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FTX collapsed due to fake trades, analysts saw more than 600 million dollars withdrawn According to Reuters


© Reuters. FILE PHOTO: The FTX logo is seen in this illustration, taken November 8, 2022. REUTERS/Dado Ruvic/Illustration//File Photo

By Summer Zhen, Vidya Ranganathan and Elizabeth Howcroft

HONG KONG/SINGAPORE/LONDON (Reuters) – Cryptocurrency exchange FTX plunged into further chaos on Saturday as the company said it had detected unauthorized transactions and analysts flagged that Millions of dollars in assets were moved off the platform under “suspicious circumstances.”

FTX filed for bankruptcy on Friday, one of the largest crypto bankruptcies ever, after traders rushed $6 billion off the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue agreement.

At least $1 billion of customer funds have disappeared from the platform, sources told Reuters on Friday. Sources say the company’s founder, Sam Bankman-Fried, transferred $10 billion in client funds to his trading firm, Alameda Research.

New issues surfaced on Saturday when FTX’s general counsel in the US, Ryne Miller, said in a Twitter post that the company’s digital assets were being moved into so-called cold storage. to minimize the damage of observing unauthorized transactions.”

Cold storage refers to cryptocurrency wallets that are not connected to the internet to protect against hackers.

Blockchain analytics firm Nansen says it has seen $659 million withdrawn from FTX International and FTX US in the past 24 hours.

A separate blockchain analytics firm Elliptic said that around $473 million in crypto was “moved out of FTX wallets under suspicious circumstances early this morning,” but it could not confirm that the The token has been stolen.

FTX’s significant downfall has seen 30-year-old Bankman-Fried, known for his shorts and t-shirts, transform from a progeny of crypto successes into character. of the industry’s highest collapse.

Bankman-Fried, who lives in the Bahamas, has also been the subject of speculation about his whereabouts. On Saturday, he told Reuters he was in the Bahamas, denying speculation on Twitter that he had flown to South America.

The fall shocked investors and prompted fresh calls to regulate the crypto-asset sector, which has seen losses pile up so far this year as cryptocurrency prices death decline.

“Things will continue to boil after the FTX crash,” said Alan Wong, chief executive officer of the Hong Kong Digital Asset Exchange.

“With an $8 billion difference between liabilities and assets, when FTX becomes insolvent, it will cause a domino effect, leading to a series of FTX-related investors going bankrupt or forced to sell assets. In an illiquid bear market, this event will result in a fresh crypto drop, as well as leveraged liquidation.”

MARKET WRONG

Since its founding in 2019, FTX has raised over $2 billion from top investors including Sequoia, SoftBank, BlackRock (NYSE:) and Temasek. In January, FTX raised $400 million from investors at a $32 billion valuation.

SoftBank and Sequoia Capital said they are marking their investment in FTX down to zero.

Cryptocurrency exchange Coinbase (NASDAQ:) Global Inc will also delete the investment its venture arm made in FTX in 2021, according to a person familiar with the matter.

It fell below $16,000 for the first time since 2020 after Binance abandoned its rescue deal on Wednesday.

On Saturday, it was trading around $16,831, down more than 75% from the all-time high of $69,000 it reached last November.

FTX’s FTT token has dropped about 91% this week. Shares of cryptocurrencies and blockchain-related companies have also fallen.

“We believe the crypto market is still too small and too silent to cause contagion in the financial markets, with a market cap of $890 billion compared to the market cap,” the Citi analysts wrote. with $41 trillion of US equity”.

“In over 4 years, FTX has raised $1.8 billion from venture capital and pension funds. This is the main way financial markets can be affected, as it can cause problems. even smaller impact on portfolio shocks in a volatile macro regime.”

In its bankruptcy petition, FTX Trading said it had assets between $10 billion and $50 billion, liabilities between $10 billion and $50 billion, and more than 100,000 creditors. John J. Ray III, restructuring expert, was appointed as CEO.

The U.S. Securities and Exchange Commission is investigating FTX.com’s handling of customer funds amid a liquidity crunch, as well as its crypto lending practices, said a source with knowledge of the matter. investigation said.

Hedge fund Galois Capital has half of its assets stuck on FTX, the Financial Times reported on Saturday, citing a letter from co-founder Kevin Zhou to investors and estimating the amount at around $100. millions of dollars.

(Graphic – Pain in crypto land: https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/lbvggrkadvq/chart.png)



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