Tag: Financial Technology

Crypto lender BlockFi is suing Sam Bankman-Fried over his shares in Robinhood: report

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Just hours after filing for Chapter 11 bankruptcy in New Jersey on Monday, cryptocurrency lender BlockFi filed a lawsuit against a holding company by FTX founder Sam Bankman-Fried over his shares in trading platform Robinhood, the Financial Times reported.

The suit was filed against Bankman-Fried’s vehicle Emergent Fidelity Technologies, of whom BlockFi is seeking to recover unpaid collateral.

The filing – also lodged in New Jersey – says BlockFi entered into a pledge agreement with Emergent on Nov. 9 stating that an unnamed borrower was obliged to pledge “certain shares of common stock” and has breached the agreement by failing to comply with its payment obligations.

The Financial Times reports the collateral in question is Bankman-Fried’s 7.6% stake in Robinhood which he bought earlier this year.

“Emergent has defaulted on its obligations under the pledge agreement and failed to satisfy its obligations thereunder despite written notice of default and acceleration,” the lawsuit filing says.

The lawsuit also named London-based brokerage ED&F Man Capital Markets for refusing to “transfer the collateral” to BlockFi.

“This is a highly complex matter,” a spokesperson for ED&F Man Capital Markets told MarketWatch in an emailed statement.

“We cannot comment on matters that are subject to legal proceedings but will of course comply with any direction given by the judge,” they added.

On Monday, BlockFi, who was once valued at $3 billion, filed for bankruptcy protection after becoming the latest company to be pushed over the edge from the collapse of crypto exchange FTX.

See also: BlockFi’s big creditors include an indenture trustee firm, FTX and the SEC

The lawsuit is the latest headache for Bankman-Fried, who is already the subject of a number of investigations in the U.S. and the Bahamas – where FTX was based. The downfall of FTX has triggered a chain reaction of crypto-casualties including crypto financial-services firm Genesis.

FTX collapse to be focus of Senate hearing Thursday — here’s what to watch for

BlockFi and representatives of Bankman-Fried did not immediately respond to MarketWatch’s request for comment.

See also: Bitcoin prices under pressure as cracks spread across crypto industry

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November 29, 2022
Fidelity Charitable launches NFT raffle amid crypto downturn

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NEW YORK — Fidelity Charitable is getting into NFTs, the digital images that are registered on the blockchain, despite a torrent of bad news from the adjacent world of cryptocurrencies.

The nation’s largest grantmaker is sponsoring a raffle that ends Tuesday, where participants can claim one of the NFTs, which stands for nonfungible token, and 50 will win $1,000 to donate through a donor advised fund at Fidelity.

“The reason we’re doing this is we really believe there’s a whole new generation of givers and philanthropists out there,” said Amy Pirozzolo, head of donor engagement for Fidelity Charitable. “We want to be where they are and the channels they use and the formats they use and further encourage their generosity.”

Around 16% of Americans say they invested in cryptocurrencies, according to a poll from Pew Research Center last year. The demographic most likely to invest were men between the ages of 18 and 29, with 43% reporting that they had invested.

The blockchain is the technology that underlies the trading of cryptocurrencies, but it can also record the ownership of digital items like images, videos or Tweets. Fidelity said that 50,000 different wallets, potentially representing that many individuals, have already registered to create an NFT and potentially win the money to donate.

Contributions in cryptocurrency to donor advised funds at Fidelity exploded last year, growing from the equivalent of $28 million in 2020 to $331 million in 2021, Fidelity has said.

Speaking of the NFT project, Jacob Pruitt, president of Fidelity Charitable, said, “I think it’ll be a unique way to engage with next gen investors. It’s another way that I think Fidelity is innovating and leaning into a new space.”

Donor advised funds allow donors to claim a tax credit for charitable donations, but do not require them to give those funds away within any specific timeframe. Organizations that host DAFs, like Fidelity Charitable, also handle more complex donations, which includes exchanging the assets for cash and producing receipts for donors for tax purposes.

“Many of the nonprofits either can’t take on these assets or they have to hire outside counsel or people to staff to do it,” Pirozzolo said.

One reason for the jump in cryptocurrency donations is that until recently, their value had appreciated significantly. The cryptocurrency market saw a huge boom in 2021 with the price of Bitcoin, the first cryptocurrency, rising to an all time high of around $68,000 in November last year.

But the meltdown of Terra — a stablecoin, or a type of cryptocurrency that tries to peg its value to an asset like the U.S. dollar — in May brought down a series of major cryptocurrency businesses. Then, earlier this month, one of the largest cryptocurrency exchanges, FTX and related entities, suddenly filed for bankruptcy leaving both American and international users unable to access assets they held on the exchange.

James Lawrence, co-founder and CEO of Engiven, which facilitates cryptocurrency to nonprofits, including Christian ministries, observed that many people giving cryptocurrencies are making major gifts and that often those happen in the last quarter of the year. That means it’s too early to say how the cryptocurrency market’s fluctuations may impact donations this year. He said he doesn’t see people donating cryptocurrencies as that different from other donors.

“They just have a different asset to give and they’re going to give the most appreciated asset they can,” Lawrence said.

Of the more than 1.5 million nonprofits registered with the Internal Revenue Service in the U.S., Lawrence estimated that only four or five thousand could receive cryptocurrency donations directly.

“That’s a huge market that still doesn’t,” he said. He also has observed that many giving large donations in cryptocurrency (they facilitated one donation of $10 million in cryptocurrency assets) are the same types of people who give large donations in general, and not necessarily the younger demographics that are more likely to invest in cryptocurrency.

“Many of the largest gifts we’ve processed have been from an older demographic who have a tradition of giving large gifts in multiple asset classes,” he said.

Another organization, Endaoment, also facilitates cryptocurrency donations to nonprofit organizations as well as hosting pooled funds to benefit certain types of nonprofits. Robbie Heeger, the organization’s president and CEO, said besides that fact that nonprofits may receive donations from cryptocurrency donors that they wouldn’t otherwise, cryptocurrency proponents are also eager to draw in new users.

“This is a leapfrog opportunity for nonprofit organizations to move from paper checks” to cryptocurrency Heeger said. “And the crypto space is very focused on adoption flywheels, on ways to incentivize or encourage the traditional economy to migrate into the crypto economy.”

He encouraged newcomers to the cryptocurrency space to carefully research projects they might get involved with and to look for ones that have gotten outside audits from professional auditors.

Pirozzolo argued that the Fidelity Charitable promotion using NFTs is separate from the cryptocurrency ecosystem.

