(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.
To view the Reuters conference live, please click here;
(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)
SINGAPORE (Reuters) – The U.S. Securities and Exchange Commission has yet to approve any spot bitcoin exchange-traded fund listings to date, commissioner Mark Uyeda said at the sidelines of a forum in Singapore on Wednesday.
“We’ve had a number of applications … none of those have been approved to date,” said Uyeda, who was in Singapore to speak at the ICI Global Asset Management Asia Forum.
Uyeda said there are applications filed by exchanges, and the SEC considers them “as they come up”.
(Reporting by Rae Wee and Ankur Banerjee; Editing by Amanda Cooper)
By Kevin Buckland
TOKYO (Reuters) – The safe-haven U.S. dollar eased from a one-week high on Wednesday amid increasing optimism for a loosening of China’s COVID restrictions, although moves were muted ahead of a speech by Federal Reserve Chair Jerome Powell later in the day.
The risk-sensitive New Zealand and Aussie dollars rose, while the offshore Chinese yuan hovered near a one-week peak.
“The market is thinking that China taking a bit of a softer stance equals China reopening, and while I think that’s a bit of a stretch, in that it’s not going to happen overnight, that’s seeing the dollar get sold,” said Bart Wakabayashi, branch manager at State Street in Tokyo.
“But there’s a back and forth between dollar selling and dollar strength, because earlier in the week, all we could talk about was hawkish Fedspeak,” he added.
The U.S. dollar index, which measures the greenback against six rivals, eased 0.13% to 106.72 after reaching 106.9 in early Asian trading for the first time since Nov. 23.
The index has dipped to around 105.3 twice since the middle of the month, amid bets the Fed would pivot from aggressive rate hikes after inflation showed signs it may be close to a peak.
Traders currently lay 63.5% odds that the Fed will slow to a half-point pace of rate rises on Dec. 14, and a 36.5% chance for another 75 basis point hike.
New York Fed President John Williams said on Monday that the central bank needs to press forward with rate rises, and St. Louis Fed President James Bullard said there is still “a ways to go” for policy tightening.
“I think the underlying message is that the Fed is not happy with where inflation and employment are at the moment,” State Street’s Wakabayashi added. “Powell will continue to err on the side of hawkishness at this point in time.”
The dollar slipped 0.07% to 138.60 yen, as the pair continued to consolidate following a bounce from a three-month low of 137.50 on Monday.
The euro ticked up 0.11% to $1.0339, lifting from a one-week low reached earlier on Wednesday at $1.0319.
German and Spanish consumer price figures came in weaker than expected on Tuesday, triggering a lowering of rate hike bets for the European Central Bank and shining a spotlight on Wednesday’s euro zone inflation data.
Sterling was flat at $1.19535.
The New Zealand dollar strengthened 0.29% to $0.6218 while the Aussie adding 0.1% to $0.66935.
The Antipodean currencies, which often function as proxy trades on China’s economic outlook, shook off downward pressure from worse-than-expected Chinese manufacturing surveys.
In Australia, lower than forecast inflation data also reduced the pressure for any aggressive tightening by the Reserve Bank next week.
The yuan weakened slightly to 7.1418 per greenback in offshore trading.
Chinese health officials said on Tuesday they will speed up COVID-19 vaccinations for the elderly, aiming to overcome a key stumbling block in efforts to ease unpopular “zero-COVID” curbs, which had sparked vigorous protests in recent days.
“Overall, it appears that China is readying to move from zero‑Covid to living with COVID,” Kim Mundy, a strategist at Commonwealth Bank of Australia, wrote in a client note.
“Expectations for an end to China’s zero‑covid policy in coming months, combined with more targeted restrictions in the meantime, can provide support to CNH, AUD and NZD.”
(Reporting by Kevin Buckland; Editing by Lincoln Feast and Kim Coghill)
SINGAPORE (Reuters) – Singapore’s Deputy Prime Minister Lawrence Wong said on Wednesday that Temasek Holdings has initiated an internal review of its investment in the now-bankrupt FTX crypto exchange, which resulted in a write-down of $275 million.
