Tag: Cryptocurrencies

By Diane Bartz

WASHINGTON (Reuters) – The chair of the Federal Trade Commission, Lina Khan, on Tuesday said giant companies like Ticketmaster, which faces a tsunami of criticism for problems in selling tickets to a 2023 Taylor Swift tour, can become “too big to care.”

Speaking at the Wall Street Journal’s CEO Council Summit, Khan said it was the Justice Department that approved the merger of Ticketmaster and Live Nation in 2010 and referenced a report that the department had a probe under way.

“There can be concerns that when firms become (large) they can become too big to care,” she added, saying giant firms may feel no need to invest in innovation because they do not face tough competition.

“There’s been public reporting that the Justice Department continues to look at this and I’m sure it’s top of mind for them, given all the incoming that they’re getting,” she added.

Ticketmaster has drawn fresh heat from U.S. lawmakers over how it handled ticket sales for Swift’s first tour in five years.

On Tuesday, a bipartisan group of lawmakers from the House Energy and Commerce Committee wrote to Michael Rapino, chief executive of Ticketmaster parent Live Nation, to raise concerns about the chaos in the Taylor Swift ticket sale and to request a briefing for staff on fees, dynamic pricing, ticket availability and transferability and scalping.

There will also be a congressional hearing, likely this month, on the debacle in November when Ticketmaster put tickets on sale for Taylor Swift’s Eras tour, and some fans struggled for hours with the ticket sale website.

Last month, U.S. lawmakers pressed the FTC to enforce a 2016 law against ticket scalpers using bots after Ticketmaster blamed the software for troubles selling tickets to Swift’s tour.

Ticketmaster has blamed problems with presale ticketing for the tour on unprecedented demand and an effort to keep out bots run by ticket scalpers.

For her part, Swift has said it was “excruciating” for her to watch fans struggle to secure tickets and that she had been assured that Ticketmaster could handle large demand.

Neither Ticketmaster nor the Justice Department immediately responded to requests for comment.

Khan also said that the FTC was not investigating cryptocurrency firm FTX, whose dramatic collapse sparked fears of contagion and prompted calls for more crypto regulation.

(Reporting by Diane Bartz; Editing by Cynthia Osterman and David Gregorio)

By Caroline Valetkevitch

NEW YORK (Reuters) – The U.S. dollar was up slightly against the euro and yen on Tuesday as U.S. stocks sold off, while investors were trying to position for next week’s expected interest rate hike from the U.S. Federal Reserve.

The dollar’s activity was also more muted after it rose sharply in the previous session following data showing U.S. services industry activity unexpectedly picked up in November, which prompted investor speculation the Fed may lift rates more than recently projected. Traders currently expect a half-point hike from the Fed in its announcement Dec. 14.

“There’s not a lot of fresh incentives,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. “There was a lot of price action yesterday,” but the big focus is on next week’s Fed meeting.

Next week’s calendar also includes the release of the key consumer price index data for November.

The dollar may be benefiting from bearish sentiment in equities, Chandler said, noting that the greenback “has tended to benefit from a risk-off environment.” All three major U.S. stock indexes ended down sharply on Tuesday, with the S&P 500 declining for a fourth straight session.

The U.S. dollar index, which measures the currency against six major peers, remains up roughly 10% for the year so far. It was last up 0.3% on Tuesday.

The euro was down 0.2% against the dollar at $1.0465, while the dollar was up 0.1% against the Japanese yen.

European Central Bank policymaker Constantinos Herodotou said on Tuesday interest rates will go up again but are now “very near” their neutral level.

The dollar was up 0.5% against the Canadian dollar ahead of the Bank of Canada’s rate decision on Wednesday. Traders are pricing in a 73.3% chance of a dialed-down 25 basis-point hike from the BoC, although a slim majority of economists polled by Reuters are expecting a 50 basis point rate hike.

The Australian dollar was last down 0.1% at $0.6687. It rose earlier after the Reserve Bank of Australia (RBA) raised rates for the eighth time in as many months. Also, the RBA said it was not on a preset course to tighten policy but inflation was still high.

The Western price cap on Russian seaborne crude, which came into force on Monday, may start to show its impact on the energy market soon, said Francesco Pesole, FX strategist at ING.

