Category: News

By Vidya Ranganathan

SINGAPORE (Reuters) – The fallout from the collapse of crypto exchange FTX kept bitcoin and other cryptocurrencies under pressure on Monday, with market participants worrying about heavy withdrawals at Singapore-based exchange Crypto.com.

Crypto.com tweeted that its chief executive Kris Marszalek will go live on YouTube to answer questions around some transactions on the platform that had sparked speculation and fund withdrawals.

“A lot has happened in the last week and there are a lot of questions which we want to address,” the exchange said.

The questions around a transfer of a big chunk of ether tokens last month from Crypto.com to another platform were raised by an user who dug through transactions after the company posted its cold wallet addresses online.

While Marszalek tweeted to say the ether, worth about $400 million, had been accidentally transferred and was recovered, his comments failed to allay concerns in a market already on edge after the spectacular public collapse of FTX last week.

The Wall Street Journal reported that withdrawals at Crypto.com rose over the weekend after Marszalek’s tweet. Twitter users pointed to other transfers between some other smaller platforms and exchanges as possible evidence that they were leaning on each other to shore up reserves.

Bitcoin slid further to below $16,000, taking losses for the month to 22.5%, while FTX’s token was at $1.60 and down 94% in November. Crypto.com’s token Cronos has halved in the past week to $0.06.

“Trust is at a massive premium because of the transparency or lack of it in this industry. How do you assess which exchange to trust at the moment?” said Leonard Hoh, the Singapore-based Asia-pacific head of exchange BitStamp.

“In reality all firms are being tested on their ability to meet their obligations and compliance controls. The market is asking for real proof. Rather than assuming parties have been acting in good faith.”

Crypto.com is among the top 10 exchanges by turnover globally, but smaller than FTX and market leader Binance. It made headlines in 2021 after it signed a $700 million deal to rename the Staples Center in Los Angeles as the Crypto.com Arena, and got actor Matt Damon to promote the platform.

FTX CONTAGION

Meanwhile, the effects of the collapse of Bahamas-based FTX, which filed for bankruptcy on Friday after a rush of customer withdrawals and a failed rescue deal with rival exchange Binance, continued to affect markets.

Bahamas securities regulator and financial investigators are investigating potential misconduct over the collapse of cryptocurrency exchange FTX, the Royal Bahamas Police Force said on Sunday.

Bloomberg news reported exchange AAX had halted withdrawals.

Visa Inc, the world’s largest payments processor, said on Sunday it was severing its global credit card agreements with collapsed crypto exchange FTX.

Binance chief executive Changpeng Zhao meanwhile tweeted that the exchange had never short-sold FTT tokens.

Zhao abandoned a deal with FTX chief Sam Bankman-Fried (SBF) last week to buy FTX’s non-U.S. assets, precipitating the bankruptcy.

He has since warned of a “cascading” crypto crisis and on Monday called for clearer crypto industry regulation.

“Full disclosure: Binance never shorted FTT. We still have a bag of as we stopped selling FTT after SBF called me. Very expensive call,” Zhao tweeted.

(Additional reporting by Xinghui Kok in Singapore; Editing by Sam Holmes)

NEW YORK (Reuters) – Visa Inc, the world’s largest payments processor, said on Sunday it was severing its global credit card agreements with collapsed crypto exchange FTX.

“The situation with FTX is unfortunate and we are monitoring developments closely,” a Visa spokesperson told Reuters.

“We have terminated our global agreements with FTX and their U.S. debit card program is being wound down by their issuer.”

FTX and Visa had announced an expanded partnership in early October, including plans to introduce account-linked Visa debit cards in 40 new countries.

(Reporting by Hannah Lang; Editing by Jacqueline Wong)

By Jasper Ward

NASSAU, Bahamas (Reuters) – The collapse of cryptocurrency exchange FTX is the subject of scrutiny from government investigators in the Bahamas, who are looking at whether any “criminal misconduct occurred,” the Royal Bahamas Police said on Sunday.

FTX filed for bankruptcy on Friday, one of the highest profile crypto blowups, after traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal.

In a statement on Sunday, the Royal Bahamas Police said: “In light of the collapse of FTX globally and the provisional liquidation of FTX Digital Markets Ltd, a team of financial investigators from the Financial Crimes Investigation Branch are working closely with the Bahamas Securities Commission to investigate if any criminal misconduct occurred.”

FTX did not respond to Reuters’ request for comment.

FTX’s newly appointed Chief Executive John J. Ray III, a restructuring expert who took over after the bankruptcy filing, said on Saturday that the company was working with law enforcement and regulators to mitigate the problem, and was making “every effort to secure all assets, wherever located.”

The exchange’s dramatic fall from grace has seen its 30-year-old founder Sam Bankman-Fried, known for his shorts and T-shirt attire, morph from being the poster child of crypto’s successes to the protagonist of the industry’s biggest crash.

Bankman-Fried, who lives in the Bahamas, has also been the subject of speculation about his whereabouts and he denied rumors on Twitter that he had flown to South America. When asked by Reuters on Saturday whether he had flown to Argentina, he responded in a text message: “Nope”. He told Reuters he was in the Bahamas.

The turmoil at FTX has seen at least $1 billion of customer funds vanish from the platform, sources told Reuters on Friday. Bankman-Fried had transferred $10 billion of customer funds to his trading company, Alameda Research, the sources said.

New problems emerged on Saturday when FTX’s U.S. general counsel Ryne Miller said in a Twitter post that the firm’s digital assets were being moved into so-called cold storage “to mitigate damage upon observing unauthorized transactions.”

Cold storage refers to crypto wallets that are not connected to the internet to guard against hackers.

Blockchain analytics firm Nansen said on Saturday it saw $659 million in outflows from FTX International and FTX U.S. in the preceding 24 hours.

Crypto exchange Kraken said on Twitter on Sunday that it froze the accounts of FTX, Alameda Research and their executives in order “to protect its creditors.”

The exchange did not immediately reply to a request for comment on the holdings of those accounts.

In its bankruptcy petition, FTX Trading said it has $10 billion to $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors.

A document that Bankman-Fried shared with investors on Thursday and was reviewed by Reuters showed FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy.