Wong, who is also finance minister, said the loss did not mean state investor Temasek’s governance system was not working and “no amount of due diligence and monitoring can eliminate the risks altogether”.
But Singapore’s leader-in-waiting told parliament the loss was “disappointing” and had caused reputational damage to Temasek.
“The fact that other leading global institutional investors like BlackRock and Sequoia Capital also invested in FTX does not mitigate this,” said Wong.
After pumping about $275 million into FTX, Temasek decided to write down the investment following the spectacular collapse of the exchange.
The review will be conducted by an independent internal team reporting directly to the board and will not involve those who made the investment, Wong said.
Temasek has said its cost of investment in FTX was 0.09% of its net portfolio value of S$403 billion ($293.97 billion) as of March 31, 2022, and it currently had no direct exposure in cryptocurrencies.
Explaining its actions, Temasek said it had conducted “extensive due diligence” on FTX from February to October 2021 and its audited financial statement then “showed it to be profitable”.
Wong told lawmakers the individual loss did not impact returns to Singapore’s reserves, which are tied to long-term returns.
FTX’s other backers such as SoftBank Group Corp’s Vision Fund and Sequoia Capital have also marked down their investment to zero after FTX, founded by Sam Bankman-Fried, filed for bankruptcy protection in the United States this month week in the highest-profile crypto blowup to date.
($1 = 1.3709 Singapore dollars)
(Reporting by Chen Lin and Xinghui Kok; Editing by Kanupriya Kapoor and Ed Davies)
By Dietrich Knauth
(Reuters) – Lawyers for BlockFi, the first direct casualty of crypto exchange FTX’s collapse, made their initial appearance in U.S. bankruptcy court on Tuesday, emphasizing that the U.S. cryptocurrency lender was “the antithesis of FTX.”
BlockFi attorney Joshua Sussberg told the court in Trenton, New Jersey, that the company’s bankruptcy stemmed from its substantial exposure to FTX, which filed for Chapter 11 protection earlier this month after traders pulled $6 billion from the platform, and from broader turmoil in crypto markets.
FTX had extended a $400 million lifeline to BlockFi in July, but the Bahamas-based exchange spectacularly imploded, sparking fears of contagion across the industry just days after BlockFi asked it for additional financing on Nov. 8.
Sussberg went to great lengths to distance BlockFi from FTX, saying the company did not face the myriad issues apparently plaguing FTX. While FTX’s new chief executive has described efforts to find missing assets and pointed to a complete failure of corporate controls – BlockFi had mature and consistent leadership, hired the right experts, and implemented the proper procedures and protocols, Sussberg said.
“This is completely, 180 degrees, a different story,” Sussberg said, before giving U.S. Bankruptcy Judge Michael Kaplan an overview of the crypto industry and BlockFi’s history.
New Jersey-based BlockFi filed for Chapter 11 protection on Monday. It asked Kaplan for the authority to continue paying employees, maintain bank accounts, and other measures needed to continue its day-to-day operations during its bankruptcy case.
Sussberg said BlockFi also intends to seek a court ruling allowing customers in the BlockFi Wallet program to withdraw their funds during the bankruptcy case if they wish.
“If it’s in your wallet, it stays in your wallet,” Sussberg said.
BlockFi’s Wallet program was created in response to regulatory investigations into the company’s interest-bearing accounts, which the U.S. Securities and Exchange Commission had determined were unregistered securities offerings. To resolve those investigations, BlockFi stopped offering interest-bearing accounts to U.S. customers, created the Wallet program for new U.S. customers and agreed to pay a record $100 million fine.
Earlier in November, BlockFi paused withdrawals from its platform amid uncertainty about FTX’s stability.
In a court filing on Monday, BlockFi said it owes money to more than 100,000 creditors. It listed FTX as its second-largest creditor, with $275 million owed on a loan issued earlier this year.
