CRIMINAL CRYPTO CAPITAL$M
Yvette Brend -
Last week, California billionaire Sam Bankman-Fried was touted as a key figure in cryptocurrency — even a saviour. Today, amid a series of apologetic tweets, he said "I f--ked up" after his cryptocurrency exchange bled billions of dollars.
His FTX exchange is now scrambling to raise $9.4 billion US from both investors and rivals, as customers rush to withdraw their funds.
A lot of people trusted FTX as a place to buy tokens or cryptocurrencies, like bitcoin.
Now industry watchers say its spectacular fall may be the catalyst that forces governments — including Canada's — to crack down on cryptocurrency.
The trouble sparked when the rival owner of the world's largest exchange, Binance, questioned the stability of FTX on Twitter. That touched off a three-day panic costing FTX an estimated $6 billion US.
Binance head Changpeng Zhao then on Wednesday backtracked on a proposed buyout of his second-ranked rival, citing regulatory concerns, according to the New York Times.
That sent FTX into a tailspin.
Bankman-Fried has said he's in talks with others on another rescue deal, but made no promises.
"I'm sorry. That's the biggest thing. I f--ked up, and should have done better," he wrote on Twitter.
What exact mistakes were made, remain unclear.
But crypto experts say investor money that should be "liquid" is not.
FTX was facing mounting legal and regulatory threats before withdrawals were frozen, according to Samson Mow, CEO of Pixelmatic and JAN3, a new bitcoin technology company.
Binance CEO and founder Changpeng Zhao, left, meets with El Salvador's President Nayib Bukele in San Salvador, El Salvador, on March 24. Zhao was briefly poised to buy out FTX.© Secretaria de Prensa de la Presidencia/Reuters
Mow says the FTX explosion has a familiar feel, though digital assets like bitcoin and ethereum were not the problem.
He says the exchange created tokens called FTT that were used to hold value. FTT was the backbone of FTX so when its value dipped, users scrambled to get out.
Mow says the U.S. Securities Exchange Commission is investigating and that it seems like client money may have been improperly used to help dig FTX's affiliate company Alameda Research out of a $10-billion hole.
People who bought bitcoin or other currencies through the exchange now can't withdraw them.
Mow says bitcoin is reliable but that exchanges which rely on tokens like FTT as collateral are built on a house of financial cards.
He said users know the risk of being "lazy" and leaving assets unclaimed on a currency exchange.
Binance and FTX logos are seen in this illustration. Bankman-Fried blamed himself for FTX's losses, though it's not clear what exactly went wrong.© Dado Ruvic/Reuters
"You gambled on a casino that went bust — and now you've lost your money," said Mow.
He says people who did not withdraw their digital assets and keep them in their own wallet now can't get access them, because FTX used FTT as collateral and those tokens are now worthless, he says.
"There's an old saying — not your keys, not your coins. It's not a new lesson. People are just not learning. They are gambling — and got what they deserved."
The implosion of FTX, which was valued at $32 billion US not long ago, is just the latest bad news for digital asset investors. Bitcoin prices are less than a third what they were at their height in 2021, before a big crash last fall.
But Bankman-Fried was seen as an influential player, someone who "was working closely with regulators," to try to regulate the space, said Ashley Stanhope of Ether Capital Corp., a public company focused on ethereum, and a founding member for the Canadian Web3 Council, a group collaborating with governments to build better investor protections.
He had also spent millions helping other companies, claiming he was a proponent of effective altruism, a movement that espouses charitable giving to safeguard humanity's future.
An advertisement for bitcoin is displayed on a street in Hong Kong, on Feb. 17.
Kin Cheung/The Associated Press
Her interpretation of his apology is that he made "genuine missteps. It doesn't sound like he was trying to scam investors or do do them wrong," she said.
Stanhope says this situation hurts the industry's credibility and that she fears regulators will now "paint all crypto with the same brush."
Among FTX's investors is the Ontario Teachers Pension Plan's (OTPP) which put more than $126 million into the exchange between October 2021 and January 2022.
Her interpretation of his apology is that he made "genuine missteps. It doesn't sound like he was trying to scam investors or do do them wrong," she said.
Stanhope says this situation hurts the industry's credibility and that she fears regulators will now "paint all crypto with the same brush."
