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FTX remains focus of ‘active’ investigation, Bahamas attorney general says

(Reuters) – Collapsed cryptocurrency exchange FTX remains the subject of “an active and ongoing investigation” by Bahamian authorities, Bahamian Attorney General Ryan Pinder said on Sunday, as he praised the Bahamas’ regulatory regime and swiftness with which it responded to the crisis.

FTX, which had been among the world’s largest cryptocurrency exchanges, is headquartered in the Bahamas. The firm, whose liquidity crunch forced the company to declare bankruptcy on Nov. 11, is the subject of investigations by Bahamian and U.S. authorities. In mid-November, the Royal Bahamas Police said that government investigators in the Bahamas were looking at whether any “criminal misconduct occurred.”

“We are in the early stages of an active and ongoing investigation,” Pinder said on Sunday, according to prepared remarks for the speech. “It is a very complex investigation.” He said it involved both civil and criminal authorities.

Pinder said that the Bahamas Securities Commission, Financial Intelligence Unit and the police’s Financial Crimes Unit would “continue to investigate the facts and circumstances regarding FTX’s insolvency crisis, and any potential violations of Bahamian law.”

Pinder also defended the Bahamas’ regulatory regime and said that its Securities Commission had moved quickly “because of the strength of the legislative framework.”

Bahamas securities regulators had revoked FTX Digital’s license and began involuntary liquidation proceedings the day before the U.S. bankruptcy case kicked off.

“Any attempt to lay the entirety of this debacle at the feet of the Bahamas, because FTX is headquartered here, would be a gross oversimplification of reality,” Pinder said, adding that the Bahamas Securities Commission had moved with “remarkable” speed in response.

Sam Bankman-Fried, 30, founded FTX in 2019 and rode cryptocurrency boom to a net worth that Forbes pegged a year ago at $26.5 billion. Bankman-Fried resigned as FTX’s chief executive officer the same day as the firm’s bankruptcy filing.

The liquidity crunch came after Bankman-Fried secretly moved $10 billion of FTX customer funds to his proprietary trading firm, Alameda Research, Reuters reported, citing two people familiar with the matter.

The U.S. Attorney’s Office in Manhattan, led by veteran securities fraud prosecutor Damian Williams, in mid-November began investigating how FTX handled customer funds, a source with knowledge of the probe told Reuters. The Securities and Exchange Commission and Commodity Futures Trading Commission also opened probes.

FTX’s demise comes after a string of meltdowns that have taken down other key players including Voyager Digital and Celsius Network and led some global investors to question the viability of the cryptocurrency sector.

(Reporting by Jasper Ward, Mrinmay Dey, David Randall, Jaiveer Shekhawat; Editing by Megan Davies and Daniel Wallis)

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Crypto lender Genesis subject of probe by regulators – Barron’s

(Reuters) – State securities regulators are investigating Genesis Global Capital as part of a wide-ranging inquiry into the interconnectedness of crypto firms, Barron’s reported on Friday citing a comment from the Alabama Securities Commission Director.

While it does not directly serve individual investors, Genesis backs products offered by crypto companies such as Circle Internet Financial, the principal operator of one of the largest stablecoins, USD Coin, and by Gemini. Those products pay yield to customers who deposit certain cryptocurrencies on the platforms.

The inquiry will look into Genesis’s connection to such retail investors, and whether it or other industry participants might have violated securities laws, the report added.

Genesis and Alabama Securities Commission did not immediately respond to Reuters’ requests for comment on the report.

In the aftermath of the collapse of crypto exchange FTX, Genesis suspended customer redemptions in a spillover effect citing “abnormal withdrawal requests” that exceeded its liquidity.

Earlier this week, the New York Times reported Genesis hired investment bank Moelis & Company to serve as the firm’s restructuring advisor as it explored options including a potential bankruptcy.

Several crypto firms have been plagued by contagion concern from the fallout of the FTX collapse, with many counting their exposure in millions to the beleaguered exchange.

(Reporting by Manya Saini in Bengaluru; Editing by Krishna Chandra Eluri)

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Binance CEO Zhao says don’t fight crypto, regulate it

ATHENS (Reuters) – Binance Chief Executive Officer Changpeng Zhao said on Friday regulation rather than opposition of the crypto sector is a better option for world governments as digital currencies become more mainstream.

Regulation of crypto currencies has come into sharp focus following the collapse of several platforms, culminating in the crash of the FTX currency exchange earlier this month.

“I think most governments now understand that adoption will happen regardless. It’s better to regulate the industry instead of trying to fight against it,” Zhao said, speaking at a Binance event in Athens.

The opaque world of crypto came into the spotlight when FTX, a crypto exchange, filed for bankruptcy protection in the United States on Nov. 11 after traders pulled $6 billion from the platform in three days.

The collapse has left an estimated 1 million creditors facing losses totalling billions of dollars.

