Tag: ftx

Sam Bankman-Fried Cashed Out $300 Million During FTX’s Fundraise in October 2021

FTX founder and former CEO Sam Bankman-Fried (SBF) quietly cashed out $300 million (roughly Rs. 2,430 crore) in personal stakes after a $420 million (roughly Rs. 3,410 crore) fundraising in October 2021, as per a recent report. At the time of the fundraising, Bankman-Fried told investors that the raise would be used for things like helping grow FTX and working closely with regulators, but a large portion of the cash was used as a reimbursement for a month’s earlier buyout of Binance’s stake in FTX.

As highlighted by a Wall Street Journal report, the move is being widely criticised as cashing out such a huge amount is taboo in regard to startup-world standards as it allows the founder to reap profit before investors. Note that the $2 billion (roughly Rs. 17,000 crore) capital came during a six-month fundraising effort led by investors like Sequoia Capital, BlackRock, and Temasek. This fundraising valued FTX at $25 billion (roughly Rs. 2,02,950 crore).

Moreover, Binance received $2.1 billion (roughly Rs. 17,050 crore) in the form of BUSD and FTT tokens for its FTX shares. In early November, Binance CEO Changpeng Zhao declared that the business would be selling tokens due to recent revelations. This decision was perceived as an indication that something was wrong with FTX.

Later, the FTX exchange suffered an abrupt collapse, revealing an $8 billion (roughly Rs. 64,940 crore) shortfall as a result of murky dealings. To top it up, FTX filed for Chapter 11 bankruptcy protection. This, understandably, started a series of investigations to reveal potentially exposed parties.

When the FTX crash became a contentious issue among community and government regulators, SBF kept on engaging in disruptive tweets and conversations with reporters disparaging the government authorities.

For this reason, Sam Bankman-Fried’s lawyer, Paul Weiss, dropped the case as Bankman kept on jeopardising his defence by speaking publicly in recent days.

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Analytics Firm Chainalysis Among FTX’s Long List of Creditors, Reveals Court Filing

Crypto analytics firm Chainalysis has disclosed that FTX owes it money in connection with the bankruptcy proceedings for the beleaguered cryptocurrency exchange. Chainalysis was listed as a creditor in filings submitted to the Delaware bankruptcy court on Wednesday, and it requested that any pertinent records be delivered to its attorneys. The partnership between the blockchain analysis company and FTX dates back at least to 2019 when they collaborated to update the exchange’s anti-money laundering (AML) and know-your-customer (KYC) procedures.

FTX founder Sam Bankman-Fried, who resigned as the company’s CEO when it filed for Chapter 11 bankruptcy last week, revealed a partnership with Chainalysis in September 2019. While it remains unclear how much Chainalysis is owed by FTX, a day before FTX declared bankruptcy, Chainalysis shared on-chain data in a series of tweets to make sense of the impact of FTX’s implosion.

“There’s no sugarcoating it: The potential collapse of an industry stalwart like FTX is bad for crypto, and the market reflects that,” the company said in a November 10 tweet. “But the industry has survived events like this before and emerged stronger. We know it will again.”

FTX has stated there may be more than a million persons having claims in the case but is expecting to release a list of its “Top 50” creditors by the end of this week.

A few companies have already disclosed their own involvement with FTX, whether it be in the form of loans, investments on one of its platforms, or holdings of the FTT token.

According to Binance CEO Changpeng Zhao, his company still possesses a substantial stock of FTT tokens. Similarly, BlockFi, a prominent cryptocurrency lender, said this week that it has “substantial exposure” to FTX and that it is considering filing for bankruptcy and making layoffs.

Meanwhile, in a statement submitted to the bankruptcy court in Delaware, new FTX CEO John J. Ray III disclosed that bankrupt firm Alameda Research owes a total of $4.1 billion (roughly Rs. 33,300 crore) from various parties.

Euclid Way, one of the companies under FTX’s bankruptcy filing, lent $2.3 billion (roughly Rs. 18,700 crore) to Paper Bird.

Additionally, Alameda Research lent $1 billion (roughly Rs. 8,118 crore) to FTX founder Sam Bankman-Fried, $543 million (roughly Rs. 4,408 crore) to FTX’s Director of Engineering Nishad Singh and $55 million (roughly Rs. 446 crore) to FTX co-CEO Ryan Salame.

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Crypto Lender BlockFi Pauses Withdrawals Amid FTX, Alameda Research Liquidity Crisis

Crypto lending firm BlockFi has announced that it was “not able to operate business as usual,” citing a lack of clarity regarding FTX, FTX.US, and Alameda Research as the reason. The leading cryptocurrency lending platform says that until there is clarity, it will be limiting activity including pausing withdrawals. It also requested that clients do not make deposits, though that would be highly unlikely given the current situation. BlockFi claimed that its priority was to protect its clients and their interests.

