A neutral examiner would also provide more public and transparent findings than an internal review, the U.S. Trustee wrote, which is “especially important because of the wider implications that FTX’s collapse may have for the crypto industry,” Vara added.

FTX filed for bankruptcy in November after a week in which a possible merger with rival crypto exchange Binance failed, FTX founder Sam Bankman-Fried was faced with allegations he had funneled customer deposits to FTX’s affiliated trading firm Alameda Research, and the exchange experienced withdrawals of about $6 billion in just 72 hours.

Bankman-Fried has said he is “deeply sorry about what happened” and acknowledged a “massive failure of oversight of risk management,” but said he did not intentionally commingle FTX’s user deposits with Alameda’s trading activity.

Examiners have been appointed in the bankruptcies of crypto companies Celsius Network and Cred Inc.

(Reporting by Dietrich Knauth, Editing by Alexia Garamfalvi and Lincoln Feast.)

By Dietrich Knauth

(Reuters) – 2022 has been a rough year for the crypto industry. The price of bitcoin has dropped 65% since the start of the year, the cryptocurrency Luna suffered a total collapse in value, and crypto exchange FTX went from buying Super Bowl ads to crash landing into bankruptcy.

Here are the major crypto companies that have gone bankrupt in 2022.

FTX

FTX’s implosion was the biggest and most spectacular crypto downfall in 2022 thus far. The Bahamas-based exchange started the year with a $32 billion valuation, hired celebrities including Larry David and Tom Brady for flashy Super Bowl ads, and put its name on the home arena of the NBA’s Miami Heat. FTX, which said it had more than a million users, positioned itself as a “white knight” that could rescue other crypto firms amid market turbulence earlier this year.

But by November, FTX went bankrupt after a week in which a possible merger with rival crypto exchange Binance failed, FTX founder Sam Bankman-Fried dealt with allegations that he had funneled customer deposits to FTX’s affiliated trading firm Alameda Research, and the exchange suffered withdrawals of about $6 billion in just 72 hours. Bankman-Fried has said he is “deeply sorry about what happened” and acknowledged a “massive failure of oversight of risk management,” but said he did not intentionally commingle FTX’s user deposits with Alameda’s trading activity.

John Ray, the new CEO brought in to oversee FTX’s bankruptcy, said he had never before seen “such a complete failure of corporate controls” – and Ray was the executive tasked with cleaning up Enron’s debts in the wake of its early-2000s accounting fraud scandal.

BLOCKFI

Crypto lender BlockFi was the first crypto company to follow FTX into bankruptcy, filing for Chapter 11 about two weeks after FTX’s collapse.

BlockFi had several ties to FTX, and it had relied on a $400 million FTX credit facility to stay afloat after competing crypto lenders Voyager Digital Ltd and Celsius Network went bankrupt as a result of market turbulence earlier in 2022.

BlockFi has previously said it had 450,000 users and intends to ask a bankruptcy judge to allow some of them to withdraw funds. The users that would be able to withdraw funds have non-interest-bearing BlockFi Wallet accounts, which BlockFi created earlier this year as part of a $100 million settlement with the U.S. Securities and Exchange Commission.

THREE ARROWS CAPITAL

The crypto hedge fund Three Arrows Capital (3AC) was the first major crypto firm to go bankrupt in 2022, brought down by the collapse of cryptocurrencies Luna and TerraUSD in May. Those meltdowns roiled crypto markets around the world, wiped out $42 billion in investor value, and led to an arrest warrant in South Korea for the cryptocurrencies’ developers.

Singapore-based 3AC, which was reported to have $10 billion in cryptocurrency earlier in 2022, began bankruptcy proceedings in the British Virgin Islands in June.

Professionals overseeing 3AC’s liquidation have said that its founders fled overseas and are not cooperating with efforts to recover assets for creditors.

VOYAGER DIGITAL

Voyager, a New Jersey-based crypto lender, in July filed for bankruptcy in the United States after 3AC defaulted on a crypto loan worth more than $650 million.

Voyager had hoped to move its bankruptcy quickly through the U.S. court system, having reached an agreement in September to sell its assets for $1.4 billion in crypto to FTX.

