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Catch up on the past week in crypto in 10 mins or less. Here's what we're covering today:
- More comes to light about FTX: SBF's DMs, missing funds, and much more
- The fallout
- More from around the web
NEW INFORMATION ON THE FTX COLLAPSE
A lot has happened and a lot of information has come to light in the past week about the lies, deceptions, and fraud that happened at FTX.
Since our last newsletter here's a few things that have happened:
- Sam Bankman-Fried has been removed and replaced as CEO: John J Ray III, an attorney and former CEO of Enron that was brought in to lead the company through bankruptcy proceedings, is now doing the same thing at FTX.
- FTX was reportedly "hacked" for ~$500M: Nearly half a billion in crypto assets were moved off the exchange last week in apparent "hack" as SBF said himself in a leaked DM message with a reporter from Vox. However, it turns out that the Bahamian government had directed SBF to transfer the assets to a digital wallet held by the Bahamian SEC, "for safekeeping." See their statement here.
- Prior to SBF being removed, FTX tweeted last week that they were facilitating withdrawals for Bahamian customers: the tweet said that they were doing so per Bahamian "regulation and regulators" but Bahamian officials quickly refuted those claims. People began suspecting that because most of the FTX management lived in the Bahamas, they were actually facilitating withdrawals to themselves.
- Many employees left the company including co-founder Gary Wang (according to SBF)
- Vox reporter Kelsey Piper released an article with DM conversations with SBF: The DM conversations were shocking in how little remorse was shown by the ex-CEO, how flippant he was about a lack of controls and oversight, and how outright fraudulent he was about the altruistic messaging he claimed to care so much about.
- FTX just released their Chapter 11 First Day Affidavit: New CEO, John J Ray III is quoted in the document saying "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here." - Coming from the guy that did the bankruptcy for Enron by the way. @Jonwu_ on Twitter provides a nice breakdown of the document here:
I just read FTX's Chapter 11 First Day Affidavit.
In it, the appointed restructuring CEO John Jay Ray III, who oversaw Enron's bankruptcy proceedings, calls FTX's case the worst of his career.
Its contents are shocking.
Here are the highlights:
— jonwu.eth (@jonwu_)
Nov 17, 2022
As expected, the collapse of FTX is causing ripple effects throughout the industry. Many institutions and individuals held large amounts of assets on FTX. Multicoin Capital and Galois Capital are among those major funds, writing down all of their investments on the exchange to 0 as they will not likely get them back. In a letter to investors this week, Multicoin announced that it is down 55% this month alone.
Aside from investors on the platform, major holdings of FTX & Alameda are now facing severe price declines as they will likely have to liquidate their positions. Solana, a layer 1 cryptocurrency, is down nearly 65% in the last two weeks since the beginning of the collapse.
Beyond that, competing exchanges are rushing to show proof of their reserves, and that they will not face similar liquidity and control issues, although some say it is not enough. Binance shows the biggest of those reserves with over $65 billion in total.
Now, crypto lenders Gemini, Genesis, and BlockFi are facing issues of their own. BlockFi is mulling a potential bankruptcy filing, saying that it had significant exposure to FTX and Alameda, while the others are pausing customer withdrawals.
Is this just the beginning of the fallout? Some seem to think so, but only time will tell.
More from around the web(3)
- Binance has announced an Industry Recovery Fund - The fund will be aimed at reducing "cascading negative effects of FTX". More details are supposed to be coming soon but the fund will be aimed at helping smaller projects facing liquidity issues.
- Achieving Crypto Privacy and Regulatory Compliance - A piece published by the venture capital firm a16z this week lays a framework for preserving consumer privacy while reducing the risk of illicit finance on the blockchain.
- Apple Pay is now available on Circle - Elligible businesses are now able to accept Apple Pay to receive USDC.
- Big Banks, NY Fed Start to Test Digital Tokens for 'Wholesale' Transactions - The 12 week pilot program will allow banks to issue tokens that represent customer deposits that are settled on a central bank reserve on a shared distributed ledger.
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Rollfi Inc does not guarantee and is in no way responsible for the accuracy of information provided in this message. All information is provided “AS IS” and with all faults. Data presented here may not reflect all activity in the market.