BlockFi’s largest creditor is Ankura Trust, which is owed $729 million. It still owes $30 million to the SEC from the fine it agreed to pay earlier this year. Valar Ventures, a Peter Thiel-linked venture capital fund, owns 19% of BlockFi equity shares.
BlockFi listed its assets and liabilities as between $1 billion and $10 billion. The company sold a portion of its crypto assets earlier in November to fund its bankruptcy, and it entered bankruptcy with $256.5 million in cash on hand.
Two of BlockFi’s largest competitors, Celsius Network and Voyager Digital, filed for bankruptcy in July, citing extreme market conditions that had resulted in losses at both companies.
BlockFi said it too suffered during that period of volatility, but the FTX loan had helped keep it afloat while its rivals went bankrupt.
BlockFi has proposed an initial restructuring plan that offers two paths out of bankruptcy.
Its Chapter 11 plan envisages that BlockFi Wallet customers would be paid back in full and other account holders and creditors would receive a mixture of cryptocurrency, cash, and new equity shares.
The plan also includes an option for a sale of the company.
(Reporting by Dietrich Knauth in New York and Noor Zainab Hussain in Bengaluru; Editing by Alexia Garamfalvi and Matthew Lewis)
By Medha Singh and Lisa Pauline Mattackal
(Reuters) – The market for fan tokens, a volatile cocktail of crypto and sport, is heating up in the desert of Qatar.
Interest in this niche breed of cryptocurrencies, typically linked to sports teams like Barcelona or Brazil, has been charged up by the soccer World Cup which began on Nov. 20.
Average daily trading volumes for these tokens have risen to around $300 million in November from $32 million the month before, according to Kaiko, a Paris-based crypto data firm.
“So we have 10-fold increase in volume which is huge for these tokens,” said research analyst Dessislava Aubert.
For some buyers, these token offer the chance to engage with their side and gain perks such as the chance to win prizes and vote on songs played at matches. For others, the tradeable coins provide a new investment opportunity.
It’s a brave investor who’d seek to divine any sensible link between erratic coin prices and real-world events, though.
The token of Lionel Messi’s Argentina side slumped 25% to $5.26 following the team’s shock defeat by Saudi Arabia in their opening World Cup game. Yet it has dropped a further 22% since the team’s subsequent victory over Mexico brought fan relief.
The coin of Cristiano Ronaldo’s Portugal rallied 119% to $7 in the 10 days leading up to the tournament but then proceeded to lose almost half its value even though it was unbeaten and top of its group heading into its clash with Uruguay on Monday, which it won to reach the knock-out stage.
Similarly in club football, Arsenal’s token has fallen 12.5% since the start of the season to $1.68 despite their glittering run to the top of the English Premier League.
The broader crypto market malaise is partly to blame for price drops, according to researchers who said the flighty assets were wilting as investors shunned risk.
The overall market cap for fan coins jumped to $401 million on the opening weekend of the World Cup, from $256 million about 10 days earlier, according to data from CoinGecko, but it has since fallen back below $300 million.
Siddharth Jaiswal, founder and CEO of Sportzchain, which mainly issues tokens for the Asian market, said people shouldn’t buy the coins primarily to make money.
“The cherry on the cake is that it’s a tool, available on the blockchain that can be easily traded in the future, so there is a financial connotation attached to it,” he added.
“But the first perception should never be that you’re buying the fan token from a profit-generating standpoint.”
BROODING BITCOIN
Socios, which is promoted by Messi, is the biggest player in this slice of the crypto industry. It facilitates trading of most fan coins, describing buying such tokens as joining a loyalty scheme with exclusive benefits and prizes.
Some of the world’s biggest football clubs have launched tokens supported by Socios including Paris Saint-Germain, Manchester City, Inter Milan and Atletico Madrid, as well as the Portuguese and Argentinian national teams, with market caps of tokens ranging from about $7 million to $21 million.