The proposed sale fell through following FTX’s implosion, and Voyager reopened discussions with other potential buyers, including the crypto exchange Binance.

CELSIUS NETWORK

Another crypto lender brought down by the Terra and Luna collapse, Celsius Network began its U.S. bankruptcy case in July on rockier footing than Voyager.

Since then, Celsius has been embroiled in disputes over fraud investigations, disparate treatment of customer accounts, customer privacy, and its spending on a new bitcoin mining facility.

Celsius’ bankruptcy judge has appointed an examiner to investigate whether Celsius operated as a Ponzi scheme and to broadly review the company’s finances. Celsius has said it welcomed an independent review, but it expressed concern about overlapping investigations undertaken by its creditors, state securities regulators and the bankruptcy examiner.

(Reporting by Dietrich Knauth in New York; Editing by Noeleen Walder, Alexia Garamfalvi and Matthew Lewis)

WASHINGTON (Reuters) – The collapse of Bahamas-based cryptocurrency exchange FTX points up the need for the United States to cooperate with other countries to develop effective international regulations for the crypto sector, U.S. Deputy Treasury Secretary Wally Adeyemo said on Thursday.

Adeyemo told the Reuters NEXT conference that it was important to erect regulatory regimes to protect investors, consumers and financial stability and block illicit uses of cryptocurrencies. Because FTX was not a U.S.-based firm, the effort must broadened, he said.

“This is a global phenomenon. And what that means is that we’re going to have to work closely with our international partners to design a regulatory regime in a framework that helps us to make sure we protect the global economy as we think about innovation like cryptocurrency,” Adeyemo told Reuters NEXT.

To view the Reuters NEXT conference live on Nov. 30 and Dec. 1, please click here [https://www.reuters.com/world/reuters-next/]

(Reporting by Dan Burns and David Lawder; Editing by Chizu Nomiyama)

By Peter Thal Larsen

(Reuters) – London Stock Exchange Group Plc Chief Executive David Schwimmer said on Thursday that large spikes in volume associated with algorithmic trading have worsened recent market volatility, exposing weak links in the global market infrastructure.

“What that means is when there’s an event … some kind of crisis like the onset of COVID in the spring of 2020, you see massive moves in the markets very quickly, and a lot of the plumbing out there cannot handle that,” he said in an interview at the Reuters NEXT conference.

At the onset of the COVID pandemic in March 2020, some banks asked LSEG to close its markets for a day or two so they could catch up with post-trade settlement and processing, he said.

“We didn’t do that, obviously, because it’s important for us to keep the markets open and maintain that functionality, but I mentioned that because it’s where there may be some progress made over time,” he said.

Volatility across markets has soared this year, as global central banks have jacked up rates to grapple with the worst outbreak of inflation in decades, sparking wild fluctuations in the prices of currencies, stocks and bonds.

Equity markets around the globe have been particularly turbulent. One-month volatility for the MSCI world equity index, which tracks shares in 47 countries, averaged 19 this year, compared with an average of 11 for the prior 10 years, according to Refinitiv data.

Another area of concern is in the private equity and debt markets, which have grown quickly in recent years, while using lots of leverage, but with very little transparency, he said.

“A lot of people are sort of wondering and watching, how does that play out as rates continue to go up,” he said.

Regarding cryptocurrencies, Schwimmer said it is not surprising that the zeal around the assets has died down as interest rates are going up, as the recent explosion in enthusiasm around crypto can be seen as a byproduct of excess liquidity in the financial system while interest rates were in negative territory.

Cryptocurrencies have also been under pressure this year after a string of high-profile bankruptcies at crypto lenders and exchanges, the biggest being FTX, which collapsed after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal. FTX’s failure has left an estimated 1 million creditors facing losses totaling billions of dollars.

The price of bitcoin is hovering around $17,000, down about 75% from its record high of around $69,000 in November.

LSEG has taken a cautious approach to crypto and does not provide digital asset trading, but it provides data on digital assets and Schwimmer said the exchange operator is “open to doing a lot of work with the underlying technology.”

