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Tag: FTX

  • FTX: Defunct crypto giant recovers over $5bn of assets

    FTX: Defunct crypto giant recovers over $5bn of assets

    A cryptocurrency exchange has gone bankrupt. According to an attorney for the firm, FTX has located assets worth more than $5 billion (£4.1 billion).


    However, a US bankruptcy court was informed on Wednesday that the extent of customer losses is still unknown.

    Prosecutors have charged FTX’s former CEO Sam Bankman-Fried with masterminding a “epic” fraud that could have cost investors, customers, and lenders billions of dollars.

    Mr Bankman-Fried has pleaded not guilty to charges of defrauding investors.

    “We have located over 5 billion dollars of cash, liquid cryptocurrency, and liquid investment securities,” Andy Dietderich, an attorney for FTX, told US Bankruptcy Judge John Dorsey in Delaware.

    Mr Dietderich said that the recovered funds do not include assets seized by the Securities Commission of the Bahamas, where FTX was based and where Mr Bankman-Fried was living at the time of his arrest.

    Most of FTX’s customers and investors who are facing losses have not been named in the hearings.

    However, American football star Tom Brady, his former wife Giselle Bündchen and New England Patriots owner Robert Kraft were mentioned in court filings.

    In December the 30-year-old was arrested in the Bahamas and extradited to the US. He has been accused of committing “one of the biggest financial frauds in US history.”

    FTX, which a year ago was valued at $32 billion, filed for bankruptcy protection on November 11. It has been estimated that $8 billion of customer funds were missing.

    US federal prosecutors have accused Mr. Bankman-Fried of misappropriating FTX customers’ funds to pay debts at his cryptocurrency trading firm Alameda Research and to make other investments.

    In December prosecutors announced eight criminal charges, including wire fraud, money laundering and campaign finance violations. Financial regulators have also brought claims against Mr Bankman-Fried.

    FTX co-founder Gary Wang and Caroline Ellison, the former head of Alameda, have also been charged over their alleged roles in the company’s collapse. Authorities said they were both cooperating with the investigation.

    In late December, Mr Bankman-Fried was released from detention on a $250 million bail on the condition that he not leave his parents’ home in California.

    In an interview with BBC News before his arrest, he said: “I didn’t knowingly commit fraud.” I don’t think I committed fraud. I didn’t want any of this to happen. I was certainly not nearly as competent as I thought I was.”

    Source: BBC.com
  • US regulators caution banks about the dangers of cryptocurrencies

    US regulators caution banks about the dangers of cryptocurrencies

    US regulators have warned banks about the dangers associated with the cryptocurrency market for the first time ever in a joint statement.

    Financial institutions were warned by the watchdogs to watch out for potential fraud, legal uncertainty, and deceptive statements made by companies dealing in digital assets.

    Banks were also warned about the industry’s “contagion risk.”

    It happens just two months after the collapse of the trading platform FTX rocked the cryptocurrency sector.

    In a joint statement, the US Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency said they were closely monitoring the crypto activities of banking organizations.

    “The events of the past year have been marked by significant volatility and the exposure of vulnerabilities in the crypto-asset sector,” the statement said.

    The regulators also said that issuing or holding crypto tokens, which are stored on public, decentralized networks, was “highly likely to be inconsistent with safe and sound banking practices.”

    Banks were also encouraged to take steps to avoid problems in the digital asset market spreading to the wider financial system.

    “It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,” it added.

    Tuesday’s statement comes after months of hesitancy by US financial industry watchdogs to issue uniform guidelines on cryptocurrencies, despite banks inviting clearer advice from regulators.

    FTX shock

    The cryptocurrency industry was rocked by the collapse of FTX in November.

    It was the world’s second largest cryptocurrency exchange and the entry point for millions of people into the digital asset market.

    On Tuesday, FTX’s former chief executive, Sam Bankman-Fried, officially denied charges that he defrauded customers and investors.

    He pleaded not guilty in a US court to claims that he took customer deposits at FTX to fund his other firm, Alameda Research, buy property, and make political donations.