Nonetheless, Zhao said he expected the industry to recover. “(This year) was a very nasty year, the last two months too much has happened. I think now we see the industry is healthier… just because FTX happened it does not mean that every other business is bad,” he said.

Asked whether he saw countries adding crypto currencies such as Bitcoin to their reserves in the future, Zhao said he expected countries to start, particularly those which did not have their own currency.

“The smaller countries will start first, I think,” he said.

(Reporting by Renee Maltezou, writing by Michele Kambas; editing by Anna Driver)

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Mexican unicorn Bitso sets out transparency roadmap amid FTX crash

By Valentine Hilaire

MEXICO CITY (Reuters) – Mexican cryptocurrency exchange unicorn Bitso laid out a transparency roadmap, as pressure from users mounted following the high-profile collapse of crypto exchange FTX, a top Bitso executive told Reuters on Thursday.

In a spectacular crypto blowup, FTX filed for protection in the United States earlier this month after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.

Bitso, which operates in Mexico, Brazil, Colombia and Argentina, will publish a solvency report in less than a month and is in the process of selecting an external partner to carry out an audit, Bitso’s Chief Regulatory Officer Felipe Vallejo told Reuters.

Bitso recently joined a group of international firms in the crypto sector, which are working to create an easy-to-understand report so users can decide for themselves if firms have funds to back their transactions.

“The proofs of funds published by some companies are insufficient since they only show assets and do not reflect how much crypto or money it owes its users,” he said.

FTX’s crash has created a sense of urgency to regulate crypto, the chair of global securities watchdog IOSCO Jean-Paul Servais said in an interview published Thursday.

Regulators across the region are stepping up efforts. Brazilian lawmakers are speeding up crypto regulation, and in the United States, Congress is expected to make progress next year on regulating its sprawling crypto sector.

In Argentina there are also signs of activity, said Vallejo, without giving more details.

“Well-constructed regulation can even be an advantage as it will remove bad actors from the ecosystem,” he added.

While Bitso’s growth could suffer in the near-term as it implements the new transparency methods, Vallejo said non-crypto services, such as remittances to Mexico, could help offset the blow.

(Reporting by Valentine Hilaire; Editing by Stephen Coates)

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Binance’s Zhao flags possible $1 billion for distressed assets- Bloomberg News

(Reuters) – Cryptocurrency exchange Binance is aiming for a roughly $1 billion fund for the potential purchase of distressed assets in the digital sector, Bloomberg News reported on Thursday, citing an interview with Chief Executive Officer Changpeng Zhao.

Zhao hinted at the possibility of allocating more funds in the interview. “If that’s not enough we can allocate more”, he said.

Zhao said while speaking at a conference in Abu Dhabi last week that there was significant interest from industry players in a recovery fund his company plans to launch to help cryptocurrency projects facing a liquidity squeeze, following the collapse of rival FTX.

He said such a fund would help “reduce further cascading negative effects of FTX” without giving an exact figure for the fund.

The crypto market is teetering after the collapse of FTX, which is seeking Chapter 11 bankruptcy protection in the United States.

Several crypto firms have been bracing for the fallout from the FTX collapse, with many counting their exposure to the exchange in millions.

Major crypto player Genesis said last week it had suspended customer redemptions in its lending business, while BlockFi is reportedly preparing to file for bankruptcy.

(Reporting by Akanksha Khushi in Bengaluru; Editing by Anil D’Silva)

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Global regulators to target crypto platforms after FTX crash

By Huw Jones

LONDON (Reuters) – The crash of FTX exchange has injected greater urgency into regulating the crypto sector and targeting such ‘conglomerate’ platforms will be the focus for 2023, the new chair of global securities watchdog IOSCO said in an interview.

Jean-Paul Servais said regulating crypto platforms could draw on principles from other sectors which handle conflicts of interest, such as at credit rating agencies and compilers of market benchmarks, without having to start from scratch.

Cryptoassets like bitcoin have been around for years but regulators have resisted jumping in to write new rules.

But the implosion at FTX, which left an estimated one million creditors facing losses totalling billions of dollars, will help change that, Servais told Reuters.

“The sense of urgency was not the same even two or three years ago. There are some dissenting opinions about whether crypto is a real issue at the international level because some people think that it’s still not a material issue and risk,” Servais said.

“Things are changing and due to the interconnectivity between different types of businesses, I think it’s now important that we are able to start a discussion and that’s where we are going.”

IOSCO, which coordinates rules for G20 countries and others, has already set out principles for regulating stablecoins, but now the focus is turning to platforms which trade in them.

In mainstream finance there is functional separation between activities like broking, trading, banking services and issuance, with each having its own set of conduct rules and safeguards.

“Is it the case for the crypto market? I would say most of the time not,” Servais said.

Crypto ‘conglomerates’ like FTX have emerged, performing perform multiple roles such as brokerage services, custody, proprietary trading, issuance of tokens all under a single roof that give rise to conflicts of interest, Servais said.