“So not crypto trading, but I’ll call it digital technology, whether that’s digital ledger technology, whether it’s digitization in other forms, there are a number of different aspects that can benefit from improved digitization,” he said.

LSEG’s purchase of Refinitiv, which it bought for $27 billion in 2021, turned the 300-year-old exchange into a major market data player, but outages and sums invested in integration raised concerns among some investors.

Thomson Reuters, which owns Reuters News, has a minority shareholding in LSEG.

(Reporting by Peter Thal Larsen and John McCrank in New York and Noor Zainab Hussain in Bengaluru; Additional reporting by Saqib Iqbal Ahmed in New York; Editing by Matthew Lewis)

WASHINGTON (Reuters) – The U.S. Commodity Futures Trading Commission (CFTC) chairman Rostin Behnam told lawmakers on Thursday that he met with former FTX chief executive officer Sam Bankman-Fried 10 times to discuss the company’s clearing house application.

Behnam said he and his team met with Bankman-Fried and his FTX team 10 times over the past 14 months in addition to follow-up calls and messages.

“We were doing what we were required to do by law,” he said during a Senate hearing into the FTX collapse.

(Reporting by Chris Prentice and Hannah Lang)

WASHINGTON (Reuters) – FTX founder Sam Bankman-Fried said there was a borrowing-lending facility at the cryptocurrency exchange but he did not know of deposits being used to pay its affiliated trading firm Alameda Research, he told ABC News in an interview aired on Thursday.

Asked if he knew whether funds were being funneled to Alamed, FTX’s former chief executive officer told ABC: “I did not know that there is any improper use of customer funds.”

(This story has been corrected to fix headline to say “not”, not “now”)

(Reporting by Susan Heavey)

By Alun John

LONDON (Reuters) – The dollar weakened to three month-lows against the yen and the pound on Thursday, after comments by Fed Chair Jerome Powell that U.S. rate hikes could be scaled back “as soon as December”, but the euro failed to climb past a major resistance level.

The aggressive pace of U.S. Federal Reserve rate increases this year has sent the dollar soaring, thanks to higher U.S. benchmark yields and fears the central bank would push the U.S. economy into recession in its attempts to combat inflation.

But Powell said on Wednesday that “slowing down at this point is a good way to balance the risks”.

He added, however, that controlling inflation “will require holding policy at a restrictive level for some time”.

Markets are pricing in a 80% probability that the Fed increases rates by 50 basis points at the next meeting, versus a 20% chance of another 75 basis point hike according to CME’s Fedwatch tool.

The greenback tumbled as much as 1.64% to 135.85 yen, its lowest level since August 23, but then recovered to 136.26.

The dollar-yen pair is extremely sensitive to changes in long-term U.S. Treasury yields, which fell after Powell’s comments and hit a two month low of 3.587% in London trading Thursday.

The pound also gained sharply, rising 0.88% to $1.2164, its highest since 12 August, hovering around its 200 day moving average.

Traders are also looking out for Thursday’s U.S. personal consumption expenditure price index to see if that offers any further insights into the inflation situation and hence the Fed’s hiking plans, and also Friday’s U.S. jobs data.

But both could be overshadowed by Powell’s remarks.

Simon Harvey, head of FX analysis at Monex Europe said he thought markets would largely look through PCE data and even when it came to Friday’s jobs data “if they weaken substantially then the market moves, if they stay the same, we’re onto thinking about CPI”.

The euro also made some gains, up 0.38% to $1.04485, but was holding off from making another effort to cross the $1.05 level.

“Euro-dollar has had two failed runs at $1.05. We’re looking to see if there is something that is going to drive things through those barriers,” Harvey said, referring both to the euro at that level and sterling-dollar’s 200 day moving average of $1.22155

The dollar weakened against most other G10 currencies, falling 0.2% against the Swiss franc while the Australian dollar reached $0.684, the highest since Sept. 13 and the New Zealand dollar touched $0.636, the highest since Aug. 17.

The Aussie and kiwi have also been buoyed by signs the Chinese government will relent on its zero-COVID policy.