The collapse shocked investors and prompted fresh calls to regulate the cryptoasset sector, which has seen losses stack up this year as cryptocurrency prices collapsed.

Bitcoin fell below $16,000 for the first time since 2020 on Wednesday, after Binance abandoned its rescue deal for FTX.

On Sunday it was trading around $16,400, down by more than 75% from the all-time high of $69,000 it reached in November last year. (This story has been refiled to fix the byline)

(Reporting by Jasper Ward in the Bahamas; Additional reporting by Maria Ponnezhath and Jyoti Narayan in Bengaluru and Rodrigo Campos in New York; Writing by Megan Davies; Editing by Daniel Wallis)

(Reuters) – Cryptocurrency exchange Binance has stopped accepting deposits of FTX’s FTT token on its platform, its chief executive Changpeng Zhao said on Sunday, urging other rival exchanges to do the same.

FTX, which filed for bankruptcy on Friday, was engulfed in more chaos on Saturday when the crypto exchange said it had detected unauthorized access and analysts said hundreds of millions of dollars of assets had been moved from the platform in “suspicious circumstances”.

“(Binance) has stopped FTT deposit, to prevent potential of questionable additional supplies affecting the market. We will monitor the situation,” CEO Zhao said in a tweet.

“FTT contract deployers moved all remaining FTT supply worth $400 million, which should be unlocked in batches. Not too sure what’s going on,” he added, in another tweet.

(Reporting by Shubham Kalia in Bengaluru;Editing by Elaine Hardcastle)

By Summer Zhen, Vidya Ranganathan and Elizabeth Howcroft

HONG KONG/SINGAPORE/LONDON (Reuters) – FTX was engulfed in more chaos on Saturday when the crypto exchange said it had detected unauthorized access and analysts said hundreds of millions of dollars of assets had been moved from the platform in “suspicious circumstances”.

FTX filed for bankruptcy on Friday, one of the highest profile crypto blowups, after traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal.

FTX Chief Executive John J. Ray III said on Saturday that the company was working with law enforcement and regulators to mitigate the problem, and was making “every effort to secure all assets, wherever located.”

“Among other things, we are in the process of removing trading and withdrawal functionality,” he said.

The exchange’s dramatic fall from grace has seen its 30-year-old founder Sam Bankman-Fried, known for his shorts and T-shirt attire, morph from being the poster child of crypto’s successes to the protagonist of the industry’s biggest crash.

Bankman-Fried, who lives in the Bahamas, has also been the subject of speculation about his whereabouts and he denied rumors on Twitter that he had flown to South America. When asked by Reuters whether he had flown to Argentina, he responded in a text message: “Nope”. He told Reuters he was in the Bahamas.

The turmoil at FTX has seen at least $1 billion of customer funds vanish from the platform, sources told Reuters on Friday. Bankman-Fried had transferred $10 billion of customer funds to his trading company, Alameda Research, the sources said.

New problems emerged on Saturday when FTX’s U.S. general counsel Ryne Miller said in a Twitter post that the firm’s digital assets were being moved into so-called cold storage “to mitigate damage upon observing unauthorized transactions.”

Cold storage refers to crypto wallets that are not connected to the internet to guard against hackers.

Blockchain analytics firm Nansen said it saw $659 million in outflows from FTX International and FTX U.S. in the last 24 hours.

A separate blockchain analytics firm Elliptic said that around $515 million worth of cryptoassets were “suspected to have been stolen,” while $186 million were likely moved into secure storage by FTX.

Crypto exchange Kraken said: “We can confirm our team is aware of the identity of the account associated with the ongoing FTX hack, and we are committed to working with law enforcement to ensure they have everything they need to sufficiently investigate this matter.”

FTX was not immediately available for comment about the outflows or Kraken’s statement.

In its bankruptcy petition, FTX Trading said it has $10 billion to $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors. Ray, a restructuring expert, was appointed to take over as CEO.

A document that Bankman-Fried shared with investors on Thursday and was reviewed by Reuters showed FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy.

The collapse shocked investors and prompted fresh calls to regulate the cryptoasset sector, which has seen losses stack up this year as cryptocurrency prices collapsed.

“Things will continue to simmer after the FTX crash,” said Alan Wong, operations manager of Hong Kong Digital Asset Exchange.

“With a gap of $8 billion between liabilities and assets, when FTX is insolvent, it will trigger a domino effect, which will lead to a series of investors related to FTX going bankrupt or being forced to sell assets.”

Crypto market maker Jump said on Twitter late on Saturday that it had an undisclosed exposure to FTX, adding that the firm remains well capitalized.

MARKET FALLOUT

Since its founding in 2019, FTX had raised more than $2 billion from top investors including Sequoia, SoftBank, BlackRock and Temasek. In January, FTX had raised $400 million from investors at a $32 billion valuation.

SoftBank and Sequoia Capital said they were marking their investments in FTX down to zero.

Cryptocurrency exchange Coinbase Global Inc will also write off the investment its ventures arm made in FTX in 2021, according to a person familiar with the matter.

Bitcoin fell below $16,000 for the first time since 2020 after Binance abandoned its rescue deal for FTX on Wednesday.

On Saturday it was trading around $16,800, down by more than 75% from the all-time high of $69,000 it reached in November last year.

FTX’s token FTT plunged by around 91% this week. Shares of cryptocurrency and blockchain-related firms have also declined.

“We believe cryptocurrency markets remain too small and too siloed to cause contagion in financial markets, with an $890 billion market cap in comparison to U.S. equity’s $41 trillion,” Citi analysts wrote.

“Over four years, FTX raised $1.8 billion from venture capital and pension funds. This is the primary way financial markets could suffer, as it may have further minor implications for portfolio shocks in a volatile macro regime.”

The U.S. securities regulator is investigating FTX.com’s handling of customer funds, as well its crypto-lending activities, a source with knowledge of the inquiry said.

Hedge fund Galois Capital had half its assets trapped on FTX, the Financial Times reported on Saturday, citing a letter from co-founder Kevin Zhou to investors and estimating the amount to be around $100 million. Pain in crypto land https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/lbvggrkadvq/chart.png

(Additional reporting by Angus Berwick and Carolina Mandl in New York; Editing by Pravin Char, Megan Davies and Daniel Wallis)

(Reuters) – FTX-affiliated crypto trading firm Alameda Research’s Chief Executive Officer Caroline Ellison and senior FTX officials knew that the crypto exchange had lent Alameda its customer funds to help meet liabilities, the Wall Street Journal reported on Saturday.