“For investor protection reasons, there is a need to provide additional clarity to these crypto markets markets through targeted guidance in applying IOSCO’s principles to crypto assets,” Servais said.

“We intend to publish consultations report on these matters in the first half of 2023,” he added.

Madrid-based IOSCO, or International Organization of Securities Commissions, is an umbrella body for market watchdogs like the Securities and Exchange Commission in the United States, Bafin in Germany, Japan’s Financial Services Agency, and the UK Financial Conduct Authority, who all commit to applying the body’s recommendations.

The European Union’s new markets in cryptoassets or MiCA framework is an “interesting starting point” for developing global guidance as it focuses on supervision of crypto operators, said Servais, who also chairs Belgium’s financial regulator FSMA.

“I think that the world is changing. We know there is some space for developing new standards about supervision of this kind of crypto conglomerates. There is an obvious necessity,” Servais said.

(Reporting by Huw Jones; Editing by Bernadette Baum)

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FTX was run as ‘personal fiefdom,’ faces hacks, missing assets, attorneys say

By Dietrich Knauth, Tom Hals and Tom Wilson

NEW YORK/LONDON (Reuters) – FTX was run as a “personal fiefdom” of former CEO Sam Bankman-Fried, attorneys for the collapsed crypto exchange said in its first bankruptcy hearing as they detailed ongoing challenges such as hacks and substantial missing assets.

In the highest-profile crypto blowup to date, FTX filed for protection in the United States after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal. The collapse has left an estimated 1 million creditors facing losses totaling billions of dollars.

An attorney for FTX said at a bankruptcy hearing on Tuesday the company now intends to sell off healthy business units, but has been the subject of cyberattacks and had “substantial” assets missing.

FTX said on Saturday it has launched a strategic review of its global assets and is preparing for the sale or reorganization of some businesses. FTX said on Tuesday it was receiving interest from potential buyers for its assets and would conduct a process to reorganize or sell them.

The hearing was held at the U.S. Bankruptcy Court in Wilmington, Delaware and was livestreamed to around 1,500 viewers on YouTube and Zoom.

An attorney also said the firm had been run as a “personal fiefdom” of Bankman-Fried with $300 million spent on real estate such as homes and vacation properties for senior staff. FTX, led since the bankruptcy filing by new CEO John Ray, has accused Bankman-Fried of working with Bahamian regulators to “undermine” the U.S. bankruptcy case and shift assets overseas.

Bankman-Fried did not immediately reply to an email seeking comment.

Reuters earlier reported that Bankman-Fried’s FTX, his parents and senior executives of the failed cryptocurrency exchange bought at least 19 properties worth nearly $121 million in the Bahamas over the past two years, official property records show.

Attorneys also said an investigation must take place into Binance’s sale of FTX in July 2021. Binance bought a stake in FTX in 2019.

Separately a filing late on Monday by Ed Mosley of Alvarez & Marsal, a consultancy firm advising FTX, showed FTX’s cash balance of $1.24 billion as of Sunday was “substantially higher” than previously thought.

It includes around $400 million at accounts related to Alameda Research, the crypto trading firm owned by Bankman-Fried, and $172 million at FTX’s Japan arm.

Reuters has reported Bankman-Fried secretly used $10 billion in customer funds to prop up his trading business, and that at least $1 billion of those deposits had vanished.

DISCLOSURE DEBATE

At the hearing, FTX representatives argued that names of customers should be kept secret, as disclosing them could destabilize the crypto market and open customers up to hacks. FTX also argued its customer list is a valuable asset, and disclosing it could impair future sale efforts or allow rivals to poach its user base.

A judge said those names can remain undisclosed until a future court hearing.

FTX lawyers also described an uneasy truce with court-appointed liquidators overseeing the wind-down of FTX’s Bahamas unit, FTX Digital Markets.

The two sides reached an initial agreement to coordinate their U.S.-based insolvency proceedings before Judge John Dorsey, avoiding the possibility of conflicting rulings from two different U.S. bankruptcy judges. But both sides signaled they still have broader disagreements over how to coordinate the recovery and preservation of assets held by various FTX affiliates.

Bankman-Fried, FTX and the Bahamas liquidators did not immediately respond to requests for comment.

CONTAGION FEARS

FTX’s fall from grace has sent shivers through the crypto world, driving bitcoin to its lowest level in around two years and triggering fears of contagion among other firms already reeling from the collapse in the crypto market this year.

Major U.S. crypto lender Genesis said on Monday it was trying to avert bankruptcy, days after FTX’s collapse forced it to suspend customer redemptions.

“Our goal is to resolve the current situation consensually without the need for any bankruptcy filing,” a Genesis spokesperson said in an emailed statement to Reuters, adding it continues to have conversations with creditors.

A Bloomberg News report, citing sources, had said Genesis was struggling to raise fresh cash for its lending unit.