========================================================

Currency bid prices at 3:37PM (2037 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index

105.5500 105.2300 +0.31% 10.335% +105.6300 +104.8900

Euro/Dollar

$1.0465 $1.0493 -0.23% -7.92% +$1.0533 +$1.0460

Dollar/Yen

136.9450 136.8000 +0.12% +18.98% +137.4200 +135.9800

Euro/Yen

143.30 143.50 -0.14% +9.96% +144.0000 +143.1100

Dollar/Swiss

0.9419 0.9427 -0.08% +3.26% +0.9455 +0.9378

Sterling/Dollar

$1.2136 $1.2185 -0.40% -10.26% +$1.2269 +$1.2136

Dollar/Canadian

1.3654 1.3587 +0.49% +7.99% +1.3675 +1.3558

Aussie/Dollar

$0.6687 $0.6699 -0.13% -7.97% +$0.6744 +$0.6681

Euro/Swiss

0.9855 0.9886 -0.31% -4.96% +0.9909 +0.9857

Euro/Sterling

0.8620 0.8606 +0.16% +2.62% +0.8632 +0.8576

NZ

Dollar/Dollar $0.6318 $0.6316 +0.07% -7.66% +$0.6354 +$0.6305

Dollar/Norway

10.0250 9.9550 +0.70% +13.80% +10.0445 +9.9025

Euro/Norway

10.4906 10.4294 +0.59% +4.77% +10.5166 +10.3953

Dollar/Sweden

10.4164 10.3943 -0.09% +15.51% +10.4403 +10.3385

Euro/Sweden

10.9018 10.9113 -0.09% +6.52% +10.9407 +10.8750

(Additional reporting by Joice Alves in London; Editing by Alexander Smith and Nick Zieminski; Editing by Will Dunham)

By Chris Prentice

NEW YORK (Reuters) – FTX founder and former chief executive Sam Bankman-Fried has hired former prosecutor Mark S. Cohen to represent him, as U.S. authorities probe the crypto exchange’s collapse, a spokesperson for Bankman-Fried said on Tuesday.

Regulators around the globe, including in the Bahamas where FTX is based and in the United States, are investigating the role of FTX’s top executives including Bankman-Fried in the firm’s stunning collapse, Reuters has previously reported. The crypto exchange filed for bankruptcy last month after a liquidity crisis that saw at least $1 billion of customer funds vanish.

Bankman-Fried has retained Cohen, of Cohen & Gresser, Bankman-Fried’s spokesperson Mark Botnick said in an emailed statement. Cohen could not be reached for comment.

Prosecutors and regulators have not charged Bankman-Fried with wrongdoing. He is facing civil lawsuits from investors and FTX customers.

David Mills, a professor at Stanford Law School, is consulting on the matter, Botnick said. Mills did not respond to requests for comment. Semafor previously reported Mills’ advisory work for Bankman-Fried.

Cohen, a former assistant United States attorney for the Eastern District of New York, recently defended Ghislaine Maxwell in her sex trafficking trial.

Bankman-Fried had previously hired Martin Flumenbaum of law firm Paul, Weiss, Rifkind, Wharton & Garrison, but the law firm said last month it was no longer representing him due to conflicts.

In recent weeks, U.S. authorities have sought information from investors and potential investors in FTX, according to two sources with knowledge of the requests. Federal prosecutors in New York are asking for details on any communications such firms have had with the crypto firm and its executives, including Bankman-Fried, the sources said. Bloomberg previously reported the information requests.

The Securities and Exchange Commission has been asking for similar information from investors as well, one of the sources said.

Those sources and attorneys, speaking on condition of anonymity, have said that U.S. authorities are likely looking for any evidence of material misrepresentations of information to investors.

Spokespeople for the Manhattan U.S. attorney’s office and the SEC declined to comment on the information request.

FTX secretly transferred customer funds to its affiliate Alameda Research to fill a shortfall at the crypto trading firm, Reuters has previously reported.

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

“I didn’t ever try to commit fraud,” Bankman-Fried said, adding that he doesn’t personally think he has any criminal liability.