Giant cities Guangzhou and Chongqing announced easings of COVID curbs on Wednesday, while officials in Zhengzhou, the site of a Foxconn factory that is the world’s biggest maker of Apple iPhones and has been the scene of worker unrest over COVID, also announced the “orderly” resumption of businesses.

China’s yuan saw some volatility in offshore trading after media reports that the capital Beijing would allow some people to home-quarantine. The dollar was last 0.3% stronger at 7.068 yuan after having weakened as much as 0.3% to a two-week low of 7.0256.

(Reporting by Kevin Buckland; Editing by Stephen Coates, Ana Nicolaci da Costa, William Mallard, Alex Richardson and Alexander Smith)

By Lawrence White and Iain Withers

LONDON (Reuters) – HSBC has identified $1.7 billion of extra costs that can be stripped out next year, Chief Executive Noel Quinn said on Friday, as the bank battles to improve returns amid calls for it to be broken up by its biggest shareholder.

The cuts – on top of existing targeted savings – are needed to help HSBC control costs amid high inflation, Quinn told a Financial Times conference in London, adding the bank’s overall target of costs rising 2% next year remained unchanged.

“That’s how I’m going to deliver 2%,” Quinn said. “I’m not going to pretend it’s easy.”

At third quarter earnings in October, HSBC estimated it would make $1 billion of additional savings in 2023. The extra cuts will include closing down portfolios, but most planned job cuts were already in place, Quinn said.

The bank has stepped up moves to trim underperforming businesses, agreeing the sale of its Canadian retail bank to RBC this week and kick-starting a review of its consumer operations in New Zealand.

Quinn also said he did not believe a campaign calling on the bank to split itself up by its biggest investor, Chinese insurer Ping An, was politically motivated.

HSBC has come under concerted pressure from Ping An Insurance Group, which has urged the bank to split off its Asian business to boost returns.

The campaign has come amid rising geopolitical tensions between China and the West, leading to speculation Ping An’s move could at least partly be prompted by Beijing.

“No, I do not believe it’s politically motivated, based on all of the dialogue that we’ve had with various stakeholders,” Quinn said.

He said other institutional shareholders he had spoken to saw no economic rationale for splitting up HSBC further.

He also reiterated his faith in the bank’s second home of Hong Kong, despite concerns among Western financial firms that Beijing’s tightening grip on the city is eroding its autonomy and value as a financial hub.

“I also believe Hong Kong will remain an international financial centre,” Quinn said, adding the hub was likely to remain the best international capital market for Chinese companies.

Quinn said he planned to stay at the helm of the bank for “many more years” to see his plans through, if the board remained happy with his efforts.

He also reiterated his sceptical stance on cryptocurrencies, saying the bank had no plans to go into offering crypto to retail investors nor to start a trading desk for digital currencies, in contrast to some other big banks.

(Reporting by Lawrence White and Iain Withers; Editing by Jan Harvey and Mark Potter)

(Reuters) – TP ICAP has obtained a license to register as a cryptoasset exchange provider with UK’s financial regulator through its Fusions Digital Assets marketplace, the world’s largest inter-dealer broker said on Thursday.

The company added the crypto exchange platform, which is for institutional investors only, will be operated by its unit Tullett Prebon Ltd.

(Reporting by Sinchita Mitra in Bengaluru; Editing by Savio D’Souza)

By Hannah Lang

(Reuters) – A leading U.S. financial regulator is set to be grilled by lawmakers on Thursday about the spectacular collapse of cryptocurrency exchange FTX and whether authorities could have done more to prevent it.

In the first of several congressional hearings to examine FTX’s failure, members of the Senate Agriculture Committee are likely to press Rostin Behnam, chairman of the Commodity Futures Trading Commission, over whether the turmoil could have been avoided with better oversight.

The hearing, entitled “Lessons Learned From the FTX Collapse, and the Need for Congressional Action”, will take place at 10am Eastern Time (1500 GMT).

The committee, which oversees the CFTC, could also press Behnam on meetings between the commodities regulator and FTX staff, including founder Sam Bankman-Fried. The CFTC had “many meetings” with FTX over its application to directly clear customer trades, Behnam said Monday at a Financial Times event. The plan was pulled after FTX filed for bankruptcy.