Reuters reported Friday that FTX founder and former CEO Sam Bankman-Fried had secretly transferred $10 billion of customer funds from FTX to Alameda.

Ellison told employees in a video meeting on Wednesday that she, Bankman-Fried, and two other executives, Nishad Singh and Gary Wang were aware of the decision to move customer funds to Alameda, the Journal said, citing people familiar with the matter.

FTX filed for U.S. bankruptcy protection early Friday and Bankman-Fried resigned as chief executive.

FTX and Alameda Research did not immediately respond to Reuters’ requests for comment.

(Reporting by Kanjyik Ghosh in Bengaluru; editing by Diane Craft)

NEW YORK (Reuters) – FTX founder Sam Bankman-Fried told Reuters on Saturday that he was in the Bahamas, denying speculation on Twitter that he had flown to South America after the exchange filed for bankruptcy and he was removed as chief executive.

When asked by Reuters whether he had flown to Argentina, Bankman-Fried responded in a text message: “Nope”. He told Reuters he was in the Bahamas.

(Reporting by Angus Berwick)

By Angus Berwick

New York (Reuters) – At least $1 billion of customer funds have vanished from collapsed crypto exchange FTX, according to two people familiar with the matter.

The exchange’s founder Sam Bankman-Fried secretly transferred $10 billion of customer funds from FTX to Bankman-Fried’s trading company Alameda Research, the people told Reuters.

A large portion of that total has since disappeared, they said. One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion.

While it is known that FTX moved customer funds to Alameda, the missing funds are reported here for the first time.

The financial hole was revealed in records that Bankman-Fried shared with other senior executives last Sunday, according to the two sources. The records provided an up-to-date account of the situation at the time, they said. Both sources held senior FTX positions until this week and said they were briefed on the company’s finances by top staff.

Bahamas-based FTX filed for bankruptcy on Friday after a rush of customer withdrawals earlier this week. A rescue deal with rival exchange Binance fell through, precipitating crypto’s highest-profile collapse in recent years.

In text messages to Reuters, Bankman-Fried said he “disagreed with the characterization” of the $10 billion transfer.

“We didn’t secretly transfer,” he said. “We had confusing internal labeling and misread it,” he added, without elaborating.

Asked about the missing funds, Bankman-Fried responded: “???”

FTX and Alameda did not respond to requests for comment.

In a tweet on Friday, Bankman-Fried said he was “piecing together” what had happened at FTX. “I was shocked to see things unravel the way they did earlier this week,” he wrote. “I will, soon, write up a more complete post on the play by play.”

At the heart of FTX’s problems were losses at Alameda that most FTX executives did not know about, Reuters has previously reported.

Customer withdrawals had surged last Sunday after Changpeng Zhao, CEO of giant crypto exchange Binance, said Binance would sell its entire stake in FTX’s digital token, worth at least $580 million, “due to recent revelations.” Four days before, news outlet CoinDesk reported that much of Alameda’s $14.6 billion in assets were held in the token.

That Sunday, Bankman-Fried held a meeting with several executives in the Bahamas capital Nassau to calculate how much outside funding he needed to cover FTX’s shortfall, the two people with knowledge of FTX’s finances said.

Bankman-Fried confirmed to Reuters that the meeting took place.

Bankman-Fried showed several spreadsheets to the heads of the company’s regulatory and legal teams that revealed FTX had moved around $10 billion in client funds from FTX to Alameda, the two people said. The spreadsheets displayed how much money FTX loaned to Alameda and what it was used for, they said.

The documents showed that between $1 billion and $2 billion of these funds were not accounted for among Alameda’s assets, the sources said. The spreadsheets did not indicate where this money was moved, and the sources said they don’t know what became of it.

In a subsequent examination, FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a “backdoor” in FTX’s book-keeping system, which was built using bespoke software.

They said the “backdoor” allowed Bankman-Fried to execute commands that could alter the company’s financial records without alerting other people, including external auditors. This set-up meant that the movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX, they said.

In his text message to Reuters, Bankman-Fried denied implementing a “backdoor”.

The U.S. Securities and Exchange Commission is investigating FTX.com’s handling of customer funds, as well its crypto-lending activities, a source with knowledge of the inquiry told Reuters on Wednesday. The Department of Justice and the Commodity Futures Trading Commission are also investigating, the source said.

FTX’s bankruptcy marked a stunning reversal for Bankman-Fried. The 30-year-old had set up FTX in 2019 and led it to become one of the largest crypto exchanges, accumulating a personal fortune estimated at nearly $17 billion. FTX was valued in January at $32 billion, with investors including SoftBank and BlackRock.

The crisis has sent reverberations through the crypto world, with the price of major coins plummeting. And FTX’s collapse is drawing comparisons to earlier major business meltdowns.

On Friday, FTX said it had turned over control of the company to John J. Ray III, the restructuring specialist who handled the liquidation of Enron Corp – one of the largest bankruptcies in history.

(Reporting by Angus Berwick; editing by Paritosh Bansal and Janet McBride)

(Reuters) – Collapsed crypto exchange FTX said on Saturday it was moving funds into offline storage following a series of “unauthorized transactions”, with analysts saying millions of dollars worth of assets had been withdrawn from the platform.

FTX U.S. general counsel Ryne Miller said in a tweet on Saturday that the exchange was expediting the process of shifting all digital assets into cold storage “to mitigate damage upon observing unauthorized transactions.”

Cold storage refers to crypto wallets that are not connected to the internet to guard against hackers.

Late on Friday, Miller tweeted that he was “investigating abnormalities with wallet movements related to consolidation of FTX balances across exchanges.”

Figures from Singapore-based analytics firm Nansen showed a one-day net outflow from FTX of about $266 million, with $73 million withdrawn from FTX U.S. alone.

FTX did not respond to a Reuters request for comment.

