One of the most high-profile cryptocurrency meltdowns, FTX filed for bankruptcy on Friday after traders rushed to remove $6 billion off the platform in only 72 hours and rival exchange Binance abandoned a planned rescue package. John J. Ray III, the chief executive of FTX, stated on Saturday that the business was collaborating with law enforcement and authorities to address the issue and was “making every effort to safeguard all assets, wherever located.”
On Saturday, FTX experienced further instability after the cryptocurrency exchange reported discovering unauthorised access and experts said that hundreds of millions of dollars’ worth of assets had been removed under “strange circumstances.”
One of the most high-profile cryptocurrency meltdowns, FTX filed for bankruptcy on Friday after traders rushed to remove $6 billion off the platform in only 72 hours and rival exchange Binance abandoned a planned rescue package.
John J. Ray III, the chief executive of FTX, stated on Saturday that the business was collaborating with law enforcement and authorities to address the issue and was “making every effort to safeguard all assets, wherever located.”
We are in the process of deleting the trading and withdrawal capabilities, among other things, he stated.
Sam Bankman-Fried, the exchange’s 30-year-old founder who is well known for wearing shorts and a T-shirt, has gone from being the face of the cryptocurrency industry’s accomplishments to the main character of the sector’s worst crash as a result of the exchange’s rapid fall from grace.
In addition, there have been rumours about the whereabouts of Bahamas resident Bankman-Fried. He denied rumours on Twitter that he had taken a private plane to South America on Saturday by telling Reuters that he was in the Bahamas.
At least $1 billion in customer cash have disappeared from the platform due to the upheaval at FTX, sources told Reuters on Friday. According to the sources, Bankman-Fried had transferred $10 billion in customer cash to his trading firm, Alameda Research.
Ryne Miller, the U.S. general counsel for FTX, tweeted on Saturday that the company was moving its digital assets into “cold storage” “to mitigate damage upon spotting unlawful activities,” Miller wrote.
In order to protect against hackers, cold storage refers to cryptocurrency wallets that are not connected to the internet.
FTX International and FTX United States have lost $659 million in the previous 24 hours, according to blockchain analytics company Nansen.
Approximately $473 million worth of cryptocurrency was “moved out of FTX wallets in questionable circumstances early this morning,” according to a different blockchain analytics company Elliptic, although the company was unable to determine whether the tokens had been stolen.
“We can confirm that our team is aware of the identity of the account connected to the ongoing FTX hack,” stated Bitcoin exchange Kraken. “We are committed to helping law enforcement to ensure that they have all they need to properly investigate this problem.”
When contacted for comment on either the outflows or Kraken’s assertion, FTX was unavailable.
According to a document provided by Bankman-Fried with investors on Thursday and seen by Reuters, FTX has $14.6 billion in assets and $13.86 billion in liabilities. Only $900 million of those assets, however, were liquid, creating a liquidity shortage that resulted in the company declaring bankruptcy.
FTX Trading claimed in its bankruptcy filing that firm has assets worth between $10 billion and $50 billion, liabilities between $10 billion and $50 billion, and more than 100,000 creditors. As CEO, Ray, a restructuring specialist, was chosen.
Investors were surprised by the drop, which renewed calls for regulation of the crypto asset industry, which has suffered losses all year due to the decline in bitcoin prices.
After the FTX meltdown, “things will continue to simmer,” according to Alan Wong, operations manager of the Hong Kong Digital Asset Exchange.
With an $8 billion difference between liabilities and assets, FTX’s insolvency will set off a domino effect that will cause a string of investors connected to FTX to file for bankruptcy or be compelled to sell their assets.
FTX has raised almost $2 billion from reputable investors since its creation in 2019 including Sequoia, SoftBank, BlackRock, and Temasek. At a $32 billion valuation, FTX had secured $400 million from investors in January.
SoftBank and Sequoia Capital declared that they were writing down their FTX investments to zero.
According to a person familiar with the situation, cryptocurrency exchange Coinbase Global Inc. will also write down the investment in FTX that its ventures arm made in 2021.
The first time since 2020, Bitcoin plummeted below $16,000 after Binance abandoned its rescue plan on Wednesday.
It was selling at roughly $16,831 on Saturday, more than 75% below the record high of $69,000 it hit in November of last year.
The value of FTX’s token, FTT, fell by over 91% this week. Shares of businesses involved with cryptocurrencies and the blockchain have also decreased.
Since the market valuation of cryptocurrencies is $890 billion, compared to the $41 trillion market cap of U.S. equity, “we believe cryptocurrency markets remain too tiny and too compartmentalised to generate contagion in financial markets,” Citi analysts wrote.
“FTX raised $1.8 billion from venture capital and pension funds over the course of four years. This is the main method that the financial markets may be hurt because it might also have minor effects on portfolio shocks in a chaotic macro environment.”
According to a person with knowledge of the investigation, the US Securities and Exchange Commission is looking into how FTX.com handled customer cash during a liquidity crisis and its involvement in crypto-lending.
The Financial Times reported on Saturday that the hedge fund Galois Capital had half of its assets locked on FTX, citing a letter from co-founder Kevin Zhou to investors and putting the sum at roughly $100 million.
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