Trading volumes for the Socios-linked token Chilliz, which users buy in order to trade with their team tokens, hit a seven-month high in early November ahead of the World Cup but have since retreated 40% from that peak.
When looking at the breakdown of trading in the Chilliz token by fiat currency, the Korean won dominates with its total fiat volume exceeding 87% in early November followed by Turkey’s lira, according to data from Kaiko.
The growth spurt in fan tokens comes at a time of tumult in the crypto market, which is reeling from the collapse of major exchange FTX earlier this month. Bitcoin is brooding near two-year lows at around $16,245.
While the FTX fiasco has raised serious questions about the lack of regulation in digital assets, fan coins – which some issuers say fall under the utility token category – remain a grey area.
“Tokens which do not offer sufficient utility could face some regulatory scrutiny, because this would infer that the token is an investment into the club,” said Marcus Sotiriou, analyst at digital asset broker GlobalBlock.
“However, if the token offers exclusive benefits and focuses on the utility it provides to its fans, then I do not think there will be regulatory issues.”
Socios said it believed in regulation to give fans trust and transparency.
In August, Britain’s advertising watchdog upheld a ruling against Arsenal over two adverts about fan tokens posted on the club’s website and Facebook that it deemed were misleading and irresponsible, although the club denied this.
Markus Thielen, head of research at digital assets platform Matrixport, said interest in these tokens among soccer fans could be short-lived.
“Companies and teams that are selling those tokens must now offer more value at regular intervals, otherwise users will lose interest after the World Cup quite quickly,”
(Reporting by Medha Singh and Lisa Mattackal in Bengaluru; Editing by Pravin Char)
(Reuters) – Crypto exchange Kraken has agreed to pay a fine to settle civil liability related to apparent violations of sanctions on Iran, the U.S. Treasury Department’s Office of Foreign Assets Control said on Monday.
As part of the settlement with OFAC, Kraken will pay about $362,000, and “invest an additional $100,000 in certain sanctions compliance controls.”
Cryptocurrencies and other digital assets have soared in popularity over recent years, saddling policymakers with monitoring risks in a largely unregulated sector.
“Kraken is pleased to have resolved this matter, which we discovered, voluntarily self-reported and swiftly corrected,” said Chief Legal Officer Marco Santori in an emailed statement to Reuters.
“Even before entering into this resolution, Kraken had taken a series of steps to bolster our compliance measures,” Santori added.
According to the OFAC statement, Kraken’s platform processed 826 transactions for users located in Iran between roughly October 2015 to June 2019.
At the time, Kraken maintained controls intended to prevent users from initially opening an account while in a jurisdiction subject to sanctions, but did not implement IP address blocking based on geolocation across its platform, the statement added.
In October, the Treasury Department had also fined crypto exchange Bittrex Inc $29 million in fines for “apparent violations” of sanctions on certain countries and anti-money laundering law.
(Reporting by Manya Saini in Bengaluru and Hannah Lang in Washington; Editing by Shailesh Kuber)
(Reuters) – U.S. cryptocurrency lender BlockFi said on Monday it had filed for Chapter 11 bankruptcy protection along with eight affiliates in a New Jersey court, the latest casualty since FTX’s collapse earlier this month triggered instability in the crypto market.
In a court filing, New Jersey-based BlockFi said it owes money to more than 100,000 creditors. It listed crypto exchange FTX as its second-largest creditor, with $275 million owed on a loan extended earlier this year.
COMMENTS:
FRANCESCO MELPIGNANO, CEO, KADENO ECO, ITALY
“The amazing thing through all of this is that DeFi protocols have been protected through all this. Despite the setback to the industry, the case for the underlying technology is only getting stronger.”
“One thing that would be interesting would be to put a cap on the leverage or the right sort of circuit breakers in the system, similar to what you have in traditional finance, to see that if one company has bad debt, it doesn’t spread higher up the chain.”