    Two of Mr Bankman-Fried’s closest colleagues have already pleaded guilty and are cooperating with the investigation, which has shaken the entire cryptocurrency industry.

    Mr Bankman-Fried was one of the most high-profile figures in the sector, known for his political ties, celebrity endorsements, and bailouts of other struggling firms.

    He has been accused by the US of building “a house of cards on a foundation of deception” while telling investors that it was one of the safest buildings in crypto”.

    Source: BBC.com

  • The fall of the FTX ‘King of Crypto’ Sam Bankman-Fried

    It took fewer than eight days for Sam Bankman-Fried to go from being nicknamed the “King Of Crypto” to his company filing for bankruptcy and him stepping down as CEO, potentially facing federal investigations into how he handled the company’s finances.

    Over the last few years, the internet has been flooded with long interviews with him, speaking over video chat from his office desk in the Bahamas.

    In some of them, there’s a distracting clicking noise.

    As his interviewees listen intently to his incredible story of how he became a multibillionaire in five years, the sound is persistent and clearly coming from the American entrepreneur’s mouse.

    “Click, click, click,” it goes, in rapid, on-off bursts.

    Meanwhile, Mr Bankman-Fried’s eyes dart around the screen.

    It’s not clear from the videos what he’s doing on his computer but his tweets can give us a pretty good clue.

    “I’m (in)famous for playing League of Legends while on phone calls,” he tweeted in February 2021.

    Mr Bankman-Fried – the former boss of embattled cryptocurrency exchange FTX – is an avid gamer. And in a series of tweets to his nearly one million followers, he explained why. Playing the team fantasy battle game was his way to get his mind to switch off from running two companies trading billions of dollars a day.

    “Some people drink too much; some gamble. I play League,” he said.

    Sam Bankman-Fried at his desk
    IMAGE SOURCE,FTX Image caption, Sam Bankman-Fried also enjoyed playing a video game called Storybook Brawl so much he brought its maker in March 2022

    Since the 30-year-old’s cryptocurrency empire collapsed this week in dramatic fashion another anecdote about his gaming has resurfaced online.

    According to a blog post from venture capital giant Sequoia Capital, Mr Bankman-Fried played an intense League of Legends battle during a high-level video call with their investment team.

    It didn’t seem to put them off at all though. The group proceeded to invest $210m in Mr Bankman-Fried’s company FTX.

    This week Sequoia Capital deleted that gushing blog post and announced they are now writing off their FTX investment as a loss.

    They’re not the only investors who have lost eyewatering amounts of money since Mr Bankman-Fried’s $32bn empire collapsed.

    FTX had an estimated 1.2 million registered users who were using the exchange to buy cryptocurrency tokens like Bitcoin and thousands of others.

    From large traders to everyday crypto fans, many are left wondering if they will ever get back their savings trapped in FTX’s digital wallets.

    It’s a dizzying downfall and the rise of Mr Bankman-Fried is also its own dramatic story of risks, rewards, and beanbags.

    Mr Bankman-Fried went to Massachusetts Institute of Technology (MIT) – a prestigious US research university where he studied physics and maths.

    But the young bright undergraduate says it was lessons learned in the student dorms that led him on his path to getting rich.

    In a BBC radio interview last month he recalled being swept up in the “effective altruism” movement. Effective altruism is a community of people “trying to figure out what practical things you can do with your life to have as much positive impact as you can on the world,” he said.

    So, as Bankman-Fried recalls, he decided to get into banking to make as much money as he could to give it back to good causes.

    He learned to trade stocks during a short stint at the trading firm Jane Street in New York before he got bored and decided to experiment with Bitcoin.

    He noticed the variations in the value of Bitcoin across different cryptocurrency exchanges and started arbitraging – buying Bitcoin from places selling it cheap and selling it to other places where it was trading for more.

    After a month of making modest profits, he got together with some college friends and started a trading business called Alameda Research.

