The FTX saga unfolds further following the cryptocurrency’s bankruptcy filing


Friday’s bankruptcy filing by cryptocurrency exchange FTX didn’t stop the chaos surrounding the once popular and trusted cryptocurrency trading space.

Since the filing, which included 135 related companies, millions of dollars in cryptocurrency have been stolen from the company, which is facing a $6 billion to $10 billion deficit. Bahamian officials are also investigating the matter.

“I don’t think it’s wrong to predict that the FTX bankruptcy will be the most complex in US history,” Caitlin Long, founder and CEO of Custodia Bank, told Yahoo Finance Live. the dice. It was a casino. Cheers to them.”

From Friday to Sunday, the global market capitalization of cryptocurrencies decreased by 3%, from $856 billion to $831 billion. It’s down 18% since Nov. 1 from just over $1 trillion, according to Coinmarketcap.

Here’s what happened over the weekend.

FTX logo with 100 dollar bill crypto coins is shown for illustration. FTX has filed for bankruptcy in the US and is looking for ways to refund users. (Photo illustration by Jonathan Raa/NurPhoto via Getty Images)

FTX burglary on Friday

On Friday night, some $663 million in cryptocurrency mysteriously flowed from wallets associated with the bankrupt exchange.

New chief restructuring officer and CEO John Jay Ray III, who was appointed less than 24 hours ago, said in a statement. statement Saturday morning: “Unauthorized access to certain assets has occurred.”

According to blockchain analytics firm Elliptic, about $477 million of the total outflow is estimated to have been stolen, with the rest transferred to cold storage for safekeeping by the FTX.

“The process was expedited this evening – to mitigate the damage after observing unauthorized operations,” Ryne Miller, senior counsel for FTX USA, said. He said on Twitter.

FTX refused to comment further on the issue.

Meanwhile, the thief was found to be trying to transfer and sell money through US-based cryptocurrency exchange Kraken. chief security officer said Saturday.

“We are committed to working with law enforcement to ensure they have everything they need to adequately investigate this matter,” Kraken said.

How much of those stolen funds will be returned is important. The Financial Times reported that FTX held approximately $900 million in liquid cryptocurrency and $5.4 million in illiquid venture capital investments against $9 billion in liabilities the day before it filed for bankruptcy.

FTX in the Bahamas

The Bahamas’ securities regulator froze the assets of FTX Digital Markets on Thursday. On Saturday, the regulator announced that FTX had begun processing unauthorized Bahamian fund withdrawals.

On Sunday, Bahamian police also gave statement They said they were working with the country’s securities regulator to investigate FTX for criminal activity.

A person familiar with the matter confirmed to Yahoo Finance that Bahamian law enforcement agencies are “enforcing” [Sam Bankman-Fried] It came after speculation that Bankman-Fried and the company’s other top executives — chief technology officer Gary Wang and head of engineering Nishad Singh — were trying to defect.

In Chapter 11

Crowell & Moring legal partner Greg Plotko told Yahoo Finance that FTX will be dealing with the same “big legal question” as cryptocurrency lenders Celsius Network and Voyager. This is whether the cryptocurrency held in customer accounts belongs to the customers themselves or to the bankruptcy estate.

Unlike Celsius and Voyager, where the ownership line is less clear, the terms of service on FTX.com informs clients that “None of the Digital Assets in your account are the property of, or may be loaned to, FTX Trading. .”

“There is also an almost massive amount of criminal fraud leading up to this scenario, and as a result, we can expect this to be a very messy public trial that will lead to bad publicity and regulatory backlash. [crypto] industry,” Haseeb Quershi, managing partner with venture firm DragonFly Capital, told Yahoo Finance.

Like Quershi’s firm Dragonfly, several major crypto hedge funds and market makers have assets trapped in FTX, including Galaxy Digital, Multicoin Capital, Jump TradingWinter time and Galois Capital.

“When you’re faced with situations like this, there are a lot of institutions that want to get out of their positions. They don’t want to go bankrupt and wait for payments for two years,” Plotko said. There are already a lot of loopholes about where all the money is going. Institutions and individuals may want to sell.”

FTX’s bid for Voyager Digital’s assets has ended

In September, bankrupt cryptocurrency lender Voyager announced a winning bid for the assets of FTX through its US subsidiary (FTX US). “Voyager Digital’s $1.4 billion bid to acquire 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 press release issued by the committee of unsecured creditors on Friday.

At the time of FTX’s bankruptcy filing, Voyager had approximately $3 million worth of cryptotokens that it was unable to redeem.

BlockFi?

Crypto lender BlockFi has also officially gone silent announces Thursday night customer withdrawal freeze. A series since then customers They mentioned that BlockFi credit cards no longer work.

While BlockFi has not been included in FTX’s Chapter 11 filings, the firm is expected to become a major creditor after taking out a $400 million emergency credit line from FTX in late June.

On Monday, BlockFi attempted to restart its productivity. On Tuesday, COO Flori Marquez announced that the firm’s “fully functional.” BlockFi did not respond to comments on its status over the weekend.

(This story is developing and will be updated with information)

David Hollerith is a senior correspondent covering cryptocurrency and stock markets at Yahoo Finance. Follow him on Twitter @DsHollers

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