CFTC declined comment. Offices for Sen. Debbie Stabenow, the Democratic chair of the Senate Agriculture Committee, along with its Republican ranking member Sen. John Boozman did not immediately respond to a request for comment.

FTX filed for bankruptcy and Bankman-Fried stepped down as chief executive on Nov. 11, days after traders pulled $6 billion from the platform and rival exchange Binance abandoned a rescue deal.

Behnam has previously requested more authority from lawmakers to regulate digital assets at the CFTC. Still, more clearly defined rules may not have prevented FTX’s demise, he said on Monday.

The CFTC, which typically oversees derivatives markets dominated by large players like money managers, has the authority to crack down on fraud and misconduct, but does not have the power to regulate spot markets.

Regulators are also squabbling over who should take primary responsibility for overseeing the crypto market. Many Senate Agriculture Committee members have previously agreed with Behnam that the CFTC should take on a larger role.

But the U.S. Securities and Exchange Commission has more expertise overseeing markets in which individual investors are involved. SEC Chair Gary Gensler has said he expects his agency to be the primary regulator because he considers most crypto tokens to be securities.

Thursday’s hearing could provide the first look at whether the FTX blowup has changed lawmakers’ stances on how to set up a framework for crypto regulation.

FTX’s downfall will be examined in several more congressional hearings this month, with the House Financial Services Committee set to hold the first in a series of meetings on Dec. 13.

The committee has said it expects to hear from Bankman-Fried, FTX and its affiliated trading firm Alameda Research, as well as Binance.

(Reporting by Hannah Lang in Washington; editing by Lananh Nguyen and Lincoln Feast.)

By Carolina Mandl

NEW YORK (Reuters) – BlackRock Inc Chief Executive Larry Fink said on Wednesday that there appear to have been “misbehaviors” by the now-bankrupt FTX crypto exchange, but that the technology behind crypto is relevant for the future.

“We’re going to have to wait to see how this all plays out (with FTX),” Fink said. “I mean, right now we can make all the judgment calls and it looks like there were misbehaviors of major consequences.”

He made the comments at an event hosted by the New York Times DealBook, adding he believes that most crypto firms “are not going to be around” in the future.

FTX filed for Chapter 11 bankruptcy protection in the United States on Nov. 11 following its precipitous collapse, saying it could owe money to more than 1 million creditors.

BlackRock invested $24 million in FTX through a billionaire fund it manages, he said. Other global asset managers such as Temasek Holdings, venture capital fund Tiger Global and Sequoia Capital have also invested in Sam Bankman-Fried’s FTX.

Despite all the problems around FTX, Fink said he considers the technology behind crypto “will be very important.” He added: “I believe the next generation for markets and next generation for securities will be tokenization of securities.”

Earlier on Wednesday, U.S. Treasury Secretary Janet Yellen said she remains skeptical about cryptocurrencies and called for regulation.

Fink gave a gloomy picture of the economy, citing a higher-than-usual inflation rate, elevated interest rates and lower growth, and limited room for fiscal stimulus.

“We’re actually going to enter a period of more what I would call malaise,” he said. “We’re just not going to have an economy that is based on real growth that we were accustomed to.”

Still, he believes the environment for investments is more favorable, especially in investments that rise with interest rates.

(Reporting by Carolina Mandl in New York; Editing by Matthew Lewis)

(Reuters) – Sam Bankman-Fried, the founder and former CEO of now-bankrupt crypto exchange FTX, attempted to distance himself from any suggestion of fraud in his first public appearance since his company’s collapse stunned investors and left creditors facing losses totaling billions of dollars.

Speaking at the New York Times’ Dealbook Summit with Andrew Ross Sorkin, Bankman-Fried said that he did not knowingly commingle customer funds on FTX with funds at his proprietary trading firm, Alameda Research.

The liquidity crunch at FTX came after Bankman-Fried secretly moved $10 billion of FTX customer funds to Alameda Research, Reuters reported, citing two people familiar with the matter. At least $1 billion in customer funds had vanished, the people said.