    Mr Bankman-Fried says it wasn’t easy and took months of perfecting techniques about how to move money in and out of banks and across borders. But after around three months he and his small team hit the jackpot.

    “We were super dogged,” he said to the Jax Jones and Martin Warner Show podcast a year ago. “We just kept going. If someone throws another roadblock we would be creative and if our system couldn’t handle that we would just build a new system to get us through that hoop.”

    By January 2018 his team was making $1m every day.

    A business reporter at CNBC asked him recently how that felt.

    Intellectually and according to his methodology, he said “it made perfect” sense. “But viscerally, it surprised me every day,” he said.

    Sam Bankman-Fried became an official billionaire in 2021 thanks to his secondary and more high-profile business – FTX. The crypto exchange grew to be the second largest in the world and a titan of the industry, seeing $10-$15bn traded a day.

    In early 2022 FTX was valued at $32bn and a household name with an NBA stadium named after the company and endorsements from celebrity backers like the NFL’s Tom Brady.

    All the while, Mr Bankman-Fried seemingly delighted in giving his Twitter followers an insight into his lifestyle. He mainly sleeps on a bean bag next to his desk in the office, he said, with a picture of him lying next to his staff at their trading terminals.

    Sam Bankman-Fried on a bean bag
    IMAGE SOURCE,TWITTER Image caption, “Mostly I sleep on a beanbag,” Mr Bankman-Fried told his Twitter followers

    In another, he posted in the early hours of the morning. “Couldn’t sleep. Back to the office,” he wrote.

    Mr Bankman-Fried’s dream of giving away vast amounts of money to charity was also well underway. In the BBC radio interview last month, he claimed he had given away “a few hundred million as of now”.

    And his generosity didn’t just extend to charities. In the last six months the “King of Crypto” was given another nickname – “Crypto’s White Knight”.

    With the price of cryptocurrencies falling in 2022, the so-called “Crypto Winter” is in full swing. While other companies in the industry faltered, Mr Bankman-Fried was handing out bailout cash in the hundreds of millions.

    Asked why he was trying to prop up failing crypto firms, he told CNBC: “It’s not going to be good long term if we have real pain and real blow points. And it’s not fair to customers.”

    He also claimed, in the same interview, to have $2bn in reserve that he could use to help to fail crypto companies.

    But last week he was going around the same industry himself trying to raise money to save his own company and customers.

    Questions about the real financial stability of FTX began swirling after an article on the CoinDesk website suggested that much of Mr Bankman-Fried’s trading giant Alameda Research rests on a foundation largely made up of a coin that a sister company of FTX invented, not an independent asset.

    Further accusations that Alameda Research used FTX’s customer deposits as loans for trading were made in the Wall Street Journal.

    The beginning of the end came though when FTX’s main competitor – Binance – publicly sold off all its crypto tokens linked to FTX a few days later.

    Binance CEO Changpeng Zhao told his 7.5 million followers his company would be selling off the holdings “in light of recent revelations”.

    It sparked a run on FTX with panicked customers withdrawing billions of dollars from the cryptocurrency exchange.

    Binance CEO Changpeng Zhao
    IMAGE SOURCE, GETTY IMAGES Image caption, Binance CEO Changpeng Zhao shared terse exchanges on Twitter with his rival Mr Bankman-Fried

    Withdrawals were halted and Mr Bankman-Fried tried to get a bailout, with Binance at one stage publicly considering a buyout before walking away.

    Binance said reports of “mishandled customer funds and alleged US agency investigations” had swayed its decision.

    A day later FTX was declared bankrupt.

    Mr Bankman-Fried apologized in a series of tweets saying “I’m really sorry, again, that we ended up here.”

    “Hopefully things can find a way to recover. Hopefully, this can bring some amount of transparency, trust, and governance to them.”

    He also said he “was shocked to see things unravel the way they did”.

    So was, and is the crypto world. The price of Bitcoin has fallen to a two-year low and many are wondering – if FTX can go down along with its talismanic leader, what could fall next?

    Source: BBC.com