Among FTX's investors is the Ontario Teachers Pension Plan's (OTPP) which put more than $126 million into the exchange between October 2021 and January 2022.
In a statement the OTPP said Thursday the "uncertainty" at FTX will have "limited impact" on the pension plan, as the investment was less than 0.05 per cent of its total net assets.
As for FTX's losses and how they will affect the industry, Stanhope admits it's a challenge, and that Bankman-Fried's fall will likely shift the crypto landscape.
"The FTX implosion will likely change investors' approach," she said.
"We'll probably see more users take their assets off centralized exchanges and rely on self-hosted wallets," until exchanges are safer and more transparent, she said.
WORKERS CAPITAL
Ontario Teachers' Pension Plan invested US$95M into failing crypto platform FTXThe Ontario Teachers' Pension Plan says it invested US$95 million into failing cryptocurrency exchange platform FTX Trading.
Ontario Teachers' Pension Plan Canadian Press
Rival exchange platform Binance pulled out of a deal to purchase FTX due to significant concerns, sending cryptocurrency prices falling, with Bitcoin sinking to a two-year low.
FTX is now being investigated for potential securities violations.
Related video: CityBiz: A good day for the markets plus problems with the Ontario Teachers Pension Plan Duration 5:02 View on Watch
OTPP says it invested in FTX's international and U.S. arms through its Teachers' Venture Growth platform so it could gain small-scale exposure to this emerging area.
It says any financial loss on its investment in FTX will have limited impact on the pension plan because the investment represents less than 0.05 per cent of its total net assets.
Customers were fleeing FTX after concerns arose that it might not have sufficient capital.
This report by The Canadian Press was first published Nov. 10, 2022.
FTX scrambles for funds as regulators take action
By Selena Li and Vidya Ranganathan - Yesterday
Illustration shows FTX logo, stock graph and representation of cryptocurrencies
With losses widening, more crypto lenders and platforms outlined surging volumes and steps to shield themselves. Crypto lender BlockFi said it was pausing client withdrawals until there was clarity on FTX.
Broker Genesis Trading disclosed its derivatives business has approximately $175 million in locked funds on FTX.
"We believe there is a 20-30% chance of a FTX rescue at best," said Matthew Dibb, chief operating officer of Singapore-based crypto investment manager Stack Funds.
He noted speculators are paying 10 cents to each dollar to buy trapped deposits on FTX.
"The damage looks to be done and even if FTX was bailed out, it would no longer be an avenue to trade as they have lost all credibility. A rescue of FTX would not be for the company, but for the clients and crypto ecosystem."
The seeds of FTX's downfall were sown months earlier, in mistakes made by Bankman-Fried after he stepped in to save other crypto firms. Sources told Reuters that FTX transferred at least $4 billion to Alameda, to prop up the trading firm after a series of losses.
BANKING ON SUPPORT
Bankman-Fried has discussed raising $1 billion each from Justin Sun, the founder of crypto token Tron, rival exchange OKX and stablecoin platform Tether, according to the source who has direct knowledge of the matter.
He is seeking the remainder from other funds, including current investors such as Sequoia Capital, the source added.
It was not clear whether Bankman-Fried will be able to raise the funds he needs or if these investors would participate.
FTX's predicament marks a stunning downfall for the 30-year-old crypto executive who was once worth nearly $17 billion.
By Selena Li and Vidya Ranganathan - Yesterday
Illustration shows FTX logo, stock graph and representation of cryptocurrencies
© Thomson Reuters
SINGAPORE (Reuters) - Regulators froze some assets of distressed cryptocurrency exchange FTX and industry peers raced to limit losses on Friday amid worsening solvency problems at the firm and heightened scrutiny of its chief executive, Sam Bankman-Fried.
The week-long saga that began with a run on FTX, one of the largest crypto exchanges, and a failed takeover deal by arch-rival Binance has thumped an already struggling bitcoin and other tokens.
FTX is scrambling to raise about $9.4 billion from investors and rivals, a source said on Thursday, as the exchange urgently seeks to save itself after a rush of customer withdrawals.
Meanwhile, the Securities Commission Of the Bahamas said on Thursday it had frozen assets of FTX Digital Markets, an FTX subsidiary. Bankman-Fried is also under investigation by the U.S. Securities and Exchange Commission for potential securities law violations, according to an unverified Bloomberg reporter tweet.