Prior to Miller’s tweets, FTX officials appeared to confirm rumors of a hack on the firm’s Telegram channel, according to a CoinDesk report which said that the exchange had instructed customers to delete FTX apps and avoid its website.

“FTX has been hacked,” an account administrator in the FTX Support Telegram channel wrote in a message, according to CoinDesk.

Reuters could not immediately verify the details posted on FTX’s private Telegram channel.

FTX, affiliated crypto trading firm Alameda Research and about 130 of its other companies have filed for bankruptcy court protection from creditors in Delaware, FTX said on Friday.

The distressed crypto trading platform had struggled to raise billions as traders withdrew $6 billion in crypto tokens from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal this week.

(Reporting by Akriti Sharma in Bengaluru; Editing by William Mallard and Pravin Char)

By Hannah Lang

(Reuters) – Sam Bankman-Fried earned a reputation as savior of the crypto industry when he bailed out two platforms earlier this year. But when FTX, the exchange he co-founded and led until Friday, needed a lifeline, none was forthcoming.

Until this week, the 30-year-old American was seen as a darling in digital assets who amassed billions in personal wealth by running one of the world’s largest crypto platforms. But as traders rushed to withdraw funds from FTX, Bankman-Fried was in denial and told investors he was convinced the business would be rescued, according to a source familiar with the situation. By Friday, FTX had filed for bankruptcy. He apologized, repeatedly.

“Nobody was saying that anything was wrong with SBF,” said Marius Ciubotariu, co-founder of the Hubble protocol, a decentralized lending platform. The company’s collapse caught markets by surprise because Bankman-Fried was seen as a business-savvy founder adept at striking deals, he said.

Known in financial circles by his initials, SBF, Bankman-Fried had become a prominent and unconventional figure in the industry. He sported his signature wild hair, t-shirts and shorts on panel appearances with statesmen like former U.S. President Bill Clinton and former British Prime Minister Tony Blair, as well as supermodel Gisele Bundchen. Bankman-Fried also quickly became one of the largest Democratic donors in the United States, contributing $5.2 million to President Joe Biden’s 2020 campaign.

The crypto wunderkind started his career at Jane Street Capital, a choice he has said was influenced by a desire to make money to pursue his interest in effective altruism, a movement that encourages people to prioritize donations to charities.

He amassed a fortune, estimated as high as $26.5 billion by Forbes a year ago, by taking advantage of the price differences in bitcoin in Asia and the United States. Bankman-Fried eventually started crypto trading firm Alameda Research in 2017 and founded FTX a year later. It was valued in January at $32 billion.

FTX’s meltdown sent bitcoin plunging to a two-year low this week amid concern that the company’s woes will spread to other crypto firms. Employees were blindsided by its collapse, with some sending apologetic notes to clients expressing shock at what had happened, according to a person familiar with the matter.

FTX appointed John J. Ray III, a restructuring expert, as CEO on Friday. He oversaw the liquidation of Enron, the energy trading giant that collapsed in scandal and bankruptcy in 2001.

“A lot of people have compared this to Lehman – I would compare it to Enron,” said former Treasury Secretary Larry Summers in an interview with Bloomberg TV.

For all his recent celebrity endorsements, notoriety and big-name backers, Bankman-Fried was not confident about FTX’s prospects back in its early days.

“I thought we would fail,” Bankman-Fried said at a June conference weeks before FTX and Alameda extended lifelines to two struggling crypto platforms. “I thought we would fail because no one would ever use it.”

(Reporting by Hannah Lang in Washington; additional reporting by Anirban Sen in New York; Editing by Lananh Nguyen and Stephen Coates)

By Alun John and Hannah Lang

LONDON (Reuters) – Crypto exchange FTX filed for U.S. bankruptcy protection on Friday and its founder Sam Bankman-Fried resigned as chief executive, after the biggest blowup in the crypto industry drew calls for tighter regulation.

The distressed crypto trading platform had struggled to raise billions to stave off collapse as traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal this week.

FTX, its affiliated crypto trading firm Alameda Research, and about 130 of its other companies have commenced voluntary Chapter 11 bankruptcy proceedings in Delaware, the company said in a statement on Twitter on Friday.

It was an abrupt fall from grace for a company that was once a darling of the crypto industry. FTX raised $400 million from investors in January, valuing the company at $32 billion. It attracted money from investors such as Singapore state investor Temasek and the Ontario Teachers’ Pension Plan as well as celebrities and sports stars.

Bankman-Fried, 30, known for his trademark shorts and t-shirt attire, has morphed from being the poster child of crypto’s successes to the protagonist of the industry’s highest-profile crash.

“The shock was that this guy was the face of the crypto industry and it turned out that the emperor had no clothes,” said Thomas Hayes, managing member at Great Hill Capital LLC in New York. (For more reactions, click )

The week’s turmoil hit already-struggling cryptocurrency markets, sending bitcoin to two-year lows. Bitcoin dropped after FTX’s announcement and was down 4.3% at $16,803 on Friday afternoon.

Shares of cryptocurrency and blockchain-related firms also dropped on the news.

FTX’s token FTT plunged 30% on Friday to $2.57, facing an 88% weekly loss.

Bankman-Fried, whose net worth was estimated as high as $26.5 billion by Forbes a year ago, repeatedly apologized.

“I’m really sorry, again, that we ended up here,” he said in a series of tweets.

Bankman-Fried did not respond to requests for comment.

POSSIBLE CONTAGION EFFECT

In its bankruptcy petition, FTX Trading said it has $10 billion to $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors. John J. Ray III, a restructuring expert, has been appointed to take over as CEO.

Cryptocurrency exchange Coinbase Global Inc will write off the investment its ventures arm made in FTX in 2021, according to a person familiar with the matter.

The company said earlier this week it had $15 million in deposits on FTX that were used to facilitate business operations and client trades, but that its total exposure is minimal.

“The next question is how wide of a contagion effect this is going to have on other exchanges and where the next potential losses can occur,” said John Griffin, founder of Integra FEC, which consults on financial fraud investigations.

U.S. Senator Elizabeth Warren, a Democrat who has previously criticized the crypto industry, tweeted that the implosion of FTX was a wake-up call for Congress and regulators to hold the industry and its executives accountable.