(Additional reporting by Alison Frankel and John McCrank; Editing by Megan Davies, Noeleen Walder and Leslie Adler)

NEW YORK (Reuters) – Most cryptocurrency tokens will likely be regulated as securities under existing securities laws in the fallout of the collapse of crypto exchange FTX, Jeff Sprecher, chief executive officer of NYSE-owner Intercontinental Exchange Inc, said on Tuesday.

“I think you’re going to see essentially tokens become securities – I mean they probably already are, but they’re going to be regulated and dealt like securities,” Sprecher said at a financial services conference hosted by Goldman Sachs Group Inc.

(Reporting by John McCrank)

By Iain Withers and Lawrence White

LONDON (Reuters) – Goldman Sachs plans to spend tens of millions of dollars to buy or invest in crypto companies after the collapse of the FTX exchange hit valuations and dampened investor interest.

FTX’s implosion has heightened the need for more trustworthy, regulated cryptocurrency players, and big banks see an opportunity to pick up business, Mathew McDermott, Goldman’s head of digital assets, told Reuters.

Goldman is doing due diligence on a number of different crypto firms, he added, without giving details.

“We do see some really interesting opportunities, priced much more sensibly,” McDermott said in an interview last month.

FTX filed for Chapter 11 bankruptcy protection in the United States on Nov. 11 after its dramatic collapse, sparking fears of contagion and amplifying calls for more crypto regulation.

“It’s definitely set the market back in terms of sentiment, there’s absolutely no doubt of that,” McDermott said. “FTX was a poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform.”

While the amount Goldman may potentially invest is not large for the Wall Street giant, which earned $21.6 billion last year, its willingness to keep investing amid the sector shakeout shows it senses a long term opportunity.

Its CEO David Solomon told CNBC on Nov. 10, as the FTX drama was unfolding, that while he views cryptocurrencies as “highly speculative”, he sees much potential in the underlying technology as its infrastructure becomes more formalized.

Rivals are more sceptical.

“I don’t think it’s a fad or going away, but I can’t put an intrinsic value on it,” Morgan Stanley CEO James Gorman said at the Reuters NEXT conference on Dec. 1.

HSBC CEO Noel Quinn, meanwhile, told a banking conference in London last week he has no plans to expand into crypto trading or investing for retail customers.

Goldman has invested in 11 digital asset companies that provide services such as compliance, cryptocurrency data and blockchain management.

McDermott, who competes in triathlons in his spare time, joined Goldman in 2005 and rose to run its digital assets business after serving as head of cross asset financing.

His team has grown to more than 70 people, including a seven-strong crypto options and derivatives trading desk.

Goldman Sachs has also together with MSCI and Coin Metrics launched data service datonomy, aimed at classifying digital assets based on how they are used.

The firm is also building its own private distributed ledger technology, McDermott said.

‘TRUSTED’ PLAYERS

The global cryptocurrency market peaked at $2.9 trillion in late 2021, according to data site CoinMarketCap, but has shed about $2 trillion this year as central banks tightened credit and a string of high-profile corporate failures hit. It last stood at $865 billion on Dec. 5.

The ripple effects from FTX’s collapse have boosted Goldman’s trading volumes, McDermott said, as investors sought to trade with regulated and well capitalized counterparties.

“What’s increased is the number of financial institutions wanting to trade with us,” he said. “I suspect a number of them traded with FTX, but I can’t say that with cast iron certainty.”

Goldman also sees recruitment opportunities as crypto and tech companies shed staff, McDermott said, although the bank is happy with the size of its team for now.

Others also see the crypto meltdown as a chance to build their businesses.

Britannia Financial Group is building its cryptocurrency-related services, its chief executive Mark Bruce told Reuters.

The London-based company aims to serve customers who are eager to diversify into digital currencies, but who have never done so before, Bruce said. It will also cater to investors who are very familiar with the assets, but have become nervous about storing funds at crypto exchanges since FTX’s collapse.

Britannia is applying for more licenses to provide crypto services, such as doing deals for wealthy individuals, he said

“We have seen more client interest since the demise of FTX,” he said. “Customers have lost trust in some of the younger businesses in the sector that purely do crypto, and are looking for more trusted counterparties.”