BRADLEY DUKE, FOUNDER AND CO-CHIEF EXECUTIVE OFFICER, ETC GROUP, LONDON
“It is unfortunate for BlockFi that the white knight that had offered them a lifeline back in June, hasn’t managed to stay solvent themselves, in part because of the massive losses accumulated at Alameda Research stemming from the same event – the collapse of Terra Luna and Three Arrows Capital.”
“If FTX had been run by a responsible and experienced management team with the requisite transparency, capital adequacy, asset segregation and operational controls in place, it would probably still be in business.”
“At ETC Group, we believe in crypto, but we also believe in applying best practice and the regulatory rigour of traditional finance to our product offering because we know that the rules of good business do not change simply because new disruptive technology has arrived.”
MARTHA REYES-HULME, HEAD OF RESEARCH, BEQUANT, LONDON
“The BlockFi bankruptcy is a sad chapter in the short history of our industry that has forced participants to be more mindful of risk management, counterparty risk, and governance. Our clients have always used diversification to minimize exchange risk but now we are seeing many pull back in the short term and seek better solutions, especially around custody, to protect their assets. We are working closely with them. Ultimately it will be better for everyone. We are still seeing interest to onboard, even in these difficult times, which is reassuring as well as interest from mainstream institutions that attended our conference last week.”
MONSUR HUSSAIN, SENIOR DIRECTOR, FITCH RATINGS, LONDON
“BlockFi’s Chapter 11 restructuring underscores significant asset contagion risks associated with the crypto ecosystem, and, potentially, deficient risk management processes. Restructuring processes can be notoriously lengthy – Mt Gox’s creditors are only getting closer to being paid eight years after the operation failed.”
MARK CONNORS, 3iQ DIGITAL ASSET MANAGEMENT, TORONTO
“During a period of unwinding and consolidation, which is where we are, leveraged strategies are more at risk. We’re trying to separate the wheat from the chaff here, and I don’t think many people were surprised by the BlockFi filing… BlockFi received a $250mm loan in Q2, from FTX – likely in self interest to help keep overleveraged Alameda afloat. So, today’s action was not unexpected.”
“Institutional investment is stalled right now in the wake of this. The first assessment will be, what failed? We believe it’s the unregulated centralized entities. So institutions are going to go back and say, did we invest in the wrong people in the VC stage? I think that’s going to be a big yes. Does this mean that bitcoin and Ethereum, the two main protocols that account for 60-odd percent of the digital asset space are flawed? There’s no institutional investor who can say those protocols failed, or do not hold the same promise they did before the FTX failure. So there are institutions that remain interested, but regulators need to define the state of play for institutions to follow.”
“There are (crypto) lending models that make sense. The decentralized finance models used proper collateralization and they’re intact. Some centralized models did not. I think you’re seeing the models with the weak lungs fail first. If a company gives you 18% yield, you better know really well where that yield is coming from.”
“FTX US, is I think the second largest creditor in BlockFi. But the question is, was that denominated in the FTT token or was it cash? In other bankruptcies, you’d have hard assets or U.S. dollars … we don’t know if they loaned (FTT) to BlockFi but we’re asking that questions for good reason.”
CONOR RYDER, RESEARCH ANALYST, KAIKO, DUBLIN
“The BlockFi filing is the latest in a string of contagion events after FTX, and arguably continued fallout from Celsius/Three Arrows Capital last summer. It was yet another example of neglected risk management when prices were going up, as crypto winter hit those that took on the most counterparty risk are getting exposed.”
“From a customer standpoint it serves as another reminder to be skeptical of any crypto yield products on offer, particularly those that sound too good to be true. That should be the biggest red flag now that a company is taking on added risk with your assets.”
(Compiled by the Global Finance & Markets Breaking News team)
By Hannah Lang, Niket Nishant and Manya Saini
(Reuters) – Cryptocurrency lender BlockFi has filed for Chapter 11 bankruptcy protection, it said on Monday, the latest crypto casualty following the spectacular collapse of the FTX exchange earlier this month.