“This is really about the blockchain and having a fun way to celebrate with digital art the generosity of giving,” she said.

The company is paying for the cost of creating the NFTs, which includes a “gas” fee that pays for the creation and registration of the item, and also said that it has compensated the artists who made the images.

People who claim the NFTs will need to sign up for a cryptocurrency wallet that has access to the Polygon blockchain. The Fidelity Charitable NFTs will be hosted on the platform OpenSea.

Participants will see the NFT in their wallet when they sign up, but the art itself and the winners of the $1,000 tickets won’t be revealed until Giving Tuesday, Nov, 29.

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Associated Press coverage of philanthropy and nonprofits receives support through the AP’s collaboration with The Conversation US, with funding from Lilly Endowment Inc. The AP is solely responsible for this content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.

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November 28, 2022
BlockFi seeks protection as FTX collapse rattles crypto

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Cryptocurrency lender BlockFi is filing for Chapter 11 bankruptcy protection as the fallout from the collapse of crypto exchange FTX spreads outward.

In a Monday filing for bankruptcy protection in New Jersey, where it is based, BlockFi claimed more than 100,000 creditors, with BlockFi’s liabilities ranging from $1 billion to $10 billion.

“Chapter 11 is a transparent process and we will continue to communicate with our clients to ensure they hear directly from us,” BlockFi said in a tweet.

Cryptocurrencies were in retreat Monday in what has already been a disastrous year. Bitcoin, among the most widely traded cryptocurrencies, has plunged almost 70% in 2022 to below $16,000 apiece.

BlockFi Inc., which was founded in 2017, said bankruptcy protection will allow it to stabilize the company and restructure. That restructuring will include an attempt to recover all obligations that it is owed by its counterparties, including FTX and associated corporate entities. BlockFi, which was bailed out by Sam Bankman-Fried’s FTX early last summer, said it anticipates recoveries from FTX will be delayed.

FTX filed for bankruptcy protection earlier this month. At the time, BlockFi announced on Twitter that it wasn’t able to do business as usual and was pausing client withdrawals as a result of FTX’s implosion.

“With the collapse of FTX, the BlockFi management team and board of directors immediately took action to protect clients and the company,” Mark Renzi of Berkeley Research Group, BlockFi’s financial advisor, said in a prepared statement Monday.

The implosion of FTX is still being sorted out and it is unknown how much collateral damage it could inflict.

There are already comparisons to the collapse of the storied Wall Street bank Lehman Brothers in 2008. The bank trafficked heavily in subprime mortgages that lost almost all of their recognized worth and shook the U.S. and global economy.

BlockFi has $256.9 million in cash on hand, which it expects will provide enough cushion to support some operations during the restructuring.

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November 28, 2022
US: 2 Estonians arrested in $575M cryptocurrency fraud

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SEATTLE — Police in Estonia have arrested two men accused in a $575 million cryptocurrency fraud, U.S. authorities said Monday.

An indictment unsealed in U.S. District Court in Seattle charged Estonian citizens Sergei Potapenko and Ivan Turogin, both age 37, with wire fraud and conspiracy to commit money laundering. According to the charging documents, they worked with four unnamed co-conspirators living in Estonia, Belarus and Switzerland.

Prosecutors said the suspects tricked hundreds of thousands of people from 2015 to 2019 into buying contracts for a cryptocurrency mining service called HashFlare and investing in a virtual currency bank called Polybius Bank. In reality the businesses operated as pyramid schemes, prosecutors said.

The men are accused of using shell companies to launder the fraud proceeds and to purchase real estate and luxury cars. The pair are in custody in Estonia pending extradition to the U.S., the Justice Department said.

“These defendants capitalized on both the allure of cryptocurrency, and the mystery surrounding cryptocurrency mining, to commit an enormous Ponzi scheme,” Seattle U.S. Attorney Nick Brown said in a news release.

U.S. and Estonian authorities are working to confiscate properties and bank accounts maintained by the defendants, Brown said.

Court records in Seattle did not indicate whether the men had obtained attorneys. Some of the victims were in Western Washington state, authorities said.

The cryptocurrency industry has seen a fair share of volatility and turmoil this year, including a sharp decline in price for bitcoin and other digital assets. Earlier this month, the third-largest cryptocurrency exchange, FTX, collapsed after experiencing the crypto equivalent of a bank run. For some, the events are reminiscent of the failures of Wall Street firms during the 2008 financial crisis, particularly now that supposedly healthy firms like FTX are failing.

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This story has been updated to correct that the four unnamed co-conspirators in the case have not been charged.

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November 22, 2022
They Lived Together, Worked Together and Lost Billions Together: Inside Sam Bankman-Fried’s Doomed FTX Empire

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NASSAU, Bahamas—Sam Bankman-Fried’s $32 billion crypto-trading empire collapsed in an incandescent bankruptcy last week, prompting irate customers, crypto acolytes and Silicon Valley bigwigs to ask how something that seemed so promising could have imploded so fast.

The emerging picture suggests FTX wasn’t simply felled by a rival, or undone by a bad trade or the relentless fall this year in the value of cryptocurrencies. Instead, it had long been a chaotic mess. From its earliest days, the firm was an unruly agglomeration of corporate entities, customer assets and Mr. Bankman-Fried himself, according to court papers, company balance sheets shown to bankers and interviews with employees and investors. No one could say exactly what belonged to whom. Prosecutors are now investigating its collapse.

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November 18, 2022
Supposed $477 million FTX ‘hack’ was actually a Bahamian government asset seizure

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Remember that hack of nearly half a billion dollars in cryptocurrency from bankrupt FTX last weekend? Turns out it was actually a government asset seizure.

The Securities Commission of the Bahamas has now acknowledged that it was behind the removal of $477 million in crypto assets from the bankrupt exchange on Nov. 12.

“The Securities Commission of the Bahamas, in the exercise of its powers as regulator acting under the authority of an order made by the Supreme Court of the Bahamas, took the action of directing the transfer of all the digital assets of FTX Digital Markets Ltd. to a digital wallet controlled by the commission, for safekeeping,” the agency said in a statement.

The transfer occurred the day after FTX had filed for Chapter 11 bankruptcy protection in Delaware and immediately sparked concerns of a major hack. The company announced that day that “unauthorized access to certain assets has occurred” and that they were coordinating with law enforcement on the matter.”

On Thursday, the U.S.-based bankruptcy administrators led by John Ray, III, who have taken control of FTX, said in court filings that they had “credible evidence” that officials in the Bahamas had directed FTX founder Sam Bankman-Fried to access FTX’s systems after the Chapter 11 filing, “for the purpose of obtaining digital assets of the debtors.”