Bankman-Fried told Reuters the company did not “secretly transfer” but rather misread its “confusing internal labeling.

FTX filed for bankruptcy and Bankman-Fried stepped down as chief executive on Nov. 11, after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.

“By late on Nov. 6 we were putting together all of the data… that obviously should have been part of the dashboards I was always looking at… and when we looked at that, there was a serious problem there,” Bankman-Fried said.

Bankman-Fried added that he “didn’t ever try to commit fraud” and that he was “shocked” by the events of the past few weeks that led to the company’s demise.

The implosion marked a stunning fall from grace for the 30-year-old entrepreneur who rode a cryptocurrency boom to a net worth that Forbes pegged a year ago at $26.5 billion. After launching FTX in 2019, he became an influential political donor and pledged to donate most of his earnings to charities.

Since FTX filed for bankruptcy, Bankman-Fried has distanced himself from the image he projected in media interviews and on Capitol Hill, telling a Vox reporter his advocacy for a crypto regulatory framework was “just PR” and his discussions on ethics within the industry were at least partly a front.

(Reporting by Carolina Mandl and Lananh Nguyen in New York; writing by Hannah Lang in Washington; editing by Megan Davies and Deepa Babington)

By David Lawder

NEW YORK (Reuters) – U.S. Treasury Secretary Janet Yellen on Wednesday said social media company Twitter should be held to certain standards for content, arguing that it is “not that different” from radio stations and broadcasters subject to such rules.

Speaking at the New York Times Dealbook Summit in New York, Yellen also said she believed that there were legitimate national security concerns related to TikTok, the Chinese-owned video sharing app.

Yellen declined to say whether the Treasury-led Committee on Foreign Investment in the United States (CFIUS) was conducting a review of Twitter after some calls for a probe of a Saudi Arabian stake in the company after billionaire Elon Musk’s takeover of the platform.

She said CFIUS looks closely at acquisitions and investments in U.S. firms by foreign buyers that could pose national security risks.

“I’m not going to say specifically what we are or aren’t looking at,” Yellen said. “We don’t comment on work that’s in progress. But if there are such risks, it would be appropriate for CFIUS to have a look.”

Musk on Monday accused Apple of threatening to block Twitter from its app store and said Apple was pressuring Twitter over content moderation demands.

Yellen said she believed it was appropriate for mobile technology giants Apple and Google to demand certain content standards.

“I think it’s a good thing, if Apple is looking at the content. Most broadcast stations are subjected to standards in terms of what they broadcast to the public. And Twitter’s not really that different than other broadcast stations,” Yellen said.

Asked if it was good that such platforms were overseeing content, Yellen said. “It’s a kind of control that I think is needed.”

Regarding TikTok, which U.S. FBI Director Chris Wray said raises national security concerns due to the risk that the Chinese government could harness the video-sharing app to influence users or control their devices, Yellen said she also believed there were “legitimate national security concerns.”

“That’s something that’s a case in progress,” Yellen added.

(Reporting by David Lawder, Writing by Andrea Shalal, Editing by Franklin Paul and Andrea Ricci)

By David Lawder

NEW YORK (Reuters) – U.S. Treasury Secretary Janet Yellen on Wednesday said recent turmoil in the cryptocurrency market has not spilled over to the banking sector, but she remained skeptical about the industry and believed it needed adequate regulation.

Yellen told an event hosted by the New York Times DealBook that it was important to ensure that crypto assets had adequate customer protections.

“I have been skeptical, and I remain quite skeptical,” she said.

She added it was important to remain open to financial innovations, especially if they could lower the cost of cross-border transactions and help improve financial inclusion, but said that was not what recent developments had been about.

“I think everything we’ve lived through over the last couple of weeks, but earlier as well, says this is an industry that really needs to have adequate regulation. And it doesn’t,” she said.

Cryptocurrency exchange FTX, which filed for bankruptcy in Delaware on Nov. 11, had said it owes its 50 biggest creditors nearly $3.1 billion. The high-profile crypto blowup left an estimated 1 million customers and other investors facing total losses in the billions of dollars.