The Wall Street Journal reported, citing sources, that Genesis had approached Binance seeking an investment but the crypto exchange decided against it, fearing a conflict of interest. Genesis also approached private equity firm Apollo Global Management for capital assistance, the WSJ said.

Apollo did not immediately respond to a Reuters request for comment on the WSJ report, while Binance declined to comment.

Crypto exchange Gemini, which runs a crypto lending product in partnership with Genesis, tweeted on Monday it was continuing to work with the company to enable its users to redeem funds from its yield-generating “Earn” program.

Gemini said on its blog last week there was no impact on its other products and services after Genesis paused withdrawals.

Since the implosion of FTX, some crypto players are taking to decentralized exchanges known as “DEXs” where investors trade peer-to-peer on the blockchain.

Overall daily trading volumes on DEXs leapt to their highest level since May on Nov. 10, as FTX imploded, according to data from market tracker DeFi Llama, but have since pared gains.

(Reporting by Dietrich Knauth in New York and Tom Wilson in London; additional reporting by Manya Saini, Rishabh Jaiswal, Juby Babu and Lavanya Sushil Ahire in Bengaluru; Editing by Megan Davies, Alexander Smith and Nick Zieminski)

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FTX says receiving interest from buyers for assets

(Reuters) – Cryptocurrency exchange FTX said on Tuesday it was receiving interest from potential buyers for its assets and would conduct process to reorganize or sell them.

(Reporting by Arunima Kumar in Bengaluru; Editing by Rashmi Aich)

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Digital Currency Group owes $575 million to Genesis Trading’s crypto lending arm

By Hannah Lang

(Reuters) – Venture capital company Digital Currency Group, which owns Genesis Trading and cryptocurrency asset manager Grayscale, owes $575 million to Genesis’ crypto lending arm, Chief Executive Barry Silbert said in a letter to shareholders on Tuesday afternoon.

Loans from Genesis Global Capital, which suspended customer withdrawals last week, were used to “fund investment opportunities” and repurchase stock from non-employee shareholders, Silbert said in the letter, which was seen by Reuters. That debt is due in May 2023, he added.

Aside from the money owed to Genesis, Digital Currency Group’s only debt is a $350 million credit facility from “a small group of lenders” led by investment firm Eldridge, as well as a $1.2 billion claim it filed in July against bankrupt crypto hedge fund Three Arrows Capital. Digital Currency Group (DCG) had assumed that liability from Genesis.

DCG is still on pace to do $800 million in revenue this year, Silbert said.

In suspending redemptions and pausing new loans, Genesis Global Capital cited the “unprecedented market turmoil” that rippled through the market after crypto exchange FTX filed for bankruptcy. At the time, DCG said the halted withdrawals at Genesis had no impact on its operations or subsidiaries.

Silbert also told shareholders he appreciated words of support “along with offers to invest in DCG” and that he would notify investors if the company decides to do a funding round. Genesis is seeking to raise as much as $1 billion, and has approached crypto exchange Binance and asset manager Apollo Global Management for assistance, the Wall Street Journal reported on Monday.

(This story has been corrected to say that Digital Currency Group owes Genesis Trading’s crypto lending arm, not the other way around, in paragraph 1)

(Reporting by Hannah Lang in Washington; Editing by Chris Reese and Jonathan Oatis)

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Crypto lender Genesis hires restructuring adviser – New York Times

(Reuters) – Troubled cryptocurrency lender Genesis Global Capital has hired investment bank Moelis & Company to explore options including a potential bankruptcy, the New York Times reported on Tuesday citing three people familiar with the matter.

The company has not yet made a final decision on bankruptcy and it was still possible to be averted, the NYT added.

Genesis did not immediately respond to a Reuters request for comment on the matter.

Earlier this month, crypto exchange FTX filed for U.S. bankruptcy protection in the highest-profile crypto blowup to date, after traders pulled billions from the platform in three days and rival exchange Binance abandoned a rescue deal.

The collapse of FTX has sparked worries of a contagion effect on other firms already reeling from dampened crypto market this year.

On Monday, Genesis had asserted it had no plans to file bankruptcy imminently, days after it suspended customer redemptions citing the collapse of FTX.

(Reporting by Manya Saini in Bengaluru; Editing by Krishna Chandra Eluri)

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Cryptoverse: Let’s talk about DEX, baby

By Medha Singh and Lisa Pauline Mattackal

(Reuters) – As the crypto castle crumbles, some true believers say the answer is to double down on DEX. Decentralized exchanges, that is.

The spectacular collapse of Sam Bankman-Fried’s FTX, a major centralized crypto exchange, has unleashed a wave of calls for more regulation from mainstream bankers and investors.

By contrast, some crypto players are channeling bitcoin creator Satoshi Nakamoto’s original crypto vision by cutting out the financial middleman and taking to decentralized exchanges, where investors trade peer-to-peer on the blockchain.