The seizure of assets came amid an emerging fight for control over the direction of the bankruptcy proceeding, with officials in the Bahamas filing a separate Chapter 15 bankruptcy petition in federal court in New York on Nov. 15.

That filing was on behalf of FTX Digital Markets Ltd., a subsidiary that managed significant aspects of the company’s operations from its headquarters in the Caribbean island nation.

A Chapter 15 filing is used typically in cases involving companies with debtors in multiple countries.

In its statement, the Bahamian Securities Commission said it believed FTX Digital Markets was not part of the Delaware bankruptcy proceeding.

The administrators of the Delaware bankruptcy have asked the judge in their case to combine the cases, saying that it was duplicative and confusing to keep them separate. The judge scheduled a hearing on the matter for Monday.

The administrators of the Delaware case have accused Bankman-Fried of attempting to undermine their efforts to sort out the mess he left behind by pushing the second bankruptcy case brought by Bahamian officials.

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November 18, 2022
Visa CEO Al Kelly to step down from that role in February

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Visa Inc. Chief Executive Al Kelly plans to step down from that role in February, to be replaced by Ryan McInerney, the company’s current president and a veteran of the payments giant for nearly a decade.

Kelly, who’s been with Visa
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in the CEO role since late 2016, said the timing of the change was right for him in a number of ways, as he’s soon to turn 65 and has a “lot of energy” to move into the next chapter of his life. He plans to embrace both his role as a grandfather and to continue to serve Visa through an executive chairman position on the company’s board of directors.

After working with McInerney for the past six years, Kelly sees him as a worthy successor.

“He is ready to be the CEO of this company,” Kelly told MarketWatch. “He’s a phenomenal executive. He has the ability to be extraordinarily strategic and he’s also an incredibly thoughtful, get-in-the-weeds problem solver.”

Under Kelly’s tenure thus far as CEO, Visa’s market value has increased to $437 billion from $181 billion, while its stock gained 173%.

He is nearing his 65th birthday next year, as is Visa, based on a popular understanding of the company’s origins.

Visa framed the transition as reflective of “the board’s very well-established and thoughtful succession plan,” according to comments from John Lundgren, the board’s lead independent director, in a press release.

“We see this announcement as part of a planned succession and do not think it will be a surprise to investors,” RBC Capital Markets analyst Daniel Perlin wrote in a note to clients.

McInerney has been responsible for Visa’s global businesses in his role as president, looking over the company’s product team and merchant team, among others. He’s been with Visa for almost a decade and sees “huge opportunity over the next 10 years” in areas like business-to-business transactions, government-to-consumer disbursements, and other payment functions that are newer to Visa.

In both emerging and developed markets, he told MarketWatch he sees the potential for an “amazing digitalization of what we call ‘new payment flows.’”

McInerney views Visa founder Dee Hock, who died over the summer at 93, as an “inspiration. Hock was “one of the original disruptors” who “saw things so far in the future that people couldn’t really imagine,” he said.

See also: He saved credit cards, and now he’s inspiring crypto enthusiasts

Kelly, who is staying on the company’s board, said he “will not be involved in the day-to-day running of the company,” but that he will be there to serve as a helper and adviser “for as long as it’s valuable to Ryan and his executive team.”

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November 17, 2022
‘This situation is unprecedented’: 10 crazy things detailed in FTX’s bankruptcy filing

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On Thursday, John Ray, III, the new CEO of FTX, dropped a long-awaited declaration in U.S. bankruptcy court, giving a sober assessment of the collapse of Sam Bankman-Fried’s crypto empire. The bankruptcy-court filing followed a whirlwind of events, including the publication of explosive texts Bankman-Fried sent to a Vox reporter earlier this week.

Ray set the tone for what he has found since FTX filed for bankruptcy protection last week, citing his 40 years of experience in the legal and restructuring business, including a role as chief restructuring officer and CEO of Enron, one of the biggest corporate collapses ever.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray wrote. “This situation is unprecedented.”

Here are 10 revelations that Ray made in federal bankruptcy court on Thursday about Bankman-Fried and the FTX debacle he created.

1. Most of FTX’s digital assets have not been secured

As of Thursday, Ray made clear that while he now controls the various FTX trading and exchange platforms and Bankman-Fried’s crypto hedge fund Alameda Research, he’d “located and secured only a fraction of the digital assets” he hoped to recover. In fact, Ray said only some $740 million of cryptocurrency had been secured in new cold wallets. Ray cited at least $372 million of unauthorized transfers that had taken place on the day FTX and Alameda filed for bankruptcy last week, and the “dilutive ‘minting’ of approximately $300 million in FTT tokens by an unauthorized source” in the days after the filing. FTT tokens were created by FTX to facilitate trading on its exchange and made up a big chunk of Alameda’s assets.

2. Nobody knows who the biggest customer creditors are of FTX.

FTX.com and FTX.US had customers around the world who used its cryptocurrency exchanges and platforms. But Ray said he was unable to create a list of FTX’s top 50 creditors that included customers.

3. Alameda Research loaned $4.1 billion out to entities, including Bankman-Fried and his closest partners.

There have been reports that FTX lent out billions of dollars in customer funds to Bankman-Fried’s hedge fund, Alameda Research. But on Thursday, Ray revealed that Alameda had made $4.1 billion of related-party loans that remained outstanding at the end of September. This included a $1 billion loan Alameda made to Bankman-Fried himself, a $543 million loan made to FTX cofounder Nishad Singh, and $55 million borrowed by FTX co-CEO Ryan Salame.

4. FTX corporate funds were used to buy personal homes

Bankman-Fried lived in a luxury resort in the Bahamas, where FTX was also based. There, bankruptcy filings say, corporate funds of FTX “were used to purchase homes and other personal items for employees and advisors.” Ray said in his filing that there is no documentation for the transactions and loans associated with these real estate purchases, which were recorded in the personal name of employees and advisors.

5. Personalized emojis to approve disbursements

To demonstrate the lack of disbursement and appropriate business controls at FTX, Ray pointed out that FTX employees “submitted payment requests through an on-line ‘chat’ platform where a disparate group of supervisors approved disbursements by responding with personalized emojis.”

6. Alameda Research was one of the world’s biggest hedge funds

According to the bankruptcy filing, Alameda’s balance sheet showed $13.46 billion in total assets as of the end of September. That’s roughly equivalent to the assets managed by famous billionaire hedge fund traders like Bill Ackman, Paul Tudor Jones and Jeffrey Talpins.