(Reporting by Iain Withers and Lawrence White, Editing by Lananh Nguyen and Alexander Smith)

By Marc Jones

LONDON (Reuters) – Pension funds and other ‘non-bank’ financial firms have more than $80 trillion of hidden, off-balance sheet dollar debt in FX swaps, the Bank for International Settlements (BIS) said.

The BIS, dubbed the central bank to the world’s central banks, also said in its latest quarterly report that 2022’s market upheaval had largely been navigated without major issues.

Having repeatedly urged central banks to act forcefully to dampen inflation, it struck a more measured tone and picked over crypto market troubles and September’s UK bond market turmoil.

Its main warning concerned what it described as the FX swap debt “blind spot” that risked leaving policymakers in a “fog”.

FX swap markets, where for example a Dutch pension fund or Japanese insurer borrows dollars and lends euro or yen before later repaying them, have a history of problems.

They saw funding squeezes during both the global financial crisis and again in March 2020 when the COVID-19 pandemic wrought havoc that required central banks such as the U.S. Federal Reserve to intervene with dollar swap lines.

The $80 trillion-plus “hidden” debt estimate exceeds the stocks of dollar Treasury bills, repo and commercial paper combined, the BIS said. It has grown from just over $55 trillion a decade ago, while the churn of FX swap deals was almost $5 trillion a day in April, two thirds of daily global FX turnover.

For both non-U.S. banks and non-U.S. ‘non-banks’ such as pension funds, dollar obligations from FX swaps are now double their on-balance sheet dollar debt, it estimated.

“The missing dollar debt from FX swaps/forwards and currency swaps is huge,” the Switzerland-based institution said, adding the lack of direct information about the scale and location of the problems was the key issue.

CLOSER

The report also assessed broader recent market developments.

BIS officials have been loudly calling for forceful interest rate hikes from central banks as inflation has taken hold, but this time it struck a more measured tone.

Asked whether the end of the tightening cycle may be looming next year, the head of the BIS’ Monetary and Economic Department Claudio Borio said it would depend on how circumstances evolve, noting also the complexities of high debt levels and uncertainty about how sensitive borrowers now are to rising rates.

The crisis that erupted in UK gilt markets in September also underscored that central banks could be forced to step in and intervene – in the UK’s case by buying bonds even at a time when it was raising interest rates to curb inflation.

“The simple answer is one is closer than one was at the beginning, but we don’t know how far central banks will have to go,” Borio said about interest rates.

“The enemy is an old enemy and is known,” he added, referring to inflation. “But it’s a long time since we have been fighting this battle”.

DINO-MITE

The report also focused on findings from the recent BIS global FX market survey, which estimated that $2.2 trillion worth of currency trades are at risk of failing to settle on any given day due to issues between counterparties, potentially undermining financial stability.

The amount at risk represents about one third of total deliverable FX turnover and is up from $1.9 trillion from three years earlier when the last FX survey was carried out.

FX trading also continues to shift away from multilateral trading platforms towards “less visible” venues hindering policymakers “from appropriately monitoring FX markets,” it said.

The bank’s Head of Research and Economic Adviser Hyun Song Shin, meanwhile, described recent crypto market problems such as the collapse of the FTX exchange and stable coins TerraUSD and Luna as having similar characteristics to banking crashes.

He described many of the crypto coins sold as “DINO – decentralised in name only” and that most of their related activities took place through traditional intermediaries.

“This is people taking in deposits essentially in unregulated banks,” Shin said, adding it was largely about the unravelling of large leverage and maturity mismatches, just like during the financial crash more than a decade ago. (This story has been refiled to name BIS in the headline)

(Reporting by Marc Jones; Editing by Toby Chopra and Alexander Smith)

WASHINGTON (Reuters) – A U.S. agency that probes allegations of deceptive conduct confirmed on Monday that it had investigations open into several cryptocurrency firms for “possible misconduct.”

The Federal Trade Commission spokesperson declined to name the firms or say precisely what actions prompted the investigations.

“While we can’t comment on current events in the crypto markets or the details of any ongoing investigations, we are investigating several firms for possible misconduct concerning digital assets,” the spokesperson said in a statement.

Bloomberg said in a report that the investigation was linked to misleading advertising but the FTC spokesperson declined to confirm this.