Yellen told DealBook that the United States was involved in discussions with allies about regulating cryptocurrencies and the Treasury Department had also done a number of reports mapping out “significant” concerns.

One key priority, she said, would be to ensure protection of customer assets and segregation of those assets to prevent problems such as those seen with FTX.

The cryptocurrency crisis amounted to a “Lehman moment” for the sector, Yellen said, referring to the 2008 bankruptcy of Lehman Brothers investment bank, which triggered a huge stock market downturn and led to a $700 billion bailout of financial players by the U.S. government.

“The good piece of an explosion like we saw is that it hasn’t spilled over to the banking sector. Banking regulators have been very careful about crypto,” she said.

“It’s a Lehman moment within crypto, and crypto is big enough that we’ve had substantial harm with investors.”

(Reporting by David Lawder and Andrea Shalal in Washington; Editing by Matthew Lewis)

(Reuters) – A Democratic senator and chair of a key committee on Tuesday pressed U.S. Treasury Secretary Janet Yellen for help in securing legislation to better regulate cryptocurrency, the latest sign of mounting pressure for better regulations following the collapse of crypto exchange FTX.

Ohio Sen. Sherrod Brown also urged the Financial Stability Oversight Council (FSOC), a U.S. regulatory panel comprising top financial regulators, to find ways to enhance crypto asset disclosures and bolster market integrity.

“It is crucial that risks in this area are contained and do not spillover into traditional financial markets and institutions, and we draw the correct lessons regarding customer and investor protection,” Brown said.

(Reporting by Hannah Lang in Washington)

FRANKFURT (Reuters) – Bitcoin is being artificially propped up and should not be legitimised by regulators or financial companies as it heads for “irrelevance”, the European Central Bank said on Wednesday.

Bitcoin and other cryptocurrencies have been variously presented as an alternative form of money and a shield from the inflationary policies pursued by major central banks such as the ECB in recent years.

But a 75% fall over the past year, just as inflation reared its head, and a string of scandals including the collapse of the FTX exchange this month has given critics among central bankers and regulators ammunition to fight back.

The value of bitcoin peaked at nearly US$69,000 in November 2021 before falling to around US$17,000 by mid-June 2022, where it is still hovering now.

In a blog post using unusually scathing language, the ECB said bitcoin’s recent stabilisation was “an artificially induced last gasp before the road to irrelevance”.

“Big bitcoin investors have the strongest incentives to keep the euphoria going,” authors Ulrich Bindseil and Juergen Schaaf wrote. “At the end of 2020, isolated companies began to promote bitcoin at corporate expense. Some venture capital firms are also still investing heavily.”

They said VC investments in the crypto and blockchain industry totalled $17.9 billion as of mid-July but did not provide evidence of price manipulation.

Regulators all over the world are drafting rules for the crypto world, a complex ecosystem that ranges from stablecoins supposedly backed by conventional currencies to forms of lending that happen on the blockchain, or distributed ledger, that underpins those coins.

The ECB blog said regulation could be “misunderstood for approval”.

“Since Bitcoin appears to be neither suitable as a payment system nor as a form of investment, it should be treated as neither in regulatory terms and thus should not be legitimised,” Bindseil and Schaaf said.

They added the involvement of asset managers, payment service providers, insurers and banks with crypto “suggests to small investors that investments in bitcoin are sound”.

“The financial industry should be wary of the long-term damage of promoting bitcoin investments – despite short-term profits they could make,” the authors of the blog said.

The ECB’s words carry weight because it is the top supervisor of euro zone banks and has a say on the European Union’s financial regulation.

ECB President Christine Lagarde said on Monday the EU’s Market in Crypto-assets Regulation (MiCA), which is in the process of being approved, would likely need to be broadened out in a future iteration that she branded “MiCA 2”.

This was a likely reference to Bitcoin, which eludes MiCA because it does not have any legal entity in the EU, meaning that only platforms for exchange are captured by the rules.

(This story has been corrected to fix spelling of one of the authors’ name)

(Reporting by Francesco Canepa, Editing by Louise Heavens)

(Reuters) – Bitfront, a U.S. crypto exchange backed by Japanese social media firm Line Corp, said it has suspended new sign-ups and credit card payments and will cease operations in a few months despite efforts to overcome challenges in the rapidly evolving industry.