7. Audit opinions from the metaverse

Bankman-Fried secured audit opinions for the international FTX trading platform part of his business from Prager Metis, a firm that Ray had never heard of before. Ray said he went to the firm’s website to learn more about it and discovered that Prager Metis described itself as the“first-ever CPA firm to officially open its Metaverse headquarters in the metaverse platform Decentraland.”

8. Alameda had a secret exemption on FTX.com

Ray’s filing on Thursday indicated that Bankman-Fried’s Alameda hedge fund might have had a trading edge on the FTX.com trading platform. According to the filing, Alameda had a “secret exemption” from “certain aspects of FTX.com’s auto-liquidation protocol.”

9. Customer liabilities are not reflected in FTX financial statements

Ray expects that the FTX.US exchange and trading platform, which serviced American customers, will have “significant liabilities arising from crypto assets deposited by customers through the FTX US platform.” He believes the FTX exchange that was used by FTX clients outside the U.S. could also have significant client liabilities. But none of these liabilities are reflected in the financial statements that were prepared while Bankman-Fried ran FTX, Ray said.

10. Ray has no confidence in any FTX balance sheet

Time and again in the filing, Ray offers the same disclaimer after detailing FTX-related financial statements. He notes that many of the balance sheets at FTX and Alameda are unaudited, and that because they were produced while Bankman-Fried ran and controlled the company, “I do not have confidence in it.”

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November 17, 2022
Size, scope of FTX failure gets clearer as users fear worst

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NEW YORK — Just days after cryptocurrency’s third-largest exchange collapsed, the public is starting to get an idea of how messy FTX’s bankruptcy case could be. Other crypto firms are failing as a result of FTX’s unraveling, events reminiscent of the domino-like meltdowns of the 2008 financial crisis.

Users remained frustratingly in the dark Tuesday about when they might get their funds back, if at all, directing much of their anger toward FTX’s founder and CEO, Sam Bankman-Fried.

In a court filing, FTX’s lawyers said there were already more than 100,000 claims against the company and estimated that figure could grow to more than 1 million, most of them customers, once the case is complete. The court ordered FTX to provide at least a list of the company’s 50 biggest creditors by Nov. 18.

The lawyers said the company is in contact with the Department of Justice, the Securities and Exchange Commission, the Commodity Futures Trading Commission as well as dozens of other state, federal and international authorities, confirming earlier reports that the U.S. government is probing the possibility that Bankman-Fried and his lieutenants violated U.S. securities law.

FTX filed for bankruptcy protection Friday, sending tsunami-like waves through the cryptocurrency industry, which has seen a fair share of volatility and turmoil this year, including a sharp decline in price for bitcoin and other digital assets. For some, the events are reminiscent of the failures of Wall Street firms during the 2008 financial crisis, particularly now that supposedly healthy firms like FTX are failing.

The Wall Street Journal reported that BlockFi, which had halted withdrawals over the weekend following FTX’s bankruptcy, is now actively considering bankruptcy and plans to lay off its staff. In previous public comments, BlockFi’s management made it clear that FTX’s failure had pushed the company towards being out of business. FTX had provided financial aid to BlockFi this summer, including a $400 million credit facility backed by its own balance sheet.

“We are shocked and dismayed by the news regarding FTX and Alameda,” BlockFi said Saturday, referring to FTX and Bankman-Fried’s hedge fund Alameda Research. “Given the lack of clarity on the status of FTX.com, FTX US and Alameda, we are not able to operate business as usual.”

Another crypto firm, crypto lending firm SALT Blockchain, also appeared to be on the verge of failure. The company Bnk to the Future pulled out of its agreement to buy SALT, citing its exposure to FTX. In tweets, SALT’s CEO Shawn Oren said he is “fully committed still to recover from the damages as victims.”

In a sign of how fearful investors are that the cascading effects could do long-term damage, cryptocurrency exchange Binance proposed the creation of a rescue fund that would save otherwise healthy crypto companies from failure. Binance’s founder and CEO Changpeng Zhao effectively laid out the possibility of a crypto-like central bank or deposit-insurance pool to be a lender of last resort to keep healthy firms from failing.

Meanwhile, FTX’s users bemoaned their losses in Telegram chat groups for traders who used the FTX exchange, writing that they’d lost access to amounts ranging from thousands to millions of dollars.

Some pleaded for information. Others speculated on the likelihood of getting back their funds, while others counseled that they should accept that their investments were gone.

Moderators for one group posted intermittently, saying things like, “No death threats please.” They wrote that they had no information about the whereabouts of Bankman-Fried or what would happen to his companies.

“No news,” posted one moderator.

Many of FTX’s users pointed to Bankman-Fried as responsible, making puns on his name like “Sam Bankrun-Fried” and calling for him to be prosecuted.

On Tuesday, a support account for FTX US was responding on Twitter to posts from people asking about their funds and directing them to send messages to the Twitter account to get assistance.

Mohit Sorout, 30, said he has lost access to 95% of the value of his cryptocurrency holdings when FTX halted its services last week, posting on Twitter, “The pain is f(asterisk)(asterisk)(asterisk)ing real.”

An electrical engineer based between New Delhi and Dubai, he started trading in 2017 and quit his job in 2018 to work full time trading cryptocurrencies. Along with a business partner, he built a custom algorithm, and grew an investment of a couple thousand dollars into a sum many times that size, though he didn’t want to disclose the value of his holdings when he lost access to them.

It’s not clear what will happen to the funds of retail investors like Sorout, which are locked within the FTX ecosystem. His requests to withdraw the funds were not honored last week and now he can’t even log onto the exchange, he said on Monday.

Sorout didn’t intend to keep all of his investments on a single platform, he said, but the tools that FTX had built for traders like himself were very effective and his algorithm worked well there. He also trusted Bankman-Fried in part because of his high profile.

“The problem was the founder, who is donating eight figures in presidential campaigns, he’s meeting with the top bureaucrats, he is sponsoring chess tournaments, he’s out there sponsoring stadiums,” Sorout said. “You don’t really expect such a huge business, especially the CEO of that business, to defraud its customers, you know?”

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November 15, 2022
Fed’s top financial regulator urges ‘guardrails’ for crypto

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WASHINGTON — The top U.S. banking regulator at the Federal Reserve is urging Congress to pass legislation that would impose regulation on crypto currencies in the wake of the swift collapse last week of FTX, a leading crypto exchange.

Michael Barr, the Fed’s vice chair for supervision, said in prepared testimony released Monday that “recent events in crypto … have highlighted the risks to investors and consumers associated with new and novel asset classes and activities when not accompanied by strong guardrails.”

