The size and scope of FTX's failure becomes clearer as users fear the worst

The size and scope of FTX’s failure becomes clearer as users fear the worst

NEW YORK (AP) — Just days after the third-largest cryptocurrency exchange collapsed, the public is starting to get an idea of ​​just how messy FTX’s bankruptcy filing could be. Other crypto businesses are failing in the wake of FTX’s collapse, events reminiscent of the domino meltdowns of the 2008 financial crisis.

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

In a court filing, attorneys for FTX said there were already more than 100,000 claims against the company. and estimated that figure could rise to over a million, for most customers, once the deal is done. The court ordered FTX to provide at least a list of the company’s top 50 creditors by November 18.

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 dozens of other state, federal and international authorities, confirming previous reports. that the US government investigate 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 a good deal of volatility and turmoil this year. including a sharp decline in the price of bitcoin and other digital assets. For some, the events are reminiscent of the failures of Wall Street companies during the 2008 financial crisis, especially now that supposedly sound companies like FTX are failing.

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 lay off its staff. In previous public comments, BlockFi management made it clear that FTX’s failure caused the company to shut down. FTX had provided financial assistance to BlockFi this summer, including a $400 million credit facility backed by its own balance sheet.

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

Another crypto company, crypto lending firm SALT Blockchain, also seemed on the verge of failure. Bnk to the Future has withdrawn from its agreement to buy SALT, citing its exposure to FTX. In the tweets, the CEO of SALT Shawn Oren said he was “fully committed to recovering from the damage as victims”.

In a sign of investors’ fears that cascading effects could cause long-term damage, cryptocurrency exchange Binance has proposed the creation of a bailout fund it would save otherwise healthy crypto companies from failing. Binance Founder and CEO Changpeng Zhao has effectively exposed the possibility of a central bank or crypto-like deposit insurance pool being a lender of last resort to prevent sound companies from failing.

Meanwhile, FTX users lamented their losses 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 on the likelihood of getting their funds back, while others advised them to accept that their investments were gone.

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

“No news,” posted a moderator.

Many FTX users have named Bankman-Fried as responsible, making puns on his name like “Sam Bankrun-Fried” and calling for him to be prosecuted.

Tuesday, a support account for FTX US was responding on Twitter to messages from people asking for information about their funds and ordering them to message the Twitter account for help.

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

An electrical engineer based between New Delhi and Dubai, he started trading in 2017 and quit his job in 2018 to work full-time in cryptocurrency trading. With a trading partner, he built a custom algorithm and turned an investment of a few thousand dollars into several times that amount, though he wouldn’t divulge the value of his holdings when he lost access to them. .

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

Sorout had no intention of keeping all of his investments on one platform, he said, but the tools FTX had built for traders like him were very effective and his algorithm performed well there. He also trusted Bankman-Fried in part because of his notoriety.

“The problem was the founder, who gives eight figures in presidential campaigns, he meets top bureaucrats, he sponsors chess tournaments, he sponsors stadiums,” Sorout said. “You don’t really expect such a huge company, especially the CEO of this company, to scam their customers, you know?”

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