On Nov. 10, as FTX imploded, overall daily trading volumes on DEXs including the likes of Uniswap leapt as high as $12 billion, their highest level since May, according to data from market tracker DeFi Llama, though they have since pared gains.

Four days later, November volumes had surpassed the whole of the month before, according to CryptoCompare.

Meanwhile, weekly bitcoin flows from centralized exchanges, or CEXs, recorded their largest-ever net outflow, with 97,805 coin moved off platforms in the seven days to Nov. 13, CryptoCompare data shows.

“It is now clear that there can be risk associated with holding assets in a centralized entity,” said Varun Kumar, CEO of decentralized crypto exchange Hashflow. “Data is showing that users are turning to decentralized trading solutions.”

Nonetheless, DEXs are not necessarily safer than their centralized rivals, with inexperienced investors potentially exposed to huge risks.

Users trade tokens directly with each other using blockchain-based smart contracts instead of passing funds through an intermediary or central authority.

Thus, as with other platforms in the world of decentralized finance (DeFi) or Web3, there is no central oversight and – for good or for ill – investors are responsible for their trades, settlements and safe-keeping of coins or tokens.

By comparison CEXs, such as Coinbase, Binance and FTX, are more akin to traditional exchanges on Wall Street, acting as the middleman in transactions, thus making trading more user-friendly especially for new investors, and sometimes offering coin custody services, as FTX did.

Many centralized players have also been pushing to boost user confidence with measures to increase transparency, such as demonstrating proof of their reserves.

Coinbase, Binance and FTX didn’t immediately respond to requests for comment.

Graphic: Crypto investors move cautiously – https://graphics.reuters.com/FINTECH-CRYPTO/WEEKLY/mopaknqzgpa/chart.png

FTX SHENANIGANS

That said, advocates of decentralization say DEXs could offer investors some protection from the kind of shenanigans that appear to have gone on at FTX, where as much as $1 billion of customer funds are reported missing.

DEXs cannot halt withdrawals, they require users to retain custody of their funds, and trading activity and reserves can be traced directly on the blockchain.

“There are definitely elements of DEXs appealing to people as they mitigate the chances of some nefarious operator or a single point of failure in the system,” said David Wells, CEO at crypto exchange Enclave Markets, which offers elements of both centralized and decentralized services.

The FTX crash certainly pumped up trading volumes on decentralized exchanges at the time.

Volumes at the largest DEX, Uniswap, spiked to $17.2 billion in the week of Nov. 6-13, from just over $6 billion the week before, while other smaller decentralized exchanges also reported higher volumes.

GMX saw over $6 billion in the week after Nov. 6, when FTX’s troubles came to light, three times recent its weekly averages. Hashflow saw $110 million on Nov. 9, the day Binance dropped a plan to bail out FTX, versus a daily average of $25 million.

Despite the recent surge, crypto isn’t migrating en masse to DeFi exchanges, and daily DEX volumes have fallen back near October levels of below $3 billion.

Nonetheless, there has been a broader, more subtle shift to decentralized exchanges, with data from Chainalysis showing overall monthly trading volumes on DEXs were between $181.5 billion and $240.3 billion from August through October, compared with a range of $173 billion to $203.5 billion for CEXs.

LOWER TRADE SPEEDS

The renewed interest in DEXs ties into the debate at the heart of crypto since Satoshi Nakamoto’s bitcoin white paper 14 years ago: the role, if any, that centralization and regulation should play in the crypto ecosystem.

While some investors prefer the transparency of decentralized exchanges, the platforms aren’t suitable for investors such as traditional financial institutions and specialized trading firms, said Wells at Enclave Markets.

For example, DEXs typically have slower transaction speeds, while hedge funds might not want their trading strategies to be publicly traceable on the blockchain.

Many traditional finance institutions are also legally required to hold external funds with an external custodian and would not be able to “self-custody” investors’ assets to trade them on decentralized exchanges.

So is the future DEX or CEX?

Many market participants see both centralized and decentralized exchanges coexisting.

“The interconnectedness is critical,” said Chris Kline, co-founder of Bitcoin IRA, which offers cryptocurrency retirement accounts, referring to DEXs and CEXs growing together as crypto trading expands.

“Both will exist in the future.”

(Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru; Editing by Vidya Ranganathan and Pravin Char)

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FTX seeks indemnity for unnamed individuals for steps taken to protect assets

(Reuters) – Bankrupt cryptocurrency exchange FTX said on Tuesday it was seeking to indemnify unidentified individuals for actions they took and continue to take in connection with assets that represent a significant share of the company’s estate.

(Reporting by Niket Nishant in Bengaluru; Editing by Sriraj Kalluvila)

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Coinbase bonds dragged lower as crypto market slumps

(Reuters) – Coinbase Global’s bonds have fallen heavily, and its shares have hit record lows, as investors ditched crypto following rival FTX’s collapse earlier this month.