Barr, who took office in July, is scheduled to testify before Congress Tuesday for the first time as vice chair. He did not refer specifically to FTX in his written remarks.

Yet his appearance comes after FTX, the third-largest crypto currency exchange, formerly led by Sam Bankman-Fried, filed for bankruptcy Friday. The fall of FTX has rippled throughout the crypto world, with lender BlockFi pausing customer withdrawals.

Barr said “some financial innovations offer opportunities, but as we have recently seen, many innovations also carry risks.” Those include runs on deposits, collapsing asset values, misuse of customer funds, fraud, theft, manipulation, and money laundering, he said.

“These risks, if not well controlled, can harm retail investors and cut against the goals of a safe and fair financial system,” Barr said.

The collapse of FTX occurred outside the banking system, Barr noted, a focus of his oversight.

“But recent events remind us of the potential for systemic risk if interlinkages develop between the crypto system that exists today and the traditional financial system,” he said.

Regarding the banking system overall, most large banks have healthy levels of cash reserves, Barr said, beyond even what is required by regulation.

But with the economy slowing as the Fed rapidly lifts interest rates, banks may come under more stress, he said.

The “economic outlook has weakened,” increasing uncertainty, Barr said. “A weaker economy could put stress on households and businesses and, thus, on the banking system as a whole.”

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November 14, 2022
‘What. H.A.P.P.E.N….’ — Sam Bankman-Fried’s latest slow roll of tweets spark scorn as well as concern

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The latest message from former FTX chief executive Sam Bankman-Fried left onlookers puzzled and alarmed after the swift decline into bankruptcy for the cryptocurrency exchange he founded.

In successive tweets, Bankman-Fried’s twitter account merely stated, “What,” followed by capital letters H.A.P.P.E.N., unfurled slowly over the span of about 19 hours.

Bankman-Fried has been an active tweeter throughout FTX’s demise, earlier having written that he was “shocked to see things unravel the way they did.”

Twitter and Tesla
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CEO Elon Musk, who’s also having some difficulties, tweeted with fire emojis to an attempt at a translation of the cryptic tweet.

Musk also tweeted his amusement at the claim that Bankman-Fried played a “League of Legends” game — the same game the executive infamously was playing when the venture-capital firm Sequoia invested in FTX. Court filings from Musk’s failed attempt to get out of his Twitter purchase show that he doubted that Bankman-Fried ever had $3 billion liquid to co-invest in Twitter.

While the broader social-media sentiment was a wish for Bankman-Fried to be jailed, there also was concern for his health.

FTX has filed for Chapter 11 bankruptcy protection, and over the weekend there also seems to have been a hack of customer funds. The securities regulator in FTX’s headquarters of the Bahamas meanwhile said it had not requested the prioritization for withdrawals of funds for Bahamian clients.

Reuters reported the allegation Bankman-Fried had a “back door” that allowed him to mask the transfer of customer funds to his Alameda hedge fund, which Bankman-Fried told the news agency was just “confusing internal labeling.”

The former FTX CEO couldn’t be reached for comment.

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November 14, 2022
Sam Bankman-Fried’s downfall sends shockwaves through crypto

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NEW YORK — Sam Bankman-Fried received numerous plaudits as he rapidly achieved superstar status as the head of cryptocurrency exchange FTX: the savior of crypto, the newest force in Democratic politics and potentially the world’s first trillionaire.

Now the comments about the 30-year-old Bankman-Fried range from bemused to hostile after FTX filed for bankruptcy protection Friday, leaving his investors and customers feeling duped and many others in the crypto world fearing the repercussions. Bankman-Fried himself could face civil or criminal charges.

“I’ve known him for a number of years and what just happened is just shocking,” said Jeremy Allaire, the co-founder and CEO of cryptocurrency company Circle.

Under Bankman-Fried, FTX quickly grew to be the third-largest exchange by volume. The stunning collapse of this nascent empire has sent tsunami-like waves through the cryptocurrency industry, which has seen a fair share of volatility and turmoil this year, including a sharp decline in price for bitcoin and other digital assets. For some, the events are reminiscent of the domino-like failures of Wall Street firms during the 2008 financial crisis, particularly now that supposedly healthy firms like FTX are failing.

One venture capital fund wrote down investments in FTX worth over $200 million. The cryptocurrency lender BlockFi paused client withdrawals Friday after FTX sought bankruptcy protection. The Singapore-based exchange Crypto.com saw withdrawals increase this weekend for internal reasons but some of the action could be attributed to raw nerves from FTX.

“Sam what have you done?,” tweeted Sean Ryan Evans, host of the cryptocurrency podcast Bankless, after the bankruptcy filing.

Bankman-Fried and his company are under investigation by the Department of Justice and the Securities and Exchange Commission. The investigations likely center on the possibility that the firm may have used customers’ deposits to fund bets at Bankman-Fried’s hedge fund, Alameda Research, a violation of U.S. securities law.

“This is the direct result of a rogue actor breaking every single basic rule of fiscal responsibility,” said Patrick Hillman, chief strategy officer at Binance, FTX’s biggest competitor. Early last week Binance appeared ready to step in to bail out FTX, but backed away after a review of FTX’s books.

The ultimate impact of FTX’s bankruptcy is uncertain, but its failure will likely result in the destruction of billions of dollars of wealth and even more skepticism for cryptocurrencies at a time when the industry could use a vote of confidence.

“I care because it’s retail investors who suffer the most, and because too many people still wrongly associate bitcoin with the scammy ‘crypto’ space,” said Cory Klippsten, CEO of Swan Bitcoin, who for months raised concerns about FTX’s business model. Klippsten is publicly enthusiastic about bitcoin but has long had deep skepticism about other parts of the crypto universe.

Bankman-Fried founded FTX in 2019, and it grew rapidly — it was recently valued at $32 billion. The son of Stanford University professors, who was known to play the video game “League of Legends” during meetings, Bankman-Fried attracted investments from the highest echelons of Silicon Valley.

Sequoia Capital, which over the decades invested in Apple, Cisco, Google, Airbnb and YouTube, described their meeting with Bankman-Fried as likely “talking to the world’s first trillionaire.” Several of Sequoia’s partners became enthusiastic about Bankman-Fried following a Zoom meeting in 2021. After several more meetings, Sequoia decided to invest in the company.

“I don’t know how I know, I just do. SBF is a winner,” wrote Adam Fisher, a business journalist who wrote a profile of Bankman-Fried for the firm, referring to Bankman-Fried by his popular online moniker. The article, published in late September, was removed from Sequoia’s website.

Sequoia has written down its $213 million in investments to zero. A pension fund in Ontario, Canada wrote down its investment to zero as well.

