Dark clouds. FTX latest: Fears of contagion darken the crypto sector outlook

The crypto industry braced for more contagion from the fall of Sam Bankman-Fried’s FTX empire. The US and The Bahamas are talking about bringing him to America for questioning, people familiar with the matter said. 

Bankman-Fried took to Twitter on Wednesday, telling his followers that “there was too much leverage -- more than I realised” in his business. That came a few hours after he posted that FTX US had enough money to repay customers. 

The fallout from the crisis is threatening the future of crypto lenders like BlockFi Inc. and Voyager Digital Ltd. Digital-asset markets were steady in a break from recent turmoil, with Bitcoin hovering around $17,000.

FTX is ‘Lehman Shock,’ more failures may come, bitFlyer CEO says

The meltdown at FTX is a ‘Lehman Shock’ to the industry, potentially causing more crypto firms to fail, said the chief executive officer and co-founder of major Japanese crypto exchange bitFlyer Inc.

“It’s a huge impact,” Yuzo Kano said in an interview with Shery Ahn and Haidi Stroud-Watts on Bloomberg Television at the New Economy Forum, adding that the turmoil may push other firms into bankruptcy.

‘Singapore focused on productive blockchain uses’

Asked at a conference about whether the FTX imbroglio changes the Monetary Authority of Singapore’s approach to crypto, its chief fintech officer Sopnendu Mohanty said “we stay on the course, we stay on the business-case driven approach to the space.”

The central bank is “willing to innovate” provided risks are under control, he added. Singapore, which is clamping down on retail-investor speculation in crypto, has previously said it is seeking to become a hub for productive uses of blockchain technology.

FTX Australia’s licence suspended

The Australian Securities and Investments Commission has suspended the Australian financial services licence of FTX Australia until May 15, 2023 after it was placed in voluntary administration on November 11, the regulator says in a statement.

Regulators discuss bringing SBF to US

The US and Bahamian authorities have been discussing the possibility of bringing Bankman-Fried to America for questioning, according to three people familiar with the matter.

The conversations between law-enforcement officials in the two countries have intensified in recent days as they probe his role in the implosion of cryptocurrency firm FTX. Bankman-Fried has been cooperating with Bahamian authorities, said one of the people, who like the others asked not to be identified due to the sensitivity of the matter. 

SBF meeting with regulators

Bankman Fried said he is meeting “in-person with regulators” to “do right by customers,” according to a tweet.

‘FTX has enough to repay customers’

FTX US had enough to repay all if its customers “as of post-11/7,” Bankman-Fried said in a tweet. But he acknowledged that “not everyone necessarily agrees with this.”

Crypto lender Voyager deal void

Bankrupt crypto lender Voyager Digital Ltd doesn’t plan to sell itself to FTX after the crypto exchange itself was forced into insolvency proceedings, according to a lawyer for Voyager.

FTX violated its contract to buy Voyager out of bankruptcy, according to Voyager’s main bankruptcy attorney Joshua Sussberg. FTX has agreed that Voyager can pursue other bids, but has not yet confirmed that the company is pulling out of the contract to buy the smaller crypto company, Sussberg said in court Tuesday.

PwC named liquidators

The Supreme Court of the Bahamas approved partners from PricewaterhouseCoopers, also known as PwC, as provisional liquidators to oversee the assets of crypto exchange FTX.

The Bahamas Securities Commission wrote in a statement that it “moved swiftly to use its regulatory powers” to further protect clients. 

Scaramucci sees Zhao’s sale as retaliation

SkyBridge Capital’s Anthony Scaramucci, whose company FTX owns a 30 per cent stake, accompanied Bankman-Fried on a recent fundraising trip to West Asia, he said at the Bloomberg New Economy Forum on Tuesday. During some of those meetings, Bankman-Fried appears to have made unspecified remarks about Zhao, Scaramucci said.  

“I think what happened frankly is he said something about CZ, the founder of Binance, in possibly one or two of those meetings, that got back to CZ and he got super upset about it,” Scaramucci said. He said ‘OK, we are in a divorce, we are not gonna make love,’ that was the Twitter comment. He hit him with $500 million worth of FTT tokens.”

After Zhao’s November 6 tweet announcing the sale of FTT tokens worth roughly $530 million at the time, concerns around FTX’s financial health spiralled into a panic and clients yanked some $5 billion from the platform in a day. FTX quickly unravelled, filing for bankruptcy last week. 

“FTX’s problems arose from mismanagement of their user funds and their highly leveraged business,” a Binance spokesperson said in an emailed response to questions about Scaramucci’s remarks. Binance decided to sell its holding of FTT after a November 2 CoinDesk article called into question the health of the balance sheet of Alameda Research, Bankman-Fried’s trading house, the spokesperson said. 

“CZ’s tweet came only after the community asked questions about the movement of a large amount of FTT which is transparent on the public blockchain,” the Binance spokesperson said. A representative for FTX didn’t immediately reply to a request for comment. 

Binance will submit evidence to UK lawmakers on its decision making around the sale of FTT, Daniel Trinder, the company’s vice president of government affairs in Europe, said at a hearing with the UK Parliament’s Treasury Committee on Monday. 

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