The spectacular implosion of FTX recently sent fresh shock waves through the cryptocurrency industry, with the value of bitcoin down sharply this year.

The Securities and Exchange Commission, which also has regulations mandating disclosures from individuals promoting securities, has cracked down on celebrity endorsements, including reality TV star Kim Kardashian on allegations of promoting a crypto token on her Instagram account without proper disclosure that she had been paid.

The FTC has also pursued companies that presented themselves as cryptocurrency-related firms but which were allegedly nothing more than scams.

(Reporting by Diane Bartz; additional reporting by Anirban Chakroborti in Bengaluru; Editing by Stephen Coates)

(Reuters) – Britain’s Treasury is finalising plans for a package to regulate the cryptocurrency industry, including limits on foreign companies selling into the country and restrictions on advertising, the Financial Times reported on Monday.

(Reporting by Jyoti Narayan in Bengaluru)

(Reuters) – FTX founder Sam Bankman-Fried tweeted on Sunday that he would testify before the House Financial Services Committee after he finished “learning and reviewing” the events that led to the spectacular collapse of his cryptocurrency exchange.

The U.S. House Financial Services Committee plans to hold a hearing in December to investigate the collapse of FTX and expects to hear from the companies and individuals involved, including founder and CEO Bankman-Fried.

Committee Chair Maxine Waters last week invited Bankman-Fried to participate in the panel’s hearing on Dec. 13.

“Once I have finished learning and reviewing what happened, I would feel like it was my duty to appear before the committee and explain,” the founder and former FTX CEO wrote in a reply to Waters.

Bankman-Fried added that he was unsure if that would happen before Dec. 13.

He rejected suggestions of fraud in a range of interviews last week after his company’s collapse stunned investors and left creditors facing losses totaling billions of dollars.

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

(Reporting by Akriti Sharma in Bengaluru; Editing by Stephen Coates)

(Reuters) – The chair of the U.S. House of Representatives Financial Services Committee demanded on Monday that Sam Bankman-Fried, founder and former CEO of the now-bankrupt crypto exchange FTX, testify before Congress on Dec. 13.

“It is imperative that you attend our hearing on the 13th, and we are willing to schedule continued hearings if there is more information to be shared later,” Representative Maxine Waters, the committee chair, wrote on Twitter.

On Sunday, Bankman-Fried tweeted that he would testify before the committee after he finished “learning and reviewing” the events that led to the spectacular collapse of his cryptocurrency exchange.

In the tweet Bankman-Fried said he was unsure if that would happen before Dec. 13.

But in her reply on Monday, Waters wrote on Twitter: “Based on your role as CEO and your media interviews over the past few weeks, it’s clear to us that the information you have thus far is sufficient for testimony.”

Bankman-Fried rejected any suggestion of fraud in a series of interviews last week after his company’s collapse stunned investors and left creditors facing losses totaling billions of dollars.

FTX filed for bankruptcy in November after a week in which a possible merger with rival crypto exchange Binance failed.

(Reporting by Akriti Sharma in Bengaluru; Editing by Leslie Adler and Howard Goller)

By Elizabeth Howcroft

LONDON (Reuters) – UK-based crypto lender Nexo said on Monday it would phase out its U.S. products and services over the coming months due to clashes with regulators.

“Our decision comes after more than 18 months of good-faith dialogue with US state and federal regulators which has come to a dead end,” Nexo said in a blog post on Monday.

Crypto lenders act like banks for the crypto world, offering customers interest on cryptocurrencies they deposit with the platform.

The firms grew rapidly during the COVID-19 pandemic, but as crypto markets slumped earlier this year various crypto lenders froze withdrawals, leaving customers with large losses. Major U.S.-based lenders Celsius, Voyager Digital Ltd and BlockFi have all filed for bankruptcy this year.

Eight U.S. state regulators charged Nexo in September for allegedly failing to register its Earn Interest Product.

California’s Department of Financial Protection and Innovation said Nexo’s interest-earning accounts promised an annual interest rate as high as 36%. Nexo said that the 36% interest was applicable only for one asset, and that it did not advertise the high rate.

Lawmakers around the world have stepped up calls for regulation of crypto firms following the collapse of major exchange FTX last month.

Nexo said it will continue to process customer withdrawals “in real-time” as it withdraws from the United States.

(Reporting by Elizabeth Howcroft in London; Editing by Tom Wilson and Matthew Lewis)

(Reuters) – Crypto broker Genesis and its parent company Digital Currency Group (DCG) owe customers of the Winklevoss twins’ crypto exchange Gemini $900 million, the Financial Times reported on Saturday.

Crypto exchange Gemini is trying to recover the funds after Genesis was wrongfooted by last month’s failure of Sam Bankman-Fried’s FTX crypto group, the newspaper said, citing people familiar with the matter.

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

Gemini, which runs a crypto lending product in partnership with Genesis, has now formed a creditors’ committee to recoup the funds from Genesis and its parent DCG, the report added.

Genesis and Gemini did not immediately respond to Reuters’ request for comment.

Genesis has hired investment bank Moelis & Company to explore options including a potential bankruptcy, the New York Times reported last month, citing three people familiar with the matter.

Genesis Global Capital suspended customer redemptions in its lending business last month, citing the sudden failure of crypto exchange FTX.

Crypto trading platform FTX filed for bankruptcy protection in the United States on Nov. 11 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.

(Reporting by Shubhendu Deshmukh and Rhea Binoy in Bengaluru; Editing by Toby Chopra and Christina Fincher)

(Reuters) – FTX’s digital currency futures and clearinghouse LedgerX is up for sale and has attracted interest from crypto firms including Blockchain.com, Gemini, Bitpanda and Kalshi, Bloomberg reported on Friday, citing people familiar with the matter.

There could be over half a dozen other potential buyers for the crypto derivatives exchange, the people told Bloomberg, adding that some of the interested parties have signed non-disclosure agreements.

Blockchain.com, Gemini and Bitpanda did not immediately respond to Reuters’ request for comment, while Kalshi could not be reached for comment.

Crypto trading platform FTX filed for bankruptcy protection in the United States on Nov. 11 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.

LedgerX was omitted from the bankruptcy proceedings. FTX US acquired it last year to expand into crypto futures and options trading.

(Reporting by Jyoti Narayan in Bengaluru; Editing by Sandra Maler and Cynthia Osterman)

(Reuters) – Galaxy Digital Holdings Ltd will buy crypto lender Celsius Network LLC-owned digital asset custody platform GK8, the crypto financial services company said on Friday.

The purchase followed a sale process executed in connection with Celsius’ Chapter 11 bankruptcy and is subject to court approvals and other closing conditions, the company said.

New Jersey-based Celsius filed for bankruptcy in July, citing extreme market conditions and listed a $1.19 billion deficit on its balance sheet.

The deal will add nearly 40 people, including cryptographers and blockchain engineers, as well as an office in Tel Aviv, Galaxy said.

Founded by Michael Novogratz, the company offers a suite of financial services including trading, asset management and investment banking among others to the crypto-focused companies.

Reuters had reported in August that San Francisco-based blockchain payments company Ripple Labs Inc was interested in potentially purchasing assets of bankrupt crypto lender Celsius Network, according to a company spokesperson.

Crypto markets were shaken by the collapse of the popular terraUSD and luna tokens in May, followed by the implosion of crypto exchange FTX last month.

(Reporting by Mehnaz Yasmin in Bengaluru; Editing by Sriraj Kalluvila)

By Andrew Goudsward

(Reuters) – Turmoil in the cryptocurrency industry has rattled major exchanges and sent the value of digital assets tumbling, but at least one group stands to gain: bankruptcy lawyers.

High-profile bankruptcies involving crypto exchange FTX, hedge fund Three Arrows Capital and crypto lenders BlockFi, Celsius Network and Voyager Digital Ltd are generating new opportunities – and big fees – for law firms that counsel troubled companies.

Large law firms can rake in more than $100 million in legal fees during a long-running bankruptcy, experts said.

“You’ve got to pay the gravedigger,” said Adam Levitin, a law professor at Georgetown University who specializes in bankruptcy law. “These are complicated cases with a bunch of novel issues, and it shouldn’t be surprising that they are going to require a lot of attorney involvement.”

The value of bitcoin has dropped 65% so far this year, dragging down other crypto assets and leaving investors reeling. The spectacular implosion of FTX last month sent fresh shock waves through the cryptocurrency industry.

One U.S. law firm, Kirkland & Ellis, is representing BlockFi in its bankruptcy case filed on Monday and is also lead counsel for Celsius Network and Voyager Digital, which both filed for bankruptcy earlier this year.

Kirkland commands some of the highest billing rates in the industry, charging up to $1,995 per hour for work by its partners on the Celsius and Voyager cases, according to court filings. The firm, which did not respond to a request for comment, has billed an average of about $3.3 million every month in each of those cases so far.

Law firm billing rates are normally not public, but in bankruptcy cases lawyers for the debtor company must detail their billings and request a judge’s approval for their fees.

The lawyers are paid from the assets of a bankruptcy estate, and experts said judges rarely demand significant reductions in professional fees.

“Kirkland is dominant in large public company bankruptcies already, and this is just extending to a new area of bankruptcy,” said Lynn LoPucki, a law professor at the University of Florida who has studied bankruptcies and corporate restructuring. “If they dominate crypto, it will keep them at the top.”

Among its larger recent cases, Kirkland earned $83 million in legal fees and reimbursements for its work in the long-running bankruptcy of satellite services provider Intelsat, billing more than 87,000 hours, court filings show.

Kirkland partner Joshua Sussberg is lead counsel in all three of the firm’s crypto-related bankruptcies. He has been involved in many major corporate bankruptcies in recent years, including for movie theater chain Cineworld Group and J.C. Penney Co Inc.

COMPLEX QUESTIONS

Wall Street firm Sullivan & Cromwell is bankruptcy counsel for FTX. The firm has not yet revealed its fees, but in a 2021 case involving Kumtor Gold Company, the firm’s partners billed up to $1,825 per hour.

Sullivan & Cromwell is also representing trading firm Alameda Research, founded by FTX founder Sam Bankman-Fried, as a creditor in the Celsius and Voyager bankruptcies. The law firm did not reply to a request for comment.

As crypto bankruptcies mount, the law firm with the highest maximum billing rate disclosed so far is Latham & Watkins, which is advising Celsius on regulatory issues and is debtor’s counsel to Three Arrows Capital. Its top rate is $2,075 an hour, according to court papers. Latham also did not respond to a request for comment.

The cryptocurrency cases are particularly significant for law firm bankruptcy practices as Chapter 11 filings set off by the COVID-19 pandemic and the struggles of big-box retailers have begun to slow, legal experts said. Crises within certain industries, such as cryptocurrency, can keep business flowing and provide years of steady revenue.

Lawyers in the crypto cases must deal with a host of issues new to bankruptcy law, including whether digital assets deposited on a platform are owned by the customer or the platform itself, according to bankruptcy law experts. That determination could help decide how much of their deposit a customer is likely to recoup from a bankrupt firm.

Levitin, a former member of the restructuring department at law firm Weil, Gotshal, & Manges, said such complex questions call for top-shelf lawyers.

“Otherwise it becomes just a grab race where it’s the biggest and most sophisticated creditors grabbing everything for themselves,” he said.

(Reporting by Andrew Goudsward in Washington; Editing by David Bario and Matthew Lewis)

(Reuters) – Regulators must step in to protect crypto investors after the collapse of FTX, financial industry executives and lawmakers said at the Reuters NEXT conference this week, the latest call for tougher oversight of a sector prone to meltdowns.

Policymakers have for years highlighted the need for effective rules on the crypto industry, pointing to risks to consumers after a string of big market crashes and corporate failures.

But cryptocurrencies and related businesses remain mostly unregulated.

The European Union regulations designed to bring crypto to heel are expected to take effect in 2024, but the United States in particular still lacks overarching rules.

The collapse of Sam Bankman-Fried’s FTX was the biggest in string of big crypto-related failures this year. It sparked a cryptocurrency rout and has left an estimated 1 million creditors facing losses of billions of dollars.

“The collapse of something as major as FTX just illustrates the importance of transparency, importance of appropriate regulatory protection, regulatory requirements for all financial activities,” Laura Cha, chairman of Hong Kong Exchanges and Clearing said.

New York Stock Exchange President Lynn Martin said institutional investors will be unlikely embrace crypto without clearer rules.