In a terse statement, the Ontario Teachers’ Pension Fund said, “Naturally, not all of the investments in this early-stage asset class perform to expectations.”

But up until last week, Bankman-Fried was seen as a white knight for the industry. Whenever the crypto industry had one of its crises, Bankman-Fried was the person likely to fly in with a rescue plan. When online trading platform Robinhood was in financial straits earlier this year — collateral damage from the decline in stock and crypto prices — Bankman-Fried jumped in to buy a stake in the company as a sign of support.

When Bankman-Fried bought up the assets of bankrupt crypto firm Voyager Digital for $1.4 billion this summer, it brought a sense of relief to Voyager account holders, whose assets has been frozen since its own failure. That rescue is now in question.

FTX’s failure started after the cryptocurrency news outlet CoinDesk published a story, based on a leaked balance sheet from Alameda Research. The story found that the relationship between FTX and Alameda Research was deeper and more intertwined than previously known, including that FTX was lending high quantities of its own token FTT to Alameda to help build up cash. It sparked mass withdrawals from FTX, causing the crypto firm to experience a very old financial problem: a bank run.

“FTX created a worthless token out of thin air and used it to make its balance sheet appear more robust than it really was,” Klippsten said.

As king of crypto, Bankman-Fried influence was starting to pour into political and popular culture. FTX bought prominent sports sponsorships with Formula One Racing and bought the naming rights to an arena in Miami, and ran Super Bowl ads featuring “Seinfeld” creator Larry David. He pledged to donate $1 billion toward Democrats this election cycle — his actual donations were in the tens of millions — and prominent politicians like Bill Clinton were invited to speak at FTX conferences. Football star Tom Brady invested in FTX, as did his supermodel soon-to-be-ex-wife Gisele Bündchen.

Bankman-Fried had been the subject of some criticism before FTX collapsed. While he largely operated FTX out of U.S. jurisdiction from his headquarters in The Bahamas, Bankman-Fried was increasingly vocal about the need for more regulation of the cryptocurrency industry. Many supporters of crypto oppose government oversight. Now, FTX’s collapse may have helped make the case for stricter regulation.

One of those critics was Binance founder and CEO Changpeng Zhao. The feud between the two billionaires spilled out onto Twitter, where Zhao and Bankman-Fried collectively commanded millions of followers. Zhao helped kickstart the withdrawals that doomed FTX when he said Binance would sell its holdings in FTX’s crypto token FTT.

“What a s(asterisk)(asterisk)t show … and it’s going to be crypto’s fault (instead of one guys’s fault),” Zhao wrote on Twitter on Saturday.

————

Reporters Michael Balsamo in Washington and Cathy Bussewitz in New York contributed.

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For more AP coverage of cryptocurrency, visit: https://apnews.com/hub/cryptocurrency

———

This story has been corrected to say that Adam Fisher is a business journalist who freelanced for Sequoia Capital. A previous version of the story identified Fisher as an employee of Sequoia.

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November 14, 2022
FTX bankruptcy also endangers founder’s philanthropic gifts

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NEW YORK — The rapid collapse of cryptocurrency exchange FTX into bankruptcy last week has also shaken the world of philanthropy, due to the donations and influence of FTX founder Sam Bankman-Fried in the “effective altruism” movement.

The FTX Foundation — and other related nonprofits mostly funded by Bankman-Fried and other top FTX executives – says it has donated $190 million to numerous causes. Earlier this year, the foundation’s Future Fund announced plans to donate an additional $100 million, with hopes of donating up to $1 billion in 2022. Because of the bankruptcy, that won’t be happening now.

And donations to numerous nonprofits, even those that have already received money from groups related to Bankman-Fried, are now in doubt.

FTX, the hedge fund Alameda Research, and dozens of other affiliated companies sought bankruptcy protection in Delaware Friday after the exchange experienced the crypto equivalent of a bank run. Customers tried to remove billions of dollars from the exchange after becoming concerned about whether FTX had sufficient capital.

Bankman-Fried has resigned from the company. His net worth, estimated earlier this year at $24 billion, has all but evaporated, according to Forbes and Bloomberg, which closely track the net worth of the world’s richest people.

On Thursday night, FTX Future Fund’s leadership team resigned, warning grantees that they were unlikely to pay out promised funds.

“We are devastated to say that it looks likely that there are many committed grants that the Future Fund will be unable to honor,” the team wrote in a joint post in the Effective Altruism Forum. “We are so sorry that it has come to this.”

ProPublica, the investigative journalism nonprofit, said it has been told by Building a Stronger Future, a foundation funded by Bankman-Fried, that the remaining two-thirds of its $5 million grant to report on pandemic preparedness and biothreats is now on hold.

ProPublica received one-third of the grant in February and expected one-third annually until 2024. The nonprofit said Building a Stronger Future is assessing its finances and that it was talking to other funders about taking on some of its grant portfolio.

“Regardless of what happens with the remainder of the grant, we are deeply committed to this important work and the team we have assembled to pursue it,” the nonprofit said in a statement. “We will use other resources to make sure that work continues.”

Bankman-Fried, 30, is the best-known proponent of the “effective altruism” social movement which believes in prioritizing donations to projects that will have the largest impact on the most number of people. Dustin Moskovitz, co-founder of Facebook and current Asana CEO and co-founder, and his wife Cari Tuna, are also major funders and backers of the movement, which also emphasizes that the lives of all people should be weighted equally, regardless of where they live now or if they will inhabit the earth generations in the future.

“I wanted to get rich, not because I like money but because I wanted to give that money to charity,” Bankman-Fried told an interviewer in a YouTube video called “ The Most Generous Billionaire,” published in January last year.

His ability to promote himself and FTX gave the exchange a higher profile than larger companies. FTX purchase the naming rights to the Miami Heat’s home arena last year, though Miami-Dade County decided Friday to terminate its relationship with the company and rename the arena. It purchased a buzzed-about ad during this year’s Super Bowl.

Bankman-Fried did set up a philanthropic infrastructure through his exchange, FTX, which promised that 1% of its crypto exchange fees would be donated to charities. It also matched user donations made through its platform up to $10,000 a day. In total, the company said more than $24 million was donated through user fees, donations and its matching program before it suspended its services.

Some “effective altruism” proponents advance the idea that making a lot of money is ethical as long as your goal is ultimately to give it away — sometimes shortened to “earning to give.” Bankman-Fried believed in this, signing The Giving Pledge in June as a promise that he would give away the majority of his wealth.

However, some now blame Bankman-Fried’s “effective altruism” mindset for FTX’s troubles.