The company posted an update to its Twitter account indicating that it will halt services. “We are shocked and dismayed at the news regarding FTX and Alameda,” BlockFi wrote. “We, like the rest of the world, found out about this situation through Twitter.”

Over the past several days, a substantial portion of Alameda Research’s holdings was revealed to be tied to FTX’s FTT token rather than the traditional assets. That controversy led to a bank run on FTX. To gain funding and protect against further losses, FTX tried to arrange an acquisition with Binance that ultimately fell through.

The fallout from the failed deal has continued into Thursday as CEO Sam Bankman-Fried posted an admission of failure.

BlockFi indirectly referred to these events as the reason for its service suspension. “Given the lack of clarity of the status of FTX.com, FTX US, and Alameda Research, we are not able to operate business as usual,” it wrote.

The company said that though it will provide updates on the situation, those updates will be “less frequent than what our clients and other stakeholders are used to.”

BlockFi did not explicitly state whether it had financial exposure to FTX or its related companies. Earlier this week, BlockFi COO and co-founder Flori Marquez said that the company had a $400 million (roughly Rs. 3,200 crore) loan from FTX US rather than FTX. It is unclear whether BlockFi had other exposure.

Incidentally, the competing crypto lending firm Nexo said on Tuesday that it had narrowly avoided losses from FTX’s collapse. Nexo withdrew certain balances just prior to FTX’s collapse and is still operating as usual.

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India’s Giottus Crypto Exchange to Give ‘Proof of Reserves’, Rivals Keep Quiet

Giottus, an Indian crypto exchange, has taken a bold step to mark its impression in the crypto sector and make it to the headlines. Amid silence from rival crypto exchanges on the subject, Giottus has said that it will provide proof of reserves in order to add another layer of transparency to its business operations in the country. Proof of reserves are documents and evidence that demonstrate that a crypto exchange has sufficient assets to handle all withdrawals in cases of emergencies.

Digital currencies were slammed this week after the FTX crypto exchange was thrown into turmoil this month due to lack of liquidity.

The sequence of events slashed the total crypto market cap to $857.16 billion (nearly Rs. 69,27,325 crore) from its trillion-dollar valuation in the last two days, owing to bubbling sentiments of fear and distrust in the global crypto community.

Amid the chaos, Giottus has said that it was ready to provide proofs of internal finances to maintain the trust of its users.

“We are working on it. As a matter of fact, it’s high time, we all did. We should have something within the next three months. This is also an ideal point for regulators to start looking at providing proof of reserves from exchanges as part of their filings,” a Coindesk report quoted Giattus as saying.

The platform, founded in 2017, has agreed to publicly publish their fund reserves or do a ‘Merkle tree’ proof of reserves. The ‘Merkle tree’ proof is a cryptographic data structure that maintains privacy but allows users to verify the stability of their holdings on exchanges, thereby creating trust.

As of now, other Indian exchanges including CoinSwitch Kuber and WazirX have not addressed their stance on providing proof of reserves.

India, by several industry experts, has been touted among the nations with most potential to explore and develop the crypto and Web3 technologies.

Johnny Lyu, the CEO of KuCoin crypto exchange, recently told Gadgets 360 that India is among the best producer of computer coders in the world and majority Indian engineers who are swarming towards Web3 are proficient in those computer languages that are required to tilt and shift the blockchain technology as we know it today.

India’s crypto activity churned $172 billion (roughly Rs. 13,85,800 crore) in cryptocurrency-related activities from July 2021 through the June of this year, a Chainalysis report released in September claimed.

A new crypto advocacy group called Bharat Web3 Association (BWA) has been launched in the country in a bid to monitor the growth and development of these nascent technologies.

Meanwhile, data oracle provider Chainlink has taken the opportunity to promote its proof-of-reserve tools.

The company claims this proofing could solve the transparency issues currently plaguing the industry.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article. 

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Binance, FTX Enter Tug-of-War in Auction to Bag Assets of Insolvent Crypto Lender Voyager

Voyager, the crypto lending platform that declared bankruptcy earlier this year, is analysing buy-out offers for its assets from other players in the crypto sector. At present, crypto exchanges Binance and FTX are standing neck-and-neck to outbid each other and bag the worthy remains from Voyager’s business. The price point around which the biddings are revolving, stands at $50 million (roughly Rs. 400 crore). At the time of writing, the bid by crypto exchange Binance was reportedly a little higher than that of rival FTX, while the exact figures are unknown.

