Cryptocurrency exchange FTX fights for survival as assets are frozen by Bahamas regulator

JM — Tue, 13 Jun 2023 12:12:16 +0000

Bahamas regulators freeze FTX assets

The Bahamas securities regulator has frozen the assets of FTX Digital Markets, the Bahamas subsidiary of FTX, the world’s second largest cryptocurrency exchange as it struggles for survival. The commission said that the powers of the directors of FTX Digital Markets have been suspended and no assets of FTX, client assets or trust assets held by FTX, can be transferred, assigned or otherwise dealt with, without the written approval of the provisional liquidator. Moreover, based on their information, the commission said that any actions, related to allegations that FTX customers’ assets were mishandled, mismanaged or transferred without client consent, would have been contrary to normal governance, without client consent, and potentially unlawful.

Hedge fund’s balance sheet loaded with FTT tokens

The regulatory action came after reports that the balance sheet of the crypto hedge fund owned by FTX’s founder, Sam Bankman-Fried was loaded with billions of dollars. This means that any volatility in FTT tokens’ price could endanger Bankman-Fried’s empire. The crisis escalated when Binance, the largest cryptocurrency exchange, announced that it would sell its holdings worth about $500m in FTT citing “recent revelations”. Subsequently, customers tried to withdraw their funds faster than the exchange could process them, which triggered the crypto equivalent of a bank run. FTX has yet to restart withdrawals, is blocking new account signups, and advising existing customers against making deposits with FTX.

Crisis could lead to more crypto industry collapses

This crisis could lead to more crypto industry collapses, and S&P global ratings expects collateral calls and liquidations to accelerate. Confidence has been lost, and there is no sight of it coming back yet, according to Kami Zeng, the head of research at Fore Elite Capital Management, a Hong Kong-based crypto fund manager. On the other hand, Changpeng Zhao, the founder of FTX’s rival Binance, warned of a 2008-style crisis that the crypto market could face in the days to come. The US Department of Justice and the Securities and Exchange Commission are reportedly examining FTX to determine whether any criminal activity or securities offences have been committed. In Australia, FTX’s Australian arm has been put into administration, and FTX’s US platform, which is separate from the international exchange, has warned that trading may be halted in a few days.

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Cryptocurrency Exchange Founder Released on $250 Million Bail Pending Fraud Trial

JM — Tue, 13 Jun 2023 10:57:18 +0000

The founder of cryptocurrency exchange FTX has been released on $250 million bail while he awaits trial on fraud charges

Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, has been released on bail of $250 million while he awaits trial on fraud charges following the collapse of the exchange. Federal prosecutors have accused the 30-year-old entrepreneur of stealing billions of dollars in FTX customer funds to plug losses at his hedge fund, Alameda Research. He was not asked to enter a plea as he appeared at Manhattan federal court.

Sam Bankman-Fried was worth several billion dollars earlier this year due to the success of FTX, but concerns about commingling of fund between FTX and his hedge fund Alameda led to the exchange’s bankruptcy in November

After Bankman-Fried co-founded FTX in 2019 aged just 27, the values of bitcoin and other digital assets propelled the exchange to a valuation of some $32 billion earlier this year, making the Massachusetts Institute of Technology (MIT) graduate a billionaire several times over, as well as an influential donor to US political campaigns. But concerns about commingling of funds between FTX and Alameda led to a flurry of customer withdrawals in early November, ultimately forcing the exchange to declare bankruptcy on November 11. Bankman-Fried later said at a New York Times conference that he had just $100,000 in his bank account.

Bankman-Fried’s bail conditions include strict pre-trial supervision, with electronic monitoring and a ban on opening new lines of credit or businesses

Bankman-Fried was surrounded by photographers on Thursday as he exited the court: he sported facial stubble and a grey suit – a far cry for the shorts and t-shirt he became notorious for wearing in public appearances while running FTX. His next court date is set for January 3, before US District Judge Ronny Abrams, who will handle the case. Mr Gorenstein set Bankman-Fried’s bail conditions to strict pre-trial supervision, with conditions including electronic monitoring via a device to be fitted before the defendant left court, as well as a ban on opening new lines of credit or businesses.

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