“However, despite our efforts … we have regretfully determined that we need to shut down BITFRONT in order to continue growing the LINE blockchain ecosystem and LINK token economy,” the California-based company said in a statement on its website on Sunday.

Bitfront said the move is unrelated to recent issues among certain crypto exchanges that have been accused of “misconduct”.

FTX, which was among the world’s largest cryptocurrency exchanges, is now the subject of investigations by authorities for “criminal misconduct”.

The company had filed for bankruptcy earlier this month, while cryptocurrency lender BlockFi filed for Chapter 11 bankruptcy protection on Monday, hurt by exposure to the collapse of FTX.

Bitfront said it has suspended new sign-ups and credit card payments as of Nov. 28, and will suspend withdrawals on March 31, 2023. The company clarified that interest for deposits made between Dec. 5 and Dec. 11 will be paid out on Dec. 13, 2022.

(Reporting by Rahat Sandhu and Maria Ponnezhath in Bengaluru; Editing by Sherry Jacob-Phillips)

LONDON (Reuters) – FTX’s venture capital arm has assets that could be worth investing in, but since the failed crypto exchange has entered Chapter 11 bankruptcy proceedings the process could take time, cryptocurrency entrepreneur Justin Sun said on Wednesday.

“FTX Ventures still has lots of portfolio (companies) and we are going through them one by one, but right now it is already in the Chapter 11 process so it might take a longer time to finish the process,” Sun told a Reuters Next conference.

Sun founded the crypto platform Tron and is member of cryptoexchange Huobi’s global advisory board. He did not specify which organisation specifically was looking at the assets in the interview.

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(Reporting by Elizabeth Howcroft, writing by Alun John, editing by Louise Heavens)

(Reuters) – U.S. cryptocurrency brokerage Genesis said it was seeking to avoid bankruptcy after Bloomberg news reported on Tuesday that creditors to the firm are organizing with restructuring lawyers to prevent insolvency.

Citing people with knowledge of the situation, the report said law firms Proskauer Rose and Kirkland & Ellis are being consulted by creditor groups, who are seeking to avoid a situation similar to crypto exchange FTX’s rapid descent into bankruptcy.

“Our goal is to resolve the current situation in the lending business without the need for any bankruptcy filing,” a Genesis spokesperson said.

Representatives for Proskauer and K&E did not immediately respond to requests for comment.

“We’ve begun discussions with potential investors and our largest creditors and borrowers, including Gemini and DCG, to agree on a solution that shores up our lending business’ overall liquidity and addresses clients’ needs,” Genesis’ interim chief executive Derar Islim told clients in a letter seen by Reuters.

The report comes as U.S. state securities regulators are investigating Genesis Global Capital as part of a wide-ranging inquiry into the interconnectedness of crypto firms, Barron’s reported last week, citing a comment from the Alabama Securities Commission director.

Genesis has hired investment bank Moelis & Company “to evaluate the best possible asset preservation strategy and effectuate a roadmap,” the firm said in the letter.

The crypto lending arm of U.S. digital asset broker Genesis Trading suspended customer redemptions earlier this month, citing the sudden failure of FTX, where its derivatives business has approximately $175 million in locked funds, the company had said.

Venture capital company Digital Currency Group, which owns Genesis Trading and cryptocurrency asset manager Grayscale, owes $575 million to Genesis’ crypto lending arm, Digital Currency Chief Executive Barry Silbert told shareholders this month.

(Reporting by Bharat Govind Gautam and additional reporting by Jaiveer Shekhawat in Bengaluru; Editing by Cynthia Osterman)

LONDON (Reuters) – The “questionable practices” at now collapsed crypto exchange FTX would not have been allowed to happen under European Union rules now being finalised, a senior European Commission official said on Wednesday.

“All these failures are very serious. We don’t see them as failures of blockchain or crypto assets per se,” added Alexandra Jour-Schroeder, deputy director general at the Commission’s financial services unit told a hearing in the European Parliament.

(Reporting by Huw Jones; editing by David Evans)