“There was no regulatory framework, and an institutional investor is not going to really dip their toe in a meaningful way in a market unless they understand what the regulatory framework is,” Martin said.

Some crypto investors share these concerns.

“Regulators could have posted a lot more guidance for crypto,” said Brian Fakhoury at crypto venture capital fund Mechanism Capital.

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

REGULATORY CATCH-UP?

The crypto sector hit a record value of almost $3 trillion late last year, before market turmoil prompted by rising interest rates and a string of industry blow-ups wiped more than $2 trillion from its valuation. Bitcoin, the biggest token, is down by three-quarters from its record high of $69,000.

This extreme volatility has not done the crypto sphere any favours in terms of winning broader support in the financial services industry.

“I don’t think it’s a fad or going away but I can’t put an intrinsic value on it,” Morgan Stanley CEO James Gorman said at Reuters NEXT. “I don’t like investing in things that have a range of outcomes or putting clients in it.”

After FTX’s collapse, regulators in the United States as well as finance industry executives and crypto entrepreneurs are focused on the need for a workable set of rules and greater transparency.

Nasdaq CEO Adena Friedman called for a balance in regulation between protection and innovation – a common refrain among mainstream businesses involved in crypto.

Nasdaq, whose crypto custody arm is expected to launch in the first half of 2023, pending regulatory approval, has provided trading and surveillance tech to crypto exchanges for several years.

“Now is the time for regulation to catch up and make sure that as we go forward, to have safety and soundness, but we also allow for innovation and a nimble ecosystem,” Friedman said.

India’s Finance Minister Nirmala Sitharaman said the collapse of FTX underscored the need for greater visibility on often-anonymous crypto transactions.

The FTX collapse “shows the importance of a well-framed regulation,” Sitharaman said, “so that countries can be clearly aware of by whom, for what for these transactions are happening. Who’s the end beneficiary?”

Crypto entrepreneur Justin Sun said investors seldom have clarity on how funds at crypto companies are used.

“For a lot of exchanges and lending providers and institutions in the space, (there’s) a lack of transparency. The customers basically have no idea where the funds are allocated,” said Sun, founder of Tron cryptocurrency.

Investors “can lose their life savings in seconds, but they have no idea where their money goes.” he said.

(Reporting by Sumeet Chatterjee, Megan Davies, Aftab Ahmed, John McCrank, Lananh Nguyen, Elizabeth Howcroft, Saeed Azhar and John Sinclair Foley. Writing by Tom Wilson. Editing by Jane Merriman)

(Reuters) – Binance Chief Executive Officer Changpeng Zhao said on Friday that the cryptocurrency exchange has paused withdrawals after the possible attacks on Web 3 operator Ankr and Hay.

“Initial analysis is developer private key was hacked, and the hacker updated the smart contract to a more malicious one.”, he tweeted.

(Reporting by Urvi Dugar in Bengaluru; Editing by Rashmi Aich)

(Reuters) – U.S. authorities are asking crypto investors and trading firms who worked closely with FTX to hand over information on the company and its key figures including Sam Bankman-Fried and Caroline Ellison, Bloomberg News reported on Thursday.

The U.S. Attorney’s Office for the Southern District of New York recently sent out a series of requests, asking recipients to hand over information on a list of FTX employees and associates, the report said, citing people familiar with the case.

Attorneys from the U.S. Securities and Exchange Commission’s enforcement division also sent similar requests for information to companies that invested in or traded on FTX, the report added.

The regulator is trying to get a better sense of what FTX representatives told investors and whether any misrepresentations were made that would violate securities laws, according to the report.

The U.S. Department of Justice’s bankruptcy watchdog earlier on Thursday called for an independent investigation into the collapse of crypto exchange FTX.

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

Last month, newly-appointed FTX CEO John Ray had said in a U.S. court filing that there was flawed regulatory oversight and a lack of corporate control of the bankrupt crypto exchange founded by Sam Bankman-Fried.

U.S. Attorney’s Office for SDNY, SEC, FTX and Caroline Ellison did not immediately respond to Reuters requests for comment. Bankman-Fried could not be immediately reached.

(Reporting by Kanjyik Ghosh in Bengaluru; Editing by Lincoln Feast.)