The crypto exchange’s note due 2031 was trading at 51 cents on the dollar on Tuesday, down from its August peak of 68.50, with yields – that trade inversely to price – jumping to 13.1%, according to Refinitiv data.

At the start of 2022, those notes were trading closer to 93 cents on the dollar.

By comparison, the yield on the 10-year U.S. Treasury bond was trading around 3.806%.

The spike in Coinbase yield and its the increasing premium over the corresponding 10-year U.S. Treasury yield indicated investors are growing increasingly concerned about the crypto exchange’s creditworthiness.

The yield on Coinbase’s notes due 2026 was at 15.52%, after touching a record high at 15.78% on Friday.

Moody’s Investors Service said on Monday it had placed Coinbase’s corporate family rating, currently at Ba3, on review for downgrade.

A rating of Baa3 and lower is considered “junk” territory and highly speculative. Coinbase is rated one notch below.

Moody’s said the collapse of FTX has heightened the level of uncertainty in the crypto industry, raising challenges for all those operating within the sector.

The crypto exchange is likely to see “an increasing possibility of sustained reductions in trading volumes and client engagement, that are important factors for Coinbase’s revenue” said Moody’s Vice President and Senior Analyst Fadi Abdel Massih.

Shares of Coinbase have lost nearly 38% in value this month and closed at a record low at $41.23 on Monday. Their value is about a tenth of the level when they listed publicly to much funfare in New York in April 2021.

(Reporting by Medha Singh in Bengaluru and Chiara Elisei in London; Editing by Amanda Cooper and Barbara Lewis)

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Dollar cedes some ground, bitcoin hunkers down

By Rae Wee and Alun John

SINGAPORE/LONDON (Reuters) – The dollar retreated on Tuesday after rallying the previous day when investors rushed to the safe-haven currency on worries about China’s COVID flare-ups, while fears of fresh contagion from the collapse of crypto exchange FTX pressured bitcoin.

The euro was up 0.3% at $1.0265 after an 0.8% loss on Monday, sterling rose 0.46% to $1.187, partially reversing its 0.6% fall, and the dollar was at 141.86 yen, down 0.6% after a 1.2% gain.

Flows to the dollar on Monday came as Beijing warned that it was facing its most severe test of the COVID-19 pandemic, with a surge in COVID cases sparking fresh restriction measures. Deaths from the virus were also recorded in the capital for the first time since May.

Restrictions in Beijing and elsewhere tightened further on Tuesday, though currency traders seemed to think the previous day’s moves were sufficient.

Lee Hardman, senior currency analyst at MUFG said in a note that more cautious remarks from U.S. Federal Reserve officials were a factor in the dollar losing some momentum on Tuesday.

Cleveland Fed President Loretta Mester said the central bank can downshift to smaller interest rate hikes from next month, and San Francisco Fed President Mary Daly said the real-world impact of interest rate increases is likely greater than its short-term rate target implies.

In Europe on Tuesday, data from the European Central Bank showed the euro zone’s current account deficit narrowed in September.

“While we flagged the big deterioration of the current account earlier this year as something that was creating a challenge for the euro, we may already be seeing signs that the worst is now over,” said Dominic Bunning, head of European FX research at HSBC, though he cautioned against reading too much into one data point.

The fresh bout of risk aversion related to China weighed particularly on the antipodean currencies – often used as liquid proxies for the Chinese yuan – with the Aussie sliding nearly 1% on Monday. It recouped some losses on Tuesday, rising 0.5% to $0.6639.

The trend held true further from China as well though, with the dollar falling 0.43% against the Swiss franc to 0.9552, reversing a similar gain the day before.

In cryptocurrencies, bitcoin fell to a new two-year low of $15,479 on Monday, another victim of Monday’s rush to the dollar, and also amid jitters about the health of crypto broker Genesis.

Genesis said on Monday it has no plans to file for bankruptcy imminently, though Bloomberg News reported, citing sources, that Genesis was struggling to raise fresh cash for its lending unit, and warning investors it may need to file for bankruptcy if it does not find funding.

The lending unit suspended redemptions last week, citing fallout from the collapse of FTX, which filed for bankruptcy on November 11.

(Reporting by Rae Wee and Alun John; editing by Kim Coghill, Jason Neely and Emelia Sithole-Matarise)

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Exclusive-Bankman-Fried’s FTX, parents bought Bahamas property worth $121 million

By Koh Gui Qing

NEW PROVIDENCE, Bahamas (Reuters) – Sam Bankman-Fried’s FTX, his parents and senior executives of the failed cryptocurrency exchange bought at least 19 properties worth nearly $121 million in the Bahamas over the past two years, official property records show.

Most of FTX’s purchases were luxury beachfront homes, including seven condominiums in an expensive resort community called Albany, costing almost $72 million. The deeds show these properties, bought by a unit of FTX, were to be used as “residence for key personnel” of the company. Reuters could not determine who lived in the apartments.