Bitcoin tumbled 4% to $16,858 on Friday, with losses totalling 17% this month. FTX's token FTT was down 27% at $2.7, with 89% losses for the month.
Trading volumes in bitcoin futures and exchange traded funds have exploded.
"Confidence is gone on day one of this fallout and there is no sight of it coming back yet," said Kami Zeng, head of research at Fore Elite Capital Management, a Hong Kong-based crypto fund manager.
"We are already seeing regulators' actions from U.S. to Japan to Bahamas, etc. Expect more to come and that's what crypto market needs badly at the moment. People get hurt and need protection."
U.S. lawmakers stepped up their calls for action, including new laws to govern the sector and a probe into what led to the FTX collapse.
SINGAPORE (Reuters) - Regulators froze some assets of distressed cryptocurrency exchange FTX and industry peers raced to limit losses on Friday amid worsening solvency problems at the firm and heightened scrutiny of its chief executive, Sam Bankman-Fried.
The week-long saga that began with a run on FTX, one of the largest crypto exchanges, and a failed takeover deal by arch-rival Binance has thumped an already struggling bitcoin and other tokens.
FTX is scrambling to raise about $9.4 billion from investors and rivals, a source said on Thursday, as the exchange urgently seeks to save itself after a rush of customer withdrawals.
Meanwhile, the Securities Commission Of the Bahamas said on Thursday it had frozen assets of FTX Digital Markets, an FTX subsidiary. Bankman-Fried is also under investigation by the U.S. Securities and Exchange Commission for potential securities law violations, according to an unverified Bloomberg reporter tweet.
Bitcoin tumbled 4% to $16,858 on Friday, with losses totalling 17% this month. FTX's token FTT was down 27% at $2.7, with 89% losses for the month.
Trading volumes in bitcoin futures and exchange traded funds have exploded.
"Confidence is gone on day one of this fallout and there is no sight of it coming back yet," said Kami Zeng, head of research at Fore Elite Capital Management, a Hong Kong-based crypto fund manager.
"We are already seeing regulators' actions from U.S. to Japan to Bahamas, etc. Expect more to come and that's what crypto market needs badly at the moment. People get hurt and need protection."
U.S. lawmakers stepped up their calls for action, including new laws to govern the sector and a probe into what led to the FTX collapse.
Related video
Analyst speaks on meltdown of cryptocurrency exchange FTX
Duration 4:03 View on Watch
With losses widening, more crypto lenders and platforms outlined surging volumes and steps to shield themselves. Crypto lender BlockFi said it was pausing client withdrawals until there was clarity on FTX.
Broker Genesis Trading disclosed its derivatives business has approximately $175 million in locked funds on FTX.
"We believe there is a 20-30% chance of a FTX rescue at best," said Matthew Dibb, chief operating officer of Singapore-based crypto investment manager Stack Funds.
He noted speculators are paying 10 cents to each dollar to buy trapped deposits on FTX.
"The damage looks to be done and even if FTX was bailed out, it would no longer be an avenue to trade as they have lost all credibility. A rescue of FTX would not be for the company, but for the clients and crypto ecosystem."
The seeds of FTX's downfall were sown months earlier, in mistakes made by Bankman-Fried after he stepped in to save other crypto firms. Sources told Reuters that FTX transferred at least $4 billion to Alameda, to prop up the trading firm after a series of losses.
BANKING ON SUPPORT
Bankman-Fried has discussed raising $1 billion each from Justin Sun, the founder of crypto token Tron, rival exchange OKX and stablecoin platform Tether, according to the source who has direct knowledge of the matter.
He is seeking the remainder from other funds, including current investors such as Sequoia Capital, the source added.
It was not clear whether Bankman-Fried will be able to raise the funds he needs or if these investors would participate.
FTX's predicament marks a stunning downfall for the 30-year-old crypto executive who was once worth nearly $17 billion.
Graphic: Pain in crypto land -
The U.S. securities regulator is investigating FTX.com's handling of customer funds and crypto-lending activities, according to a source with knowledge of the inquiry.
(Additional reporting by Rae Wee in Singapore, Hannah Lang in New York, David Shepardson in Washington, Aishwarya Nair in Bangalore; Editing by Sam Holmes)
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