Size, scope of FTX failure gets clearer as users fear worst

NEW YORK (AP) – Just days after the third largest cryptocurrency exchange collapsed, the public is starting to get an idea of ​​how messy the FTX bankruptcy case could be. The emergence of FTX has seen other crypto businesses fail, events reminiscent of the domino-like financial crises of 2008.

Users remained frustratingly in the dark Tuesday about when they might get their funds back, if at all, directing much of their anger toward FTX founder and CEO Sam Bankman. – Fried.

In a court filing, FTX lawyers said there were already more than 100,000 claims against the company and it was estimated that figure could increase to more than 1 million, most of them customers, when the case is complete. The court ordered FTX to provide a list of at least the company’s 50 largest creditors by November 18.

The lawyers said the company is in contact with the Department of Justice, the Securities and Exchange Commission, the Commodity Futures Trading Commission as well as many other state, federal and international authorities, confirming earlier reports. that the US government is investigating the possibility that Bankman-Fried and his lieutenants violated US securities law.

FTX filed for bankruptcy protection on Friday, sending tsunami-like waves through the cryptocurrency industry, which has seen its fair share of volatility and turmoil this year. including a sharp drop in price for bitcoin and other digital assets. For some, the events are reminiscent of the failure of Wall Street firms during the 2008 financial crisis, especially now that healthy companies like FTX are failing.

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The Wall Street Journal reported that BlockFi, which halted withdrawals over the weekend following the FTX bankruptcy, is now actively considering bankruptcy and plans to evacuate his staff. In previous public comments, BlockFi management made it clear that the failure of FTX had forced the company out of business. FTX provided financial assistance to BlockFi this summer, including a $400 million credit facility backed by its own balance sheet.

“We are surprised and disappointed by the news regarding FTX and Alameda,” BlockFi said Saturday, referring to hedge fund FTX and Bankman-Fried Alameda Research. “Given the lack of clarity on the status of, FTX US and Alameda, we are unable to operate business as usual.”

Another crypto firm, crypto lending firm SALT Blockchain, also appeared to be on the verge of failure. The company Bnk to the Future withdrew from its agreement to buy SALT, citing exposure to FTX. In tweets, there is CEO SALT Shawn Oren said he remains “fully committed to recovering from the damages as victims.”

In a sign of investors’ fears that the cascading effects could cause long-term damage, Binance proposed creating a rescue fund cryptocurrency exchange. which would save otherwise healthy crypto companies from failure. Binance founder and CEO Changpeng Zhao effectively laid out that a central bank or crypto insurance pool could be a lender of last resort to keep healthy businesses from failing.

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Meanwhile, FTX users complained about their loss in Telegram chat groups for traders who used the FTX exchange, writing that they had lost access to amounts ranging from thousands to millions of dollars.

Some pleaded for information. Others speculated about the likelihood of getting their funds back, while others advised that they should just accept that their investments were gone.

One group’s moderators occasionally posted, saying things like, “No death threats please.” They wrote that they had no information about Bankman-Fried’s whereabouts or what would happen to his companies.

“No news,” one moderator posted.

Many FTX users held Bankman-Fried responsible, punning on his name as “Sam Bankrun-Fried” and calling for him to be prosecuted.

Tuesday, a support account for FTX US responding on Twitter to posts from people asking about their funds and directing them to send messages to the Twitter account for assistance.

Mohit Sorout, 30, said he lost access to 95% of the value of his cryptocurrency holdings when FTX terminated its services last week, post on Twitter“The f(asterisk) (asterisk) pain is real.”

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An electrical engineer based between New Delhi and Dubai, he started trading in 2017 and resigned in 2018 to work full time trading cryptocurrencies. Together with a business partner, he built a custom algorithm, and grew an investment of a few thousand dollars into a sum many times that amount, although he did not want to reveal the value of his holdings when he lost access to them.

It is unclear what will happen to the funds of retail investors like Sorout, who are locked within the FTX ecosystem. His requests to withdraw the funds were not honored last week and now he can’t even log into the exchange, he said Monday.

Sorout did not intend to keep all his investments on one platform, he said, but the tools FTX had built for traders like himself were very effective and their algorithm worked well there. He also trusted Bankman-Fried in part because of his high profile.

“The problem was the founder, who’s donating eight figures to presidential campaigns, he’s meeting with top bureaucrats, he’s sponsoring chess tournaments, he’s out there sponsoring stadiums,” Sorout said. . “You don’t really expect a business that big, especially the CEO of that business, to defraud its customers, you know?”


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