The documents for another home with beach access in Old Fort Bay — a gated community that was once home to a British colonial fort built in the 1700s to protect against pirates — show Bankman-Fried’s parents, Stanford University law professors Joseph Bankman and Barbara Fried, as signatories. The property, one of the documents dated June 15 said, is for use as a “vacation home.”

When asked by Reuters why the couple decided to buy a vacation home in the Bahamas and how it was paid for — whether in cash, with a mortgage or by a third party such as FTX — a spokesman for the professors said only that Bankman and Fried had been trying to return the property to FTX.

“Since before the bankruptcy proceedings, Mr. Bankman and Ms. Fried have been seeking to return the deed to the company and are awaiting further instructions,” the spokesperson said, declining to elaborate.

While it is known that FTX and its employees bought real estate in the Bahamas, where it established its headquarters in September last year, the property records seen by Reuters show for the first time the scale of their buying spree and the intended use of some of the real estate.

FTX, which filed for bankruptcy earlier this month after a rush of customer withdrawals, did not respond to a request for comment. Bankman-Fried did not respond to requests for comment.

Bankman-Fried has told Reuters he lived in a house with nine other colleagues. For his employees, he said FTX provided free meals and an “in-house Uber-like” service around the island.

The collapse of FTX, one of the world’s largest crypto currency exchanges, has left an estimated 1 million creditors facing losses totalling billions of dollars. Reuters has reported Bankman-Fried secretly used $10 billion in customer funds to prop up his trading business, and that at least $1 billion of those deposits had vanished.

In a U.S. court filing with the District of Delaware bankruptcy court earlier this month, John Ray, FTX’s new chief executive, said he understood that corporate funds of the FTX Group were used to “purchase homes and other personal items for employees and advisors.”

Reuters could not determine the source of funds that FTX and its executives used to buy these properties.

    PROPERTY PURCHASES

    Reuters searched property records at the Bahamas Registrar General’s Department for FTX, Bankman-Fried, his parents and some of the company’s key executives.

    FTX Property Holdings Ltd, an FTX unit, bought 15 properties worth nearly $100 million in 2021 and 2022. 

    Its most expensive purchase was a $30 million penthouse at the Albany, a resort where Tiger Woods hosts a golf tournament every year. The property records for the penthouse, dated March 17, were signed by Ryan Salame, the president of FTX Property, and showed it was intended as “residence for key personnel.”

    Salame did not respond to a request for comment.

    Other high-end real estate purchases include three condominiums at One Cable Beach, a beachfront residence in New Providence. Records showed the condominiums cost between $950,000 and $2 million and were bought by Nishad Singh, the former head of engineering at FTX, Gary Wang, an FTX co-founder, and Bankman-Fried for residential use. 

    Singh and Wang did not respond to requests for comment.

    Two of FTX Property’s real estate holdings were marked for commercial use – an $8.55 million cluster of houses that served as FTX’s headquarters, and a 4.95-acre plot of land on the coastline overlooking cyan waters that was also meant to be developed into office space for the crypto exchange. 

    The FTX headquarters is now unoccupied, with furniture pushed against some windows. Its signage has been removed.  The plot of land, which cost $4.5 million, also lies empty.

    A security guard said employees did not return to the headquarters after leaving earlier this month.  

(Reporting by Koh Gui Qing; editing by Paritosh Bansal and Claudia Parsons)

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FTX had total cash balance of $1.24 billion as of Nov. 20

(Reuters) – Cryptocurrency exchange FTX, which has filed for U.S. bankruptcy court protection, had a total cash balance of $1.24 billion as of Nov. 20, according to a court filing on Monday.

FTX will see a drop in its cash flow by $20 million to $459 million by Dec. 23, from $479 million as of Nov. 25, the filing said.

In an earlier court filing, FTX had said that it owes its 50 biggest creditors nearly $3.1 billion.

(Reporting by Juby Babu in Bengaluru; Editing by Kim Coghill)

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U.S. prosecutors opened probe of FTX months before its collapse – Bloomberg News

(Reuters) – Crypto exchange FTX was on the radar of federal prosecutors in Manhattan months before its collapse, Bloomberg News reported on Monday citing people familiar with the investigation.

The U.S. Attorney’s Office for the Southern District of New York spent months working on a sweeping examination of cryptocurrency platforms that have U.S. and offshore arms including FTX’s massive exchange operations, the report added.

FTX and the concerned U.S. Attorney’s Office did not immediately respond to Reuters’ requests for comment.

The implosion of FTX has spread ripples across the industry, hobbling liquidity at firms with exposure to what was once one of the world’s biggest crypto exchanges, prompting investigations by regulators in several countries. It has fanned fears about the future of the crypto industry after FTX outlined a “severe liquidity crisis”.

Earlier this month, FTX filed for U.S. bankruptcy protection and its founder Sam Bankman-Fried resigned as chief executive, after rival exchange Binance walked away from a proposed acquisition.

Several crypto firms have since been bracing for a fallout from the FTX collapse, with many counting their exposure in millions to the beleaguered exchange.

(Reporting by Manya Saini in Bengaluru; Editing by Krishna Chandra Eluri)

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U.S. Senate to hold FTX hearing on Dec. 1, CFTC chairman to testify

(Reuters) – The U.S. Senate Agriculture Committee on Thursday said it will hold a hearing on Dec. 1 to examine the sudden collapse of FTX, one of the world’s biggest crypto exchanges.

FTX filed for bankruptcy on Nov. 11, leaving an estimated 1 million customers and other investors facing billions of dollars in total losses. The firm’s failure has created a liquidity crunch that has rippled across the industry and sent the prices of bitcoin and other digital assets plummeting.

Rostin Behnam, the chairman of the Commodity Futures Trading Commission, is the first witness named for the hearing, titled, “Why Congress Needs to Act: Lessons Learned from the FTX Collapse.”

U.S. Senate Agriculture Committee Chair Debbie Stabenow also on Thursday called on Congress to pass the bipartisan Digital Commodities Consumer Protection Act, which she said, “would have prohibited the misconduct and risky behavior undertaken by FTX.”

The U.S. House Financial Services Committee has also said it plans to hold a hearing in December to investigate FTX’s collapse.

(Reporting by John McCrank in New York; Editing by David Gregorio)

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Investors flock to short crypto funds, products as negative sentiment deepens -CoinShares

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – Institutional investors rushed to crypto products that bet on price declines, posting record inflows, as the collapse of digital asset exchange FTX rippled across the industry and significantly weighed on market sentiment, according to weekly data from digital asset manager CoinShares released on Monday.

Crypto products and funds saw inflows of $44 million, as of the week ended Nov. 18, but 75% of those flows represented investments in short crypto products, data showed.

The total assets under management have plunged to $22 billion, the lowest in two years, CoinShares said.

FTX filed for bankruptcy protection in the United States more than a week ago in the highest-profile crypto implosion to date. FTX’s downfall came after traders withdrew $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.

Last week, the executive hired to steer FTX Group through bankruptcy, John Ray, offered his first findings of improper fund transfers and poor accounting at the collapsed crypto exchange, describing it as a “complete failure” of controls.

“Even for corporate fraud historians, the scope and audacity of FTX’s con defies imagination,” said Matt Weller, global head of research, at FOREX.com and City Index.

He added, referring to FTX’s former chief executive officer, Sam Bankman-Fried, “For traders and investors, every word that comes out of SBF’s mouth at this point increases the likelihood of harsher regulations in the crypto space, both in the U.S. and elsewhere, and token prices are likely to remain under pressure as long as fears over the regulatory hammer falling loom.”

In a conversation with a Vox reporter published last week, Bankman-Fried blamed FTX’s collapse in part on “messy accounting,” expressed regret at his decision to file for bankruptcy and denigrated U.S. regulators in profane terms. He later said he did not intend for the conversation to be made public.

CoinShares data also showed that bitcoin posted inflows of $14 million, but when offset by inflows into short investment products, the net flows were a negative $4.3 million. The AUM on short-bitcoin was at $173 million, not far from a high of $186 million,

There were minor outflows of $800,000 for Ethereum, the second-largest blockchain network. Investors poured in record inflows to short-Ethereum products of $14 million.

There was a slew of outflows across most altcoins, most notably Solana, XRP, Binance and Polygon.

(Reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Matthew Lewis)

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NBA champions Golden State Warriors are sued over FTX collapse

(Reuters) – The Golden State Warriors were sued on Monday by an FTX account holder who accused the reigning National Basketball Association champions of fraudulently promoting the now-bankrupt cryptocurrency exchange.

Elliott Lam, a Canadian citizen and Hong Kong resident who said he lost $750,000 in his FTX yield-bearing account, filed his proposed class-action lawsuit in San Francisco federal court.

Other defendants include Sam Bankman-Fried, who founded FTX, and Caroline Ellison, who led Bankman-Fried’s trading firm Alameda Research.

Lam accused the defendants of falsely representing that FTX was a “viable and safe way to invest in crypto,” in order to deceive consumers into investing there.

The lawsuit seeks unspecified damages for people outside the United States with FTX yield-bearing accounts.

Spokespeople for the Warriors did not immediately respond to requests for comment.

The team had last December named FTX its official cryptocurrency platform, in what it called a first-of-its-kind cryptocurrency partnership in professional sports.

It paused promotions related to FTX last week, according to published reports.

Another NBA team, the Miami Heat, on Nov. 11 said it would drop the FTX name from its home arena and seek a new naming sponsor.

(Reporting by Jonathan Stempel in New York; Additional reporting by Amy Tennery; Editing by Tomasz Janowski)