“Too much of the crypto industry is smoke and mirrors. It’s time for stronger rules and stronger enforcement to protect ordinary people,” she said.

FTX was scrambling to raise about $9.4 billion from investors and rivals, Reuters reported citing sources, as the exchange sought to save itself after customer withdrawals.

“The Chapter 11 filing is a necessary step to allow the company to assess the situation and develop plans to move forward for the benefit of stakeholders,” Ray, the new CEO, said in a Slack memo to FTX staff seen by Reuters.

Ray, 63, oversaw the liquidation of Enron after its bankruptcy filing and served as the senior officer of what became Enron Creditors Recovery Corp. He also led the bankruptcy restructuring at Nortel Networks.

He did not respond to a request for comment.

Pain in crypto land https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/lbvggrkadvq/chart.png

As FTX’s troubles mounted, regulators around the world stepped in.

FTX is under investigation by the U.S. Securities and Exchange Commission, the U.S. Justice Department and the Commodity Futures Trading Commission, according to a source familiar with the investigations.

Some investors, including Sequoia and SoftBank, had already marked their investments in FTX to zero. SkyBridge Capital is working to buy back its FTX stake, the alternative investment firm’s founder, Anthony Scaramucci, said in an interview with CNBC on Friday.

The reverberations went beyond financial markets. Mercedes’ Formula One team suspended its partnership with FTX ahead of the season’s penultimate race in Brazil.

“Once Binance walked away from buying FTX after only 24 hours of due diligence the writing was on the wall for FTX,” said Antoni Trenchev, co-founder of crypto lender Nexo.

“Now we enter the next phase of the fallout, where we witness the second order effects and discover which entities were exposed to FTX and Alameda.”

(Reporting by Alun John in London and Hannah Lang in Washington; Additional reporting by Rae Wee in Singapore, Carolina Mandl and Saeed Azhar in New York, David Shepardson in Washington, Aishwarya Nair in Bangaluru, Georgina Lee in Hong Kong, Elizabeth Howcroft in London and Jasper Ward in the Bahamas; Editing by Paritosh Bansal, Louise Heavens and Matthew Lewis)

By Gertrude Chavez-Dreyfuss and Elizabeth Howcroft

NEW YORK/LONDON (Reuters) – A week of turmoil culminating in major crypto exchange FTX filing for bankruptcy has left investors questioning the viability of a sector already bruised by the bitcoin bubble bursting and closures of key market players.

The collapse of several crypto lenders, including Celsius and Voyager, major tokens terraUSD and Luna, and hedge fund Three Arrows Capital, had rung alarm bells even before the blow-up of FTX, headed by Sam Bankman-Fried. Crypto markets have also come under intense pressure this year as rising interest rates prompted investors to ditch riskier assets. FTX filed U.S. bankruptcy proceedings on Friday and Bankman-Fried stepped down as chief executive officer after a rapid liquidity crunch at the group left FTX scrambling to raise about $9.4 billion from investors and rivals. Top cryptocurrency bitcoin was trading at around $16,946, down 3.5% on Friday and had dropped below $16,000 for the first time in two years on Wednesday when rival exchange Binance abandoned a rescue for FTX. “The fallout from FTX isn’t something that’ll be resolved in hours,” said Antoni Trenchev, co-founder of crypto lender Nexo. “This will remain a dark cloud over the industry and institutions will stay away until the dust settles.” Knock-on effects are already rippling through the crypto industry. Crypto lender BlockFi early on Friday said it was pausing client withdrawals until there was clarity on FTX. FTX’s swift fall from grace followed heavy speculation about its financial health that triggered $6 billion of withdrawals in just 72 hours earlier this week. The company had published a valuation of $32 billion as recently as January. “From a financial side, it’s fair to say that confidence is going to be somewhat shaken because if you can’t trust FTX then what can you trust?” Yat Siu, co-founder of Hong Kong-based investor Animoca Brands, told Reuters on Wednesday. JPMorgan analysts said in a client note on Wednesday that the trouble at FTX “creates a confidence crisis and reduces the appetite of other crypto companies to come to the rescue.” Speaking at the Token2049 crypto conference in London on Wednesday, Andrei Kazantsev, global head of crypto trading at Goldman Sachs, said “counterparty risk is starting to be top of mind” for some clients once drawn to crypto trading by high volatility and yield. Unlike traditional corporations and financial firms, crypto entities operate in a regulatory gray area. For instance, deposits at crypto lenders are not insured by the government. In the case of FTX, U.S. residents cannot trade on its global platform due to strict regulations for the crypto space in the United States. FTX has a U.S. partner, FTX.US, but its offerings are more limited than the global platform. FTX’s bankruptcy filing makes stricter regulation of cryptocurrency exchanges more likely, said Joseph Edwards, investment partner at Securitize Capital.

“We’re likely to step back years in terms of retail market access to all but the most basic products.”

“It’s another set of headwinds adding to an already deleterious macro situation, so many will lose their appetite for the inherent risk involved in the sector,” he said. ‘POSTER CHILD’ NO MORE It was only a few months ago that Bankman-Fried, 30, had been seen as a crypto white knight, salvaging beleaguered crypto firms that faltered as prices cratered. “The show must go on, the industry needs to keep growing, but it’s definitely a step-back in itself when you see the poster child of the industry being put in this position,” said Jean-Marie Mognetti, chief executive of crypto asset manager CoinShares. “It is a lesson which seems to keep repeating itself,” he added, citing certain star traders in various companies that ended up in trouble.

While the meltdown would not stop companies from creating new blockchain-based products, Animoca’s Siu said it “probably will create a little bit of a chill effect” for institutional investors entering crypto markets.

To be sure, some investors continued to have faith in the sector.

In an interview with CNBC on Thursday, Microstrategy Chairman Michael Saylor said he will continue to acquire bitcoin when the opportunity presents itself. On Wednesday ARK Invest, led by high-profile crypto proponent Cathie Wood, bought shares in FTX rival exchange Coinbase Global. Max Boonen, co-founder of digital asset liquidity provider B2C2, said FTX’s problems have set the crypto space back by six months. Speaking at the Token2049 crypto conference in London, he suggested that investors will to have to rely more on credit asset managers doing due diligence on private financials.Ken Lo, co-founder at Hong Kong-based crypto exchange and custodian Hong Kong Digital Asset Exchange, said counterparty risk, which comes from a lack of transparency and information disclosure, underscores the need for “clear regulatory framework and vision statement.”

