• Withdrawal freeze leads to sometimes massive failures among competitors
• Companies strive for transparency and proof of liquidity
• As a market leader, Binance wants to support the industry
After doubts about the capital reserves of the FTX group of 30-year-old star investor Sam Bankman-Fried became public, investors fled in droves and withdrew billions of dollars in capital, a sum that FTX could not cover. This also came as a surprise to many industry insiders: “The decline of FTX is breathtaking even for the crypto industry, which is characterized by excess speculation and extreme price fluctuations,” writes the dpa-AFX news agency, for example.
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Affected companies strive for transparency
Most investors have already written off their deposits in FTX, reports the Reuters news agency. The extent of the entanglements and the consequences of FTX’s bankruptcy on other companies cannot yet be estimated due to the short time available, according to Reuters. However, the news outlet has compiled some information about companies with FTX investments. After the collapse of FTX, well-known companies such as Binance, BlockFi, Coinbase, CoinShares or Galaxy Digital wrote press releases and blog posts in which they emphasize their risk management and their prudence in the investments made and try to prove transparency.
BlockFi Facing Bankruptcy: Significant Investments in Bankman Fried Companies
Troubled crypto lender BlockFi admitted extensive exposure to FTX: “We have significant exposure to FTX and its related entities, which includes obligations to Alameda, assets at FTX.com and undrawn amounts on our line of credit with FTX. US includes.” According to the Wall Street Journal, the crypto bank is heading for bankruptcy, citing insiders, while withdrawals are still on hold. Like everyone else, they found out about the situation via Twitter and are currently unable to continue operations due to some uncertainties.
Bankrupt credit institution Celsius also announced via Twitter a 3.5 million exposure to serum tokens (SRM) on FTX, as well as FTT token-only loans from bankman-fried firm Alameda Research.
The sum that hedge fund Galois Capital is said to have invested in FTX is estimated at around $100 million, according to Reuters. A letter to investors states that this is half of the assets under management. According to their own statements, the cryptocurrency exchange Kraken, the US cryptocurrency broker Genesis Trading and the US provider of digital solutions, Silvergate Capital, only have small stakes in FTX and were not significantly affected by the bankruptcy.
Less extensive exposure and cash
In a blog post on the company’s website, Coinbase is also transparent and states that it currently has “$15 million worth of deposits at FTX [zu haben]to facilitate business operations and customer trading”. As can be read in the annual financial statements, the customer funds are held 1:1, they have invested in risk management from the start and are in a “strong capital position”. In the third quarter, the balance sheet shows 5 Billions of US dollars in cash and cash equivalents.
According to its own statements, the largest European digital asset manager CoinShares is invested with 30.3 million US dollars in FTX, the sum is made up of 190 Bitcoin and 1,000 Ethereum in outstanding withdrawals, approx. 25.9 million US dollars in USD and USDC and approximately $110,000 in other assets. CoinShares CEO Jean Marie Mognetti is quoted in the press release as saying: “Given the high level of public interest in FTX’s financial position and in the interest of transparency, we have decided to disclose our current exposure to FTX. Thanks to our prudent approach to risk, we had our exposure on the FTX exchange significantly reduced in response to increased volatility and uncertainty ahead of FTX’s decision to freeze further withdrawals”.
According to its own statements, the crypto exchange Crypto.com also managed to drastically reduce its investments even before the collapse of FTX: Of the originally invested sum of one billion US dollars, less than 10 million US dollars were left at the time of the collapse been. They strive for transparency and believe that crypto exchanges should be required to publish proof of their reserves. In order to restore investor confidence, they are working with auditors to publish relevant evidence for Crypto.com, the homepage reads.
Galaxy Digital also highlighted its liquidity in the third quarter earnings statement: “With cash of $1.5 billion, including more than $1.0 billion in cash, the company remains in a strong position for organic and inorganic growth while we focus on the future,” said Mike Novogratz, founder and CEO of Galaxy Digital. Of the $76.8 million invested by Galaxy on FTX, $47.5 million was said to be “in the process of withdrawal” at the time the payout was halted.
Market leader Binance interested: Another auction of Voyager Digital
Changpeng Zhao “CZ”, CEO of crypto exchange Binance, said on your Twitter space event that he was only able to sell a small part of his $580 million FTT shares, he still holds most of them. CZ got the ball rolling in early November with his tweet that Binance wanted to sell its shares. A short-term announced agreement between Binance and FTX to rescue FTX was intended to calm tempers, but CZ dropped it shortly thereafter.
FTX was awarded the roughly $1.4 billion purchase of Voyager Digital’s assets in late September. Voyager Digital is now up for sale again; no assets are said to have been transferred to FTX.US in the meantime. According to a CoinDesk report, Binance.US is now set to bid on Voyager again after Changpeng Zhao’s company lost to FTX in the last bidding process.
Binance will also launch a crypto industry recovery fund to prop up struggling but solid businesses. “Binance doesn’t want to be the ‘white knight’ of cryptocurrency,” Binance Chief Communications Officer Patrick Hillmann told CoinDesk. “There are no Luke Skywalkers or Darth Vaders in the industry. This is a company that has the most to lose as a leader and is looking around to see where we can help prop up the industry with a black swan.”
FTX aside, avoid businesses/exchanges/projects that:
– are not profitable (musical chairs)
– survive by selling their own tokens
– give high incentives for locking your tokens
– have a large total supply, but only a small circulation supply
– involves loansstay #SAFU ?
– CZ ? Binance (@cz_binance) November 11, 2022
The Binance CEO is increasingly giving his followers advice on their crypto investments via Twitter, most recently advising his followers not to invest in projects other than FTX that only survive on the history of their own tokens, do not work profitably or involve loans.
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