“Either (‘effective altruism’) encouraged Sam’s unethical behavior, or provided a convenient rationalization for such actions,” tweeted Moskovitz, who has also signed The Giving Pledge. “Either is bad.”

William MacAskill, a philosophy professor at Oxford University and a co-founder of the “effective altruism” movement, condemned Bankman-Fried for allegedly misusing customer funds.

“Sam and FTX had a lot of goodwill,” MacAskill, who was also an unpaid advisor to the FTX Future Fund, wrote in a thread on Twitter. “And some of that goodwill was the result of association with ideas I have spent my career promoting. If that goodwill laundered fraud, I am ashamed.”

MacAskill’s book, “What We Owe The Future,” prompted a wave of media coverage of the “effective altruism” movement this summer.

Requests for comment were sent to the largest grantees listed on the FTX Future Fund’s website, including other “effective altruism” advocates like the Long-Term Future Fund and the Centre for Effective Altruism and Longview.

In an interview with The Associated Press in May, Nick Beckstead, the CEO of FTX Foundation until he resigned Thursday, said there were about five people working at the foundation and that they were still working out how the various philanthropic projects started by Bankman-Fried would be structured.

“It’s a bit shoestring,” he said.

The community grew out of the work of philosophers at Oxford, including MacAskill, and debates of the merits of approaches and proposals on forums reflect the high-flying thinking of its origins.

Beckstead acknowledged the community can be “strange and intense,” but also that its emphasis on quantifying impact helps decide where to direct donations. Beckstead did not immediately respond to a request for comment.

“What is the cost per life saved or what is the cost per quality adjusted life year from this kind of activity?,” he previously said were some of the questions he likes to try to answer, drawing on input from subject matter experts.

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Associated Press coverage of philanthropy and nonprofits receives support through the AP’s collaboration with The Conversation US, with funding from Lilly Endowment Inc. The AP is solely responsible for this content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.

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November 14, 2022
EXPLAINER: What’s happening at bankrupt crypto exchange FTX?

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The imploding cryptocurrency trading firm FTX is now short billions of dollars after experiencing the crypto equivalent of a bank run.

The exchange, formerly one of the world’s largest, sought bankruptcy protection last week, and its CEO and founder resigned. Hours later, the trading firm said there had been “unauthorized access” and that funds had disappeared. Analysts say hundreds of millions of dollars may have vanished.

The unraveling of the once-giant exchange is sending shockwaves through the industry. Here’s a look at the company’s collapse so far:

WHY DID FTX GO BANKRUPT?

Customers fled the exchange over fears about whether FTX had sufficient capital, and it agreed to sell itself to rival crypto exchange Binance. But the deal fell through pending Binance’s due diligence on FTX’s balance sheet.

FTX had valued its assets between $10 billion to $50 billion, and listed more than 130 affiliated companies around the world, according to its bankruptcy filing.

FTX and dozens of affiliated companies — including CEO Sam Bankman-Fried’s hedge fund, Alameda Research — filed the bankruptcy petition in Delaware on Friday.

This week’s developments marked a shocking turn of events for Bankman-Fried, who was hailed as somewhat of a savior earlier this year when he helped shore up a number of cryptocurrency companies that ran into financial trouble. He was recently estimated to be worth $23 billion and has been a prominent political donor to Democrats.

WAS IT HACKED, TOO?

FTX confirmed Saturday there had been unauthorized access to its accounts, hours after the company filed for Chapter 11 bankruptcy protection.

A debate formed on social media about whether the exchange was hacked or a company insider had stolen funds — a possibility that cryptocurrency analysts couldn’t rule out.

Exactly how much money is involved is unclear, but analytics firm Elliptic estimated Saturday that $477 million was missing from the exchange. FTX’s new CEO John Ray III said it was switching off the ability to trade or withdraw funds and taking steps to secure customers’ assets.

IS FTX UNDER INVESTIGATION?

The Royal Bahamas Police Force said Sunday it is investigating FTX, adding to the company’s woes. The police force said in a statement Sunday it was working with Bahamas securities regulators to “investigate if any criminal misconduct occurred” involving the exchange, which had moved its headquarters to the Caribbean country last year.

IS ANYONE ELSE INVESTIGATING?

Even before the bankruptcy filing and missing funds, the U.S. Department of Justice and the Securities and Exchange Commission began examining FTX to determine whether any criminal activity or securities offenses were committed, according to a person familiar with matter who spoke to The Associated Press last week on condition of anonymity because they could not discuss details of the investigations publicly.

WHAT ARE THE REPERCUSSIONS?

Companies that backed FTX are writing down investments, and the prices of bitcoin and other digital currencies have been falling. Politicians and regulators are calling for stricter oversight of the unwieldy industry. FTX said Saturday that it was moving as many digital assets as can be identified to a new “cold wallet custodian,” which is essentially a way of storing assets offline without allowing remote control.

FTX had also entered into a number of sports-related deals, some of which are crumbling. The NBA’s Miami Heat and Miami-Dade County decided Friday to terminate their relationship with FTX, and will rename the team’s arena. Earlier Friday, Mercedes said it would immediately remove FTX logos from its Formula One cars.

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November 13, 2022
Funds vanish at bankrupt crypto exchange FTX; probe underway

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NEW YORK — Collapsed cryptocurrency trading firm FTX confirmed there was “unauthorized access” to its accounts, hours after the company filed for Chapter 11 bankruptcy protection Friday.

The embattled company’s new CEO John Ray III said Saturday that FTX is switching off the ability to trade or withdraw funds and taking steps to secure customers’ assets, according to a tweet by FTX’s general counsel Ryne Miller. FTX is also coordinating with law enforcement and regulators, the company said.

Exactly how much money is involved is unclear, but analytics firm Elliptic estimated Saturday that $477 million was missing from the exchange. Another $186 million was moved out of FTX’s accounts, but that may have been FTX moving assets to storage, said Elliptic’s co-founder and chief scientist Tom Robinson.

A debate formed on social media about whether the exchange was hacked or a company insider had stolen funds, a possibility that cryptocurrency analysts couldn’t rule out.

Until recently, FTX was one of the world’s largest cryptocurrency exchanges. It was already short billions of dollars when it sought bankruptcy protection Friday and its former CEO and founder, Sam Bankman-Fried, resigned.

The company had valued its assets between $10 billion to $50 billion, and listed more than 130 affiliated companies around the world, according to its bankruptcy filing.

The unraveling of the once-giant exchange is sending shockwaves through the industry, with companies that backed FTX writing down investments and the prices of bitcoin and other digital currencies falling. Politicians and regulators are calling for stricter oversight of the unwieldy industry. Experts say the saga is still unfolding.