Top crypto exchanges by volume Top crypto exchanges by volume

https://graphics.reuters.com/FINTECH-CRYPTO/jnpwygnndpw/chart.png

(Reporting by Gertrude Chavez-Dreyfuss in New York and Elizabeth Howcroft in London; Additional reporting by Georgina Lee in Hong Kong; Editing by Alden Bentley, Catherine Evans and Matthew Lewis)

LONDON (Reuters) – FTX filed for U.S. bankruptcy proceedings on Friday, capping a week of turmoil for one of the world’s largest cryptocurrency exchanges.

FTX and its local units, had already attracted scrutiny from regulators around the world.

Here’s a roundup of what global regulators are doing about FTX:

UNITED STATES

FTX is under investigation by the U.S. Securities and Exchange Commission, Justice Department, and Commodity Futures Trading Commission, according to a source familiar with the investigations.

BAHAMAS

FTX’s group headquarters is in the Bahamas. The Securities Commission of the Bahamas said on Thursday it would freeze the assets of FTX Digital Markets, the group’s local unit, and also appointed a provisional liquidator for the unit.

EUROPE/CYPRUS

Cyprus’s Securities and Exchange Commission asked FTX EU to suspend its operations on Nov. 9, the regulator said on Friday.

FTX announced in September it had received approval from the Cypriot regulator to operate as a Cyprus Investment Firm, allowing the company to fully own a local investment firm it had previously acquired.

This allowed FTX EU to serve the European Economic Area.

JAPAN

FTX tweeted on Thursday that its local Japanese unit would go into “close only” mode, following the guidance of Japan’s Financial Services Agency, preventing customers from opening new accounts or trading.

The local unit resumed withdrawals on Friday.

(Reporting by Alun John; Editing by Emelia Sithole-Matarise)

(Reuters) – Coinbase Global Inc will write off the investment its ventures arm made in cryptocurrency exchange FTX in 2021, according to a person familiar with the matter.

Coinbase had said in a blog post Tuesday that the company has $15 million in deposits on FTX that were used to facilitate business operations and client trades, but that its total exposure is minimal.

According to a source, Coinbase plans to participate in the FTX bankruptcy proceedings to seek a claim on those deposits. FTX filed for bankruptcy in the U.S. on Friday.

(Reporting by Hannah Lang in Washington)

(Reuters) – Crypto exchange FTX filed for U.S. bankruptcy on Friday and Sam Bankman-Fried stepped down as CEO, after a liquidity crisis that has prompted intervention from regulators around the world.

FTX, its affiliated crypto trading fund Alameda Research and about 130 other companies have commenced voluntary Chapter 11 bankruptcy proceedings in Delaware, FTX said.

MARKET REACTION:

Shares of cryptocurrency and blockchain-related firms dropped on Friday after FTX, one of the biggest crypto exchanges, said it would initiate bankruptcy proceedings in the United States, triggering a potentially massive meltdown in the industry.

COMMENTS:

DENNIS DICK, MARKET STRUCTURE ANALYST AND TRADER AT TRIPLE D TRADING

“The bankruptcy filing happened right before the open so that actually knocked the entire stock market down too.”

“There was a lot of bad news already priced in. You would think these stocks would be down significantly on this news but many have actually come off the loss significantly. The dip got bought.”

THOMAS HAYES, MANAGING MEMBER AT GREAT HILL CAPITAL LLC IN NY

“It is sell the rumor. Now we have the news. What was feared is now done and I wouldn’t be surprised if in the coming days you see crypto start to find the bottom.”

“The shock was that this guy was the face of the crypto industry and it turned out that the emperor had no clothes. And I think that the real risk moving forward is confidence is lost in an asset class that’s not backed by anything and that’ll be something that has to play out.”

JAY HATFIELD, CEO OF INFRASTRUCTURE CAPITAL MANAGEMENT IN NEW YORK

“Bitcoin fell when the bankruptcy was announced pretty substantially and that tends to drag down most of the crypto related stocks like MicroStrategy because they own Bitcoin.”

“Well, they’ve already taken a pretty big hit. And overall, we’re in an upward trend after the inflation report. All these securities are high data, high risk so if the market goes up that’ll drag them higher.”

JOSEPH EDWARDS, INVESTMENT ADVISER AT SECURITIZE CAPITAL

“The main danger here is that the U.S. entity is involved – it essentially means contagion risk now jumps into areas that were supposed to be ringfenced, at which point it becomes much closer to an existential problem because of the regulatory implications.”

“The failure here has essentially been a failure of industry structures rather than a failure of the asset class, but when U.S. entities and authorities start getting involved, the difference between the two begins to blur.”

ERIC CHEN, CEO AND CO-FOUNDER OF INJECTIVE LABS

“The events today will likely cause ripple effects across the regulatory environment given that SBF was a major donor to the elections (sixth largest donor overall) so the politicians will likely have a negative sense of centralized crypto exchanges moving forward.

“Washington has lost one of the most important voices in crypto and I am not sure who exactly fills that gap in the short term. I suspect this volatility will be shortlived since it is mainly being driven by sudden liquidations.

“I think the events that have transpired over the past few days only add further fuel to the broader decentralization narrative and how important it will be for users to have unrestricted access to their funds at all times. In the long run, I think participants in crypto will be even more wary of centralized platforms or exchanges which will be a major boon for decentralized finance as a whole.”

OMID MALEKAN, ADJUNCT PROFESSOR AT COLUMBIA BUSINESS SCHOOL

“The ‘what’ of this latest crisis seems to be that FTX did things with client funds that an exchange should not have and now some amounts are missing. We need more details to know what the exact impropriety was and how much can be recovered.

“The ‘how’ is even tougher to answer because unlike a Terra, which was always questionable, or a Celsius, which like any lender could face a run, FTX was almost universally perceived to be safe, particularly after playing white knight to other failed crypto players. CEO SBF had taken a leadership role in things like regulations, and it almost seems pathological to have someone run a massive fraud while simultaneously working with Congress to clean up the industry. Ultimately, the lesson here is that the crypto industry needs to stop trusting cults of personality, no matter how well-intentioned they might seem.”

RICHARD GARDNER, CHIEF EXECUTIVE OFFICER OF MODULUS GLOBAL, A SOFTWARE PROVIDER TO BIG-TICKET WALL STREET CLIENTS

“FTX finds itself in this situation to begin with certainly is of no surprise. SBF’s freewheeling approach to industry consolidation was ill-conceived from the beginning. Even if he were in a position to successfully make the acquisitions, we are in the beginning of the economic crunch. To find the best deals associated with the most desirable institutions, a waiting game was in order. Shooting for the moon so fast was a surefire way to invite this kind of risk, and, while it isn’t a surprise, it is most certainly not going to give retail investors any sense of calm.”

GREG KIDD, CO-FOUNDER OF VC FIRM HARD YAKA

“Sam and FTX were playing a brilliant long-term strategic game (chess). Unfortunately for them, CZ and Binance chose to play a short-term tactical game (checkers) that put FTX under the spotlight on liquidity concentrations at Alameda that were vulnerable to price shocks that CZ/Binance could trigger by dumping particular assets. When FTX crossed the line to try to help Alameda weather the storm, the trap was sprung bringing the whole SBF ecosystem to its knees.”

“CZ and Binance flexed their muscles last month by delisting Coinbase and Circle’s USDC from their exchange, squelching liquidity from the world’s second most popular stablecoin in favor of their own stablecoin. Highlander hardball tactics again carried the day, strengthening Binance’s hand at the expense of the #2 and #3 players in the industry.

“It’s a rough and tumble world that just got rougher. Longer term, CZ/Binance may have their own comeuppance over their lenient compliance controls that have well benefited the likes of the Russian version of Silk Road and been a conduit of laundering proceeds for North Korean hackers.”

JOHN GRIFFIN, CEO AND FOUNDER OF INTEGRA FEC, WHICH PROVIDES CONSULTING TO GOVERNMENT AGENCIES AND LAW FIRMS INVESTIGATING FINANCIAL FRAUDS, AND FINANCE PROFESSOR AT UNIVERSITY OF TEXAS

“The next question is how wide of a contagion effect this is going to have on other exchanges and where the next potential losses can occur.

“Usually there is a lot of cross collateralization. So to what extent when you have a major entity like this that goes down, all the assets tied to that FTX exchange go down. It’s kind of the great financial crisis. You have people that have their custodians or assets related to FTX. It could cause somebody else to go down.

“You have a lack of trust in the crypto area, so you don’t know if someone else will be bankrupt and you might not get your crypto out (from other players). Investors could pull their crypto off the exchanges and put it on the blockchain. Then this would remove a lot of cross collateralization, a lot of leverage in the system, put downward pressure on crypto prices and potentially cause other players to fail. So this could be like a financial crisis in the crypto space.

“It seems that Alameda is short on obligations to the tune of many billions dollars. That means they owe someone billions of dollars. So those parties, as they experienced losses, that could cause them to wipe out other entities and those entities could wipe out other entities. You have an incentive to basically break all counterparties, you want to eliminate the counterparty risk, like you want to get out of any derivative trades you’ve made. You pull everything into hard cash. So you may be selling bitcoin or other crypto to raise cash. That puts downward pressure on crypto.

(Compiled by the Global Finance & Markets Breaking News team; Editing by Richard Chang)

(Reuters) – Sam Bankman-Fried on Friday resigned from his role as chief executive of FTX and the crypto exchange said it will initiate bankruptcy proceedings in the United States, capping off a tumultuous week for the industry.

Following are some facts about the co-founder and former CEO:

EDUCATION AND VENTURES BEFORE FTX

Born in 1992, Sam Bankman-Fried grew up in California. As a high school student, he attended the Canada/USA Mathcamp, a summer program for mathematically proficient students that also counts his future business partner Gary Wang among its alumni.

Bankman-Fried later graduated from the Massachusetts Institute of Technology (MIT) with a degree in physics. He traded currencies, futures and exchange-traded funds for Jane Street Capital.

After a more than three-year stint at the New York-based firm, he moved to crypto trading and founded Alameda Research in 2017. Besides trading major cryptocurrencies, the company also dabbled in other digital asset products and their derivatives.

FOUNDING OF FTX

More than a year and a half after starting Alameda, Bankman-Fried teamed up with Gary Wang, a former software engineer at Google and a fellow MIT graduate, to start FTX. The company offered trading on crypto tokens and derivatives, while also boasting of a robust risk management system. Bankman-Fried, often referred to by his initials SBF, brought Binance on board as FTX’s first investor.

Bankman-Fried was based in Hong Kong, where his company was headquartered earlier. Last year, he moved to the Bahamas when FTX decided to shift its headquarters to the archipelago nation.

WEALTH

Before the FTX collapse wiped out most of SBF’s wealth, he was one of the richest people in the digital asset industry. Forbes estimates his net worth to have peaked at $26.5 billion amid a wave of institutional adoption that pumped up crypto prices to record highs last year.

After a liquidity crisis at his companies, his net worth is now reported to be around $991 million.

Data released ahead of the U.S. midterm elections showed he was the sixth-largest political donor, having contributed $39.8 million with the vast majority going to help Democrats.

CELEBRITY INTEREST

National Football League quarterback Tom Brady and supermodel Gisele Bundchen took stakes in FTX last year. The company also signed NBA star Steph Curry as an ambassador.

In February, pop star Katy Perry posted on Instagram, “im quitting music and becoming an intern for @ftx_official ok”, reportedly after a chat with SBF the day before.

(Reporting by Niket Nishant in Bengaluru; Editing by Shounak Dasgupta)

(Reuters) – FTX was commencing bankruptcy proceedings in the United States and its Chief Executive Officer Sam Bankman-Fried has resigned, the crypto exchange said on Friday, in a spectacular collapse that will likely send shivers through the industry.

Here is a history of FTX since its foundation in 2019:

2019:

May – Former Wall Street trader Sam Bankman-Fried and ex-Google employee Gary Wang founded FTX, the owner and operator of FTX.COM cryptocurrency exchange.

2021:

July – A $900 million funding round valued FTX at $18 billion.

September – FTX signed a sponsorship deal with Mercedes’ Formula 1 team.

October – FTX raised capital at a valuation of $25 billion from investors including Singapore’s Temasek and Tiger Global.

2022:

Jan. 27 – FTX’s U.S. arm said it was valued at $8 billion after raising $400 million in its first funding round from investors including SoftBank and Temasek.

Jan. 31 – FTX raised $400 million from investors including SoftBank at a valuation of $32 billion.

June 4 – FTX signed a reportedly $135 million sponsorship deal for naming rights of the Miami Heat’s home court.

July 1 – FTX signed a deal with an option to buy embattled crypto lender BlockFi for up to $240 million.

July 22 – FTX offered a partial bailout of bankrupt crypto lender Voyager Digital. Voyager called it a “low-ball bid”.

Aug. 19 – A U.S. bank regulator ordered FTX to halt “false and misleading” claims it had made about whether funds at the company are insured by the government.

Nov. 2 – Crypto news website CoinDesk reported a leaked balance sheet that showed Alameda Research, Bankman-Fried’s crypto trading firm, was heavily dependent on FTX’s native token, FTT. Reuters was unable to verify the report.

Nov. 6 – Binance CEO Changpeng Zhao said his firm would liquidate its holdings of FTT due to unspecified “recent revelations”.

Nov. 7 – Bankman-Fried said “FTX is fine. Assets are fine”.

Nov. 8 – Binance said it was planning a deal to acquire FTX.

Nov. 9 – Binance decided against pursuing a nonbinding agreement to bail out FTX.

Nov. 10 – FTX suspended on-boarding of new clients as well as withdrawals until further notice

Nov. 10 – Bankman-Fried told staff in a memo that he was seeking a capital raising and had held talks with Justin Sun, founder of the crypto token Tron

Nov. 10 – Reuters reported that Bankman-Fried is seeking to put together a rescue package of up to $9.4 billion for FTX

Nov. 11 – FTX starts voluntary Chapter 11 proceedings in the United States, along with its U.S. unit, crypto trading firm Alameda Research and nearly 130 other affiliates. Bankman-Fried resigns as CEO.

Here is a list of FTX’s investors since 2019, according to private market data provider, PitchBook.

2019 Tiger Global Management, Insight Partners, SoftBank

Inves Investment Advisors, Temasek, Telstra Ventures,

tors Teachers Venture Growth, Steadview Capital Management,

Redline DAO, Paradigm, New Enterprise Associates,

Lightspeed Ventures, 500 Global, Binance Labs,

Consensus Lab, FBG Capital, Galois Capital, Greylock

Capital Management, Lemniscap, Race Capital, IVP, HOF

Capital

2020 Bitscale Capital, BR Capital, Evangelion Capital,

Inves Exnetwork Capital, Genblock Capital, Insignius

tors Capital, Pantera Capital

2021 BlackRock, Tom Brady, Gisele Bundchen, Samsung NEXT

Inves Ventures, Sequoia Capital, Coinbase Ventures, Base10

tors Partners, Astronaut Capital, AGE Crypto, Vetamer

Capital, Senator Investment Group, Sea Capital,

Paradigm, Meritech Capital Partners, ICONIQ Growth,

Third Point Ventures, Thoma Bravo, Kevin O’Leary,

Willoughby Capital, Digital Currency Group, Third

Point, Tribe Capital, Bond Capital, Standard

Investments, Circle , Ribbit Capital, Multicoin

Capital, Mayfield, 6ixth Event, Abstract Ventures,

Alan Howard, Altimeter Capital Management, Bond,

Schoeneck & King, DHVC, Israel Englander, Mark VC

2022 Temasek, SoftBank Vision Fund 2, Ontario Teachers

Inves Pension Plan, K5 Global, MiH Ventures, Mint Ventures,

tors NKB Ventures, Signum Capital, Alchemy Ventures, Lux

Capital, Fenrir, Claritas Capital, Hard Yaka, Early

Capital Group, Chapter One Ventures, One Block

Capital, Chainfund Capital, A’Z Angels, Allied

Investors Group, ArkStream Capital

(Compiled by Harish Sridharan in Bengaluru; Editing by Sam Holmes, Shri Navaratnam, Sriraj Kalluvila)

(Reuters) – Shares of cryptocurrency and blockchain-related firms dropped on Friday after FTX, one of the biggest crypto exchanges, said it would initiate bankruptcy proceedings in the United States, triggering a potentially massive meltdown in the industry.

Silvergate Capital declined 10%, leading the losses in the sector, while bitcoin holder MicroStrategy Inc slipped 2.6%.

Crypto miners Riot Blockchain and Marathon Digital fell about 5% each.

Bitcoin fell 3.6% to $16,919 as FTX Chief Executive Sam Bankman-Fried said he will step down from his position.

“The shock was that this guy was the face of the crypto industry and it turned out that the emperor had no clothes,” said Thomas Hayes, managing member at hedge fund Great Hill Capital LLC in New York.

“And I think that the real risk moving forward is confidence is lost in an asset class.”

The announcement comes days after larger rival Binance walked away from a proposed acquisition of FTX, leaving the distressed firm scrambling to raise about $9.4 billion following a frantic pace of customer withdrawals earlier this week.

The turmoil at FTX, which has rescued other players during the crypto market’s recent crash, has raised concerns about the future of the crypto industry.

Robinhood Markets, which counts Bankman-Fried as an investor, edged 3% higher. The online brokerage said on Thursday it does not have a direct exposure to FTX.

MicroStrategy and Silvergate’s tickers were trending on investors-focused social media platform stocktwits.com, indicating increased chatter among retail pundits.

ProShares Bitcoin Strategy ETF fell 8%, while Short Bitcoin Strategy ETF jumped 7.4%.

(Reporting by Medha Singh and Bansari Mayur Kamdar in Bengaluru; Editing by Shinjini Ganguli)

(Reuters) – SkyBridge Capital is working to buy back its stake from embattled crypto exchange FTX, the alternative investment firm’s founder Anthony Scaramucci said in an interview with CNBC on Friday.

(Reporting by Niket Nishant in Bengaluru)