The filing in a New Jersey court comes as crypto prices plummet. The price of bitcoin, the largest digital currency by far, is down more than 70% from a 2021 peak.
“BlockFi’s Chapter 11 restructuring underscores significant asset contagion risks associated with the crypto ecosystem,” said Monsur Hussain, senior director at Fitch Ratings.
New Jersey-based BlockFi, founded by Zac Prince, said in a bankruptcy filing that its substantial exposure to FTX created a liquidity crisis. FTX filed for protection in the United States earlier in November after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.
In a court filing on Monday, BlockFi listed FTX as its second-largest creditor, with $275 million owed on a loan extended earlier this year. It said it owes money to more than 100,000 creditors. The company also said in a separate filing it plans to lay off two-thirds of its 292 employees.
Under a deal signed with FTX in July BlockFi was to receive a $400 million revolving credit facility while FTX got an option to buy it for up to $240 million.
BlockFi’s bankruptcy filing also comes after two of BlockFi’s largest competitors, Celsius Network and Voyager Digital, filed for bankruptcy in July citing extreme market conditions that had resulted in losses at both companies.
Crypto lenders, the de facto banks of the crypto world, boomed during the pandemic, attracting retail customers with double-digit rates in return for their cryptocurrency deposits. On the flip side, institutional investors such as hedge funds looking to make leveraged bets paid higher rates to borrow the funds from the lenders, who profited from the difference.
Crypto lenders are not required to hold capital or liquidity buffers like traditional lenders and some found themselves exposed when a shortage of collateral forced them – and their customers – to shoulder large losses.
CREDITOR LIST
BlockFi’s largest creditor is Ankura Trust, a company that represents creditors in stressed situations, and is owed $729 million. Valar Ventures, a Peter Thiel-linked venture capital fund, owns 19% of BlockFi equity shares.
BlockFi also listed the U.S. Securities and Exchange Commission as one of its largest creditors, with a $30 million claim. In February, a subsidiary of BlockFi agreed to pay $100 million to the SEC and 32 states to settle charges in connection with a retail crypto lending product the company offered to nearly 600,000 investors.
In a blog post, BlockFi said its Chapter 11 cases will enable the company to stabilize its business and maximize value for all stakeholders.
“Acting in the best interest of our clients is our top priority and continues to guide our path forward,” BlockFi said.
BlockFi had earlier paused withdrawals from its platform and acknowledged it had “significant exposure” to FTX and its associated entities, including “obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US.”
In its bankruptcy filing, BlockFi said it had hired Kirkland & Ellis and Haynes & Boone as bankruptcy counsel and Berkeley Research Group as a financial adviser.
At the end of June, a third of BlockFi’s $1.8 billion outstanding loans were unsecured, according to the company.
ORIGINS
BlockFi was founded in 2017 by Prince, who is currently the company’s chief executive officer, and Flori Marquez. Though headquartered in Jersey City, BlockFi also has offices in New York, Singapore, Poland and Argentina, according to its website.
In July, Prince had tweeted that “it’s time to stop putting
BlockFi in the same bucket / sentence as Voyager and Celsius.”
“Two months ago we looked the ‘same.’ They shut down and have impending losses for their clients,” he said.
According to a profile of BlockFi published earlier this year by Inc, Prince was raised in San Antonio, Texas, and financed his college education at the University of Oklahoma and Texas State University with winnings from online poker tournaments. Before starting BlockFi with Marquez, he held jobs at Orchard Platform, a broker dealer, and at Zibby, a lease-to-own lender now called Katapult.
Marquez previously worked at Bond Street, a small business lending outfit that was folded in to Goldman Sachs in 2017, according to Inc.
(Reporting by Hannah Lang in Washington, Niket Nishant and Manya Saini in Bengaluru and Elizabeth Howcroft in London; Additional reporting by Dietrich Knauth, Editing by Megan Davies, Conor Humphries and Matthew Lewis)