“We’ll have to wait and see what the fallout is, but I think we are going to see more dominoes falling and an awful lot of people stand to lose their money and their savings,” said Frances Coppola, an independent financial and economic commentator. “And that is just tragic, really.”

The timing and the extent of access that the assumed hacker appeared to achieve, siphoning money from multiple parts of the company, led Coppola and other analysts to theorize that it could have been an inside job.

FTX said Saturday that it’s moving as many digital assets as can be identified to a new “cold wallet custodian,” which is essentially a way of storing assets offline without allowing remote control.

“It does look as if the liquidators didn’t act fast enough to stop some kind of siphoning off of funds from FTX after it filed for bankruptcy, and that’s bad, but it just shows how complex this thing is,” Coppola said.

Initially, some people were hoping that perhaps all the missing funds were liquidators or bankruptcy administrators trying to move assets to a more secure spot. But it would be unusual for that to happen on a Friday night, said Molly White, cryptocurrency researcher and fellow with the Library Innovation Lab at Harvard University.

“It looked very different from what a liquidator might do if they were trying to secure the funds,” she said.

White also said there are signs of possible insider involvement. “It seems unlikely that someone who is not an insider could have pulled off such a massive hack with so much access to FTX systems.”

The collapse of FTX highlights the need for cryptocurrency to be regulated more like traditional finance, Coppola said.

“Cyrpto isn’t in the very early stages anymore,” she said. “We’ve got ordinary people putting their life savings into it.”

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November 12, 2022
Funds vanish at bankrupt crypto exchange FTX; probe underway

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NEW YORK — Collapsed cryptocurrency trading firm FTX confirmed there was “unauthorized access” to its accounts, hours after the company filed for Chapter 11 bankruptcy protection Friday.

The embattled company’s new CEO John Ray III said Saturday that FTX is switching off the ability to trade or withdraw funds and taking steps to secure customers’ assets, according to a tweet by FTX’s general counsel Ryne Miller. FTX is also coordinating with law enforcement and regulators, the company said.

Exactly how much money is involved is unclear, but analytics firm Elliptic estimated Saturday that $477 million was missing from the exchange. Another $186 million was moved out of FTX’s accounts, but that may have been FTX moving assets to storage, said Elliptic’s co-founder and chief scientist Tom Robinson.

A debate formed on social media about whether the exchange was hacked or a company insider had stolen funds, a possibility that cryptocurrency analysts couldn’t rule out.

Until recently, FTX was one of the world’s largest cryptocurrency exchanges. It was already short billions of dollars when it sought bankruptcy protection Friday and its former CEO and founder, Sam Bankman-Fried, resigned.

The company had valued its assets between $10 billion to $50 billion, and listed more than 130 affiliated companies around the world, according to its bankruptcy filing.

The unraveling of the once-giant exchange is sending shockwaves through the industry, with companies that backed FTX writing down investments and the prices of bitcoin and other digital currencies falling. Politicians and regulators are calling for stricter oversight of the unwieldy industry. Experts say the saga is still unfolding.

“We’ll have to wait and see what the fallout is, but I think we are going to see more dominoes falling and an awful lot of people stand to lose their money and their savings,” said Frances Coppola, an independent financial and economic commentator. “And that is just tragic, really.”

The timing and the extent of access that the assumed hacker appeared to achieve, siphoning money from multiple parts of the company, led Coppola and other analysts to theorize that it could have been an inside job.

FTX said Saturday that it’s moving as many digital assets as can be identified to a new “cold wallet custodian,” which is essentially a way of storing assets offline without allowing remote control.

“It does look as if the liquidators didn’t act fast enough to stop some kind of siphoning off of funds from FTX after it filed for bankruptcy, and that’s bad, but it just shows how complex this thing is,” Coppola said.

Initially, some people were hoping that perhaps all the missing funds were liquidators or bankruptcy administrators trying to move assets to a more secure spot. But it would be unusual for that to happen on a Friday night, said Molly White, cryptocurrency researcher and fellow with the Library Innovation Lab at Harvard University.

“It looked very different from what a liquidator might do if they were trying to secure the funds,” she said.

White also said there are signs of possible insider involvement. “It seems unlikely that someone who is not an insider could have pulled off such a massive hack with so much access to FTX systems.”

The collapse of FTX highlights the need for cryptocurrency to be regulated more like traditional finance, Coppola said.

“Cyrpto isn’t in the very early stages anymore,” she said. “We’ve got ordinary people putting their life savings into it.”

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November 12, 2022
FTX bankruptcy is ‘somebody running a company that’s just dumb-as-f___ing greedy,’ says Mark Cuban

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Billionaire Dallas Maverick’s owner Mark Cuban recently offered his perspective on the implosion of crypto platform FTX late this week.

“‘That’s somebody running a company that’s just dumb-as-fucking greedy.’”

— Mark Cuban

Cuban, speaking on Friday at a conference in Washington, D.C. hosted by Sports Business Journal, shared the view that avarice was at the root of the downfall of one-time crypto darling Sam Bankman-Fried, whose firm FTX Group just filed for chapter 11 bankruptcy.

“So what does Sam Bankman [Fried] do, he’s just–‘gimme more, gimme more, gimme more.’ So I’m gonna borrow money, loan it to an affiliated company and hope and pretend to myself that the FTT tokens that are in there on my balance sheet are gonna to sustain their value.”

Check out: Mark Cuban says buying metaverse real estate is ‘the dumbest shit ever

FTX’s collapse marks a stunning turnabout for a company, which was once valued at $26 billion, and whose founder, Bankman-Fried was viewed by many in the crypto industry as a venerable actor in the Wild West of digital exchanges.

On Thursday, the 30-year-old entrepreneur tweeted: “I f—ked up, and should have done better,” referencing the collapse of his exchange.

Embattled FTX, short billions of dollars, sought bankruptcy protection after the exchange experienced the crypto equivalent of a bank run. FTX, an affiliated hedge fund Alameda Research, and dozens of other related companies also filed a bankruptcy petition in Delaware on Friday morning. Boasting a nearly $16 billion fortune recently, Sam Bankman Fried’s net worth had all but evaporated in the wake of the FTX implosion, according to the Bloomberg Billionaires Index.

The price of FTX’s native token FTT went down about 88.8% over the past seven days to around $2.74, according to CoinMarketCap data.

The U.S. Justice Department and the Securities and Exchange Commission are looking into the crypto exchange to determine whether any criminal activity or securities offenses were committed.

Regulators and are examining whether FTX used customer deposits to fