FTX Crash: Latest Updates on the Cryptocurrency Crisis

New Delhi
CNN Business

After last week’s massive earthquake in the trillion-dollar cryptocurrency industry, the aftershocks continued to be felt on 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. According to CoinDesk, it was trading around $16,500 on Monday, and analysts believe it could fall below $10,000 in the coming days.

Meanwhile, ethereum, the world’s second most valuable cryptocurrency, isn’t doing so well. It traded at $1,231.53 on Monday, down more than 20% over the past week, according to CoinDesk data.

The decline comes as investors continue to grapple with the stunning implosion of FTX Group, 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 manages the Binance cryptocurrency. “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.

The Binance boss, known as CZ, 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.”

Zhao was a key player in the events surrounding the downfall of FTX. It was Binance previously reached an initial bailout agreement with FTX week, but this operation collapsed almost immediately.

FTX continued its downward spiral over the weekend after filing for bankruptcy on Friday. And another big name in the industry has admitted to mismanaging funds, further scaring 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. Before its collapse, FTX’s crypto hedge fund Alameda decided to lend billions of dollars worth of client assets to fund risky bets, 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, FTX said it was investigating whether its crypto assets were stolen and had since moved all its digital assets offline. Crypto risk management firm Elliptic said $473 million in crypto assets were stolen from FTX, although the theft has not been confirmed.

In a tweet Saturday morning, FTX general counsel Ryne Miller said the company was “taking precautions” and moving all of its digital assets into cold storage. Miller said in a tweet that the process was “expedited Thursday” to “minimize damage after observing unauthorized transactions.”

Miller said Friday evening that FTX is investigating anomalies “related to the consolidation of FTX balances between exchanges” regarding movements in crypto wallets. The facts are still unclear and the company will share more information as soon as possible.

As scrutiny of the big players in the cryptocurrency world grows, another major setback over the weekend has investors worried. Singapore-based Crypto.com has admitted to sending more than $400 million worth of ethereum to the wrong account.

Its CEO Kris Marszalek said on Twitter on Sunday that the transfer of 320,000 ETH was made three weeks ago to a corporate account at rival exchange Gate.io, not to one of the offline or “cold” wallets.

Although funds are recovered, users leave the platform fearing the same outcome as FTX.

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

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 cryptocurrencies operate very, very differently from banks,” he said.

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