FTX Crash: Latest Updates on the Cryptocurrency Crisis

New Delhi
CNN Business

The aftershocks have continued to rumble after last week’s massive earthquake rocked the trillion-dollar cryptocurrency industry. Monday.

The prices of digital currencies fell again as the crisis engulfing the market deepened over the weekend. Bitcoin, the world’s largest cryptocurrency, has fallen nearly 65% ​​so far this year. It was trading at around $16,500 on Monday, according to CoinDesk. Analysts believe it could fall below $10,000.

ether, the second most valuable cryptocurrency in the world, which is not good at all. It traded at around $1,230 on Monday and has lost more than 20% in the past week, according to CoinDesk data.

The decline comes as investors continue to grapple with the surprising breakout of FTX, one of the industry’s biggest and most powerful players.

Some industry insiders say the company’s collapse triggered a “Lehman moment,” citing the 2008 collapse of the investment bank that sent shockwaves around the world.

The episode has not only destroyed confidence in the cryptocurrency industry, but will also embolden global regulators to tighten the screws. Some of the biggest names in the business said they would welcome the review if it helped restore confidence in the industry.

“There are a lot of risks,” said Changpeng Zhao, who runs Binance, the largest. crypto exchange. “We’ve seen things get crazy in the industry in the last week, so we need some regulation, we need to do it right,” he said.

CZ, as it is known, spoke at a conference in Indonesia on Monday. He said last week that comparing the current cryptocurrency to the 2008 global financial crisis is “probably an accurate analogy.”

It was Binance previously reached an initial bailout agreement with FTX week, but this operation collapsed almost immediately.

FTX continued its downward spiral after filing for bankruptcy on Friday. Another big name in the industry has also admitted to mismanaging funds, further spooking investors.

The way things have unfolded in the last few days shows that the crisis is just beginning.

FTX moved its headquarters from Hong Kong to the Bahamas last year, which former CEO Sam Bankman-Fried described at the time as “one of the few places to build a comprehensive framework for crypto.”

On Sunday, authorities in the Bahamas said they were investigating potential criminal wrongdoing in connection with the company’s explosion.

“In light of the global collapse of FTX and the temporary liquidation of FTX Digital Markets Ltd., the Financial Crimes Investigation Division’s financial investigative team is working closely with the Bahamas Securities Commission to investigate whether any criminal wrongdoing has occurred,” he said. This was reported by the police force of the Bahamas.

It is unclear what aspect of the rapid collapse FTX authorities are investigating.

The founder of the exchange was 30-year-old Bankman-Fried one of the faces of the crypto industry, amassed a $25 billion fortune that has since disappeared. He was seen as the white knight of the crypto world, having previously stepped in to rescue struggling companies following the collapse of the TerraUSD stablecoin in May.

Backed by elite investors such as BlackRock and Sequoia Capital, FTX has quickly become one of the largest cryptocurrency exchanges in the world. Bankman-Fried’s decision to lend billions of dollars worth of client assets to fund risky bets by crypto hedge fund Alameda preceded its collapse, The Wall Street Journal reported Thursday.

The Bahamas investigation comes a day after the bankrupt stock exchange said it was launching its own investigation.

On Saturday, the FTX said it was investigating whether the cryptocurrencies were stolen. Crypto risk management firm Elliptic said $473 million worth of crypto assets were seized from FTX.

FTX General Counsel Ryne Miller said Saturday that the company “initiated precautionary measures” on Friday and took all of its digital assets offline. The process was expedited on Friday evening “to mitigate damage after observing unauthorized transactions”.

Miller said that FTX is investigating anomalies “related to the consolidation of FTX balances between exchanges” related to movements in crypto wallets.

The facts are still unclear and the company will share more information as soon as possible, he added.

As scrutiny of big players in the cryptocurrency world mounts, Singapore-based Crypto.com has admitted to sending more than $400 million worth of ether to the wrong account.

CEO Kris Marszalek said on Sunday that the 320,000 ETH transfer three weeks ago was made to a corporate account at rival exchange Gate.io, rather than to one of the offline or “cold” wallets.

Although the funds have been restored, users are withdrawing their funds, fearing that the platform may crash like FTX.

“We have since strengthened our process and systems to better manage these internal transfers,” Marszalek tweeted on Sunday. According to CoinDesk, the platform’s native token has fallen more than 20% in the past 24 hours.

Marszalek said Monday that his firm had acted as a “responsible, regulated player” and would soon prove “all naysayers wrong with our actions.”

Crypto.com has 70 million people on its platform globally and its business model is “completely different” from FTX, he said.

“We’ve never taken third-party risk, we don’t run a hedge fund, we don’t trade client assets,” he said.

Marszalek said his firm will soon publish an audit report showing its reserves.

At a conference in Bali, Binance boss Zhao stated that regulating the industry will not be easy.

The authorities’ “natural response is to borrow regulations from traditional banking systems … but crypto exchanges operate very, very differently from banks,” he said.

“It’s very, very normal for a bank to transfer user assets for investments and try to generate income,” he said. If a cryptocurrency exchange operates this way, it is “almost guaranteed to go down,” he said. added that the industry collectively has a role to play in protecting consumers.

“Regulators have a role … but no one can protect a bad player,” he said.

— Matt Egan, Ramishah Maruf and Allison Morrow contributed to this report.

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