New Jersey-based Voyager Digital that reached a $3.74 billion (roughly Rs. 29,791 crore) market cap last year, slipped down the business ladder following the collapse of 3 Arrows Capital (3AC). This dealt a major blow to Voyager, which was heavily exposed to the hedge fund. The now bankrupt company has filed claims of more than $650 million (roughly Rs. 5,194 crore) against 3AC.

An auction for Voyager’s assets was recently held in New York City. The final results will be announced around September 29. However, the announcement could be revealed later, Coindesk reported.

Neither Binance nor FTX have commented on their bids.

Back in July, Voyager Digital had categorically rejected a buyout offer from FTX and its subsidiary Alameda Research, calling it a ‘low-ball bid’.

At the time, Voyager had said it would entertain “any serious proposal” made under its bidding procedures, while the joint offer from Bankman-Fried’s firms “was designed to generate publicity” rather than provide value to customers, they added.

Several crypto firms have faced challenges this year. Investors in the crypto sector have pulled out, owing to recession-like economic climate and low-risk appetite.

Crypto lenders Celsius Network, BlockFi, and Vauld also met with fates similar to Voyager’s, from pausing withdrawals to declaring bankruptcy.

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Crypto Sector Bagged Over $14 Billion from Venture Capital Firms in First Half of 2022: KPMG

The crypto sector saw the successful completion of 725 deals in the first half of this year. So far in 2022, the industry has bagged investments of $14.2 billion (roughly Rs. 1,13,500 crore), a new report by KPMG has claimed. The organisation is among India’s renowned providers of risk, financial, and business advisory. As part of its new findings, Germany’s crypto trading platform Trade Republic emerged as the biggest crypto investor that poured $1.1 billion (roughly Rs. 8,800 crore).

Among the top four investors in crypto projects, Fireblocks digital asset custody platform contributed $550 million (roughly Rs. 4,400 crore) and secured the second spot on the index of largest investors in digital assets.

FTX crypto exchange and Ethereum software firm ConsenSys scored the third and fourth spots with the investments of $500 million (roughly Rs. 4,000 crore) and $450 million (roughly Rs. 3,600 crore), as per KPMG findings.

The report has highlighted that crypto-centric investment figures for the first half of 2022 alone has doubled all years prior to 2021.

“(This) highlights the growing maturity of the space and the breadth of technologies and solutions attracting investment,” the report said.

KPMG’s report comes at a time when Mike Kondoulis, an intellectual property lawyer from the US, has claimed that the blockchain sectors have swelled majorly. He said that over 3,600 trademark applications around the sectors of cryptocurrency, Web3, metaverse, and non-fungible tokens (NFTs) have been filed so far this year in the US as of August 31. The number of trademarks filed around these industries stood at 3,516 in all of 2021.

Despite the progess, however, KPMG has warned of an approaching downturn in the crypto industry.

Looming political recession, economic climate of inflation, and hikes in interest rates are named as reasons why the crypto sector will suffer negative impacts in the coming times.

Even presently, the total market cap of the crypto sector is below the trillion-dollar mark. As per CoinMarketCap, the total crypto valuation stands at $939 billion (roughly Rs. 75,03,800 crore), which had exceeded the mark of $3 trillion (roughly Rs. 2,39,72,100 crore) last year.

KPMG, meanwhile, expects crypto-centric investment efforts to pick pace in underdeveloped fintech markets, particularly in Africa.

Binance crypto exchange is already in talks with Nigerian authorities to establish a crypto-focussed special economic zone that would incubate related startups and businesses in the region.

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FTX to Freeze Deposits, Withdrawals on Solana, Arbitrum Blockchains Amid Merge Transition

FTX crypto exchange will be briefly pausing all deposits and withdrawals of ETH and ERC-20 tokens as the Etheruem blockchain gears up to transition into its eco-friendly upgrade, named the Merge. The final Bellatrix update for this transition to complete is scheduled to start on Tuesday, September 6. The Merge is expected to arrive around September 15, if all goes well. In a bid to ensure that no transactions are lost or hit during this transition, FTX will be halting all deposits and withdrawals for at least 30 minutes on Solana, Arbitrum, as well as other blockchains.

“FTX will suspend ETH and ERC-20 token deposits and withdrawals at approximately half an hour before the Bellatrix consensus layer upgrade. It is your responsibility to understand the implications of the Merge. FTX is not liable for any losses incurred,” the company said in its blog post.

The Bahamas-based crypto exchange, which claimed to have over one million users as of February this year, has also posted an update on Twitter.

This decision from FTX comes just days after a DappRadar report had warned that stablecoins and transactions backed on the Ethereum blockchain could encounter some snags as the blockchain shifts from its energy-intensive Proof-of-Work (PoW) mining model to the energy-efficient Proof-of-Stake (PoS) mining model.

While the PoW mining model is infamous for consuming bulks of energy, PoS-supporting blockchains are termed as energy efficient.

Once the Ethereum blockchain transitions to its Merge version, its power consumption will be cut by 99.95 percent.

In the backdrop of the Merge release inching closer, OpenSea NFT marketplace recently said that it will solely support the upgraded version of the blockchain.

Earlier this month, stablecoin major Tether and Circle Pay, the issuer of USD Coin, also extended support for the Merge.

While Circle Pay has said that once the Merge has released, it will only use that version of Ethereum for the operations of USD Coin, Tether has decided to start making arrangements to support the Merge in line with its release schedule.

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Crypto Exchange FTX Ordered to Halt ‘False and Misleading’ Claims by US Bank Regulator

A US bank regulator ordered crypto exchange FTX on Friday to halt what it called “false and misleading” claims the exchange had made about whether funds at the company are insured by the government. The Federal Deposit Insurance Corporation said a July tweet by Brett Harrison, head of FTX’s US operations, contained misleading claims that funds held at and stocks purchased through FTX were FDIC insured, and ordered the company to remove any misleading language from its social media accounts and websites.

In the tweet, which Harrison has since deleted, he stated that direct deposits from employers to the crypto exchange are “stored in individually FDIC-insured bank accounts” and that stocks purchased via FTX US “are held in FDIC-insured” brokerage accounts. The FDIC said in its cease and desist letter to FTX US that those statements implied that FDIC insurance was available for cryptocurrency and stock holdings, and that the agency does not insure brokerage accounts.

In a tweet on Friday, FTX CEO Sam Bankman-Fried emphasised FTX is not FDIC-insured, and apologised if anyone misinterpreted previous comments.

The order, one of five sent to crypto firms by the FDIC on Friday, comes as regulators have ramped up efforts to police crypto firms that may be misleading investors on whether their funds enjoy a government backstop. The issue has come to a head of late, as turmoil in the crypto market has led to stress and the collapse of some high profile firms.

The bank regulator issued a similar cease and desist letter to bankrupt crypto firm Voyager Digital, arguing that the company had misled customers by claiming their funds with Voyager would be covered by the FDIC. Later, the FDIC issued an advisory urging banks dealing with crypto companies to ensure that customers are aware of what types of assets are government-insured, particularly in cases where firms offer a mix of uninsured crypto products alongside insured bank deposit products.

© Thomson Reuters 2022

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Crypto Exchange FTX Is in Talks to Acquire a Stake in BlockFi: Report

Cryptocurrency exchange FTX is in talks to acquire a stake in crypto lender BlockFi, the Wall Street Journal reported, citing people familiar with the matter.

The companies had previously announced on Tuesday that BlockFi had signed a term sheet with FTX for a $250 million (roughly Rs. 1,955 crore) revolving credit facility, which will give BlockFi crucial access to capital amid a rout in the digital currency market.

No equity agreement has yet been reached, and discussions are ongoing, according to a recent report from the Wall Street Journal.

In a statement, a BlockFi spokesperson said the company “does not comment on market rumours.”

“We are still negotiating the terms of the deal and cannot share more information at this time. We anticipate sharing more on the terms of the deal with the public at a later date,” the BlockFi spokesperson said.

A spokesperson for FTX did not immediately respond to a request for comment.

Last week, BlockFi said it was reducing its headcount by about 20 percent, in addition to implementing other cost-cutting measures like reducing marketing spending and executive compensation.

Aggressive rate hikes by the US Federal Reserve and recession fears have led to a turmoil in equities and sparked a sell-off in cryptocurrencies. Last weekend, the world’s biggest cryptocurrency, Bitcoin, dropped below the key $20,000 (nearly Rs. 15.6 lakh) level for the first time since December 2020.

In his previous announcement, BlockFi’s Chief Executive Officer, Zac Prince mentioned on Twitter that the company has signed a termed sheet with FTX to secure a revolving credit facility. Prince confirmed in a subsequent tweet that the amount secured from FTX will be used to ensure liquidity for users who are depositing funds into the project.

BlockFi’s CEO goes on to mention that the newly acquired credit facility is essential in keeping the company’s operational efficiency intact amidst the massive downturn in the broader crypto ecosystem. He proposed that the loan will provide the company with access to capital that will further bolster its balance sheet and its overall platform strength.

© Thomson Reuters 2022

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