Crypto exchange FTX’s bankruptcy filing on Friday did not end the chaos surrounding the once prominent and trusted crypto trading venue.
Since the filing which included 135 affiliates, millions of dollars in crypto have been stolen from the company, which faces a shortfall of between $6 billion and $10 billion. Bahamian officials are also investigating the matter.
“I don’t think it’s an understatement to predict that FTX’s bankruptcy will be the most complex in US history,” Caitlin Long, founder and CEO of Custodia Bank, told Yahoo Finance Live. of. It was a casino. Good riddance to them.”
From Friday to Sunday, the global market capitalization of crypto assets fell by 3%, from $856 billion to $831 billion. Since November 1, it has fallen 18% from just over $1 trillion, according to Coinmarketcap.
Here’s what happened over the weekend.
Friday FTX Heist
On Friday evening, around $663 million in crypto mysteriously leaked from wallets linked to the now bankrupt exchange.
John Jay Ray III, the new Chief Restructuring Officer and CEO who was appointed less than 24 hours ago, said in a statement Saturday morning: “Unauthorized access to certain assets has occurred.”
Of the total releases, an estimated $477 million was stolen, while the rest was transferred to cold storage by FTX for backup, according to blockchain analytics firm, Elliptic.
“The process was expedited tonight – to mitigate damages when observing unauthorized transactions,” said FTX US General Counsel Ryne Miller. said on Twitter.
FTX declined to comment further on the matter.
Meanwhile, the thief has been identified trying to transfer and sell funds through US-based crypto exchange Kraken, the Security Chief said Saturday.
“We are committed to working with law enforcement to ensure they have everything they need to sufficiently investigate this matter,” Kraken said.
The amount of those stolen funds that will be returned matters. The Financial Times reported that FTX held approximately $900 million in liquid crypto and $5.4 in illiquid venture capital investments against $9 billion in liabilities the day before it filed for bankruptcy.
FTX in the Bahamas
The Bahamas security regulator froze the assets of FTX Digital Markets on Thursday. On Saturday, the regulator announced that FTX had started processing withdrawals of Bahamian funds for which it had not been authorized.
On Sunday, Bahamas police also gave a statement stating that they are working with the country’s securities regulator to investigate FTX for criminal misconduct.
A person familiar with the matter confirmed to Yahoo Finance that Bahamian law enforcement is “forcing [Sam Bankman-Fried] to stay in the Bahamas” from Saturday evening. This followed speculation that Bankman-Fried and the company’s other top executives – Chief Technology Officer Gary Wang and Chief Engineering Officer Nishad Singh – were trying to to escape.
Under Chapter 11
FTX will deal with the same “big legal question” as crypto lenders Celsius Network and Voyager, Greg Plotko, a Crowell & Moring legal partner, told Yahoo Finance. This is whether the crypto held in client accounts belongs to the clients themselves or to the bankruptcy estate.
Unlike Celsius and Voyager, where the line of ownership was less clear, the terms of service on FTX.com tell customers that “none of the digital assets in your account are owned by, or shall or may be loaned to, FTX Trading.”
“There are also almost certainly massive amounts of criminal fraud that have led to this scenario and therefore we can expect this to be a very messy public trial that will result in bad publicity and regulatory backlash for the [crypto] Haseeb Quershi, managing partner at venture capital firm DragonFly Capital, told Yahoo Finance.
Like Quershi’s Dragonfly, several larger hedge funds and crypto market makers have assets trapped on FTX, including Galaxy Digital, Multicoin Capital, Jump Tradewintermute and Galois Capital.
“When you have these situations, there are a lot of institutions that want to exit their positions. They don’t want to be stuck in bankruptcy for two years, waiting for payments,” Plotko said. There are already a lot of holes as to where all the money went. Institutions and individuals may want to sell themselves. »
FTX’s bid for Voyager Digital assets has ended
In September, bankrupt crypto lender Voyager announced that FTX, through its US subsidiary (FTX US), had made the winning bid for its assets. But that “$1.4 billion bid to buy Voyager Digital customer accounts is now in serious jeopardy,” Jason DiBattista, head of legal analysis at LevFin Insights, told Yahoo Finance.
Voyager Digital has reopened the bidding process for its assets, according to a Friday press release from its unsecured creditors committee.
At the time of FTX’s bankruptcy filing, Voyager held approximately $3 million worth of crypto tokens that it could not withdraw.
BlockFi?
Crypto lender BlockFi has also since officially gone silent. announcing a freeze on customer withdrawals on Thursday evening. Since then, a number of clients noted that their BlockFi credit cards no longer work.
Although BlockFi is not included in the FTX Chapter 11 filing, the company is expected to be a major creditor after securing a $400 million emergency line of credit from FTX in late June.
As recently as Monday, BlockFi attempted to relaunch its yield product. On Tuesday, COO Flori Marquez announced that the company was “fully operational.” BlockFi did not respond to comments on its status throughout the weekend.
(This story is developing and will be updated with information)
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David Hollerith is a senior reporter at Yahoo Finance covering cryptocurrency and stock markets. Follow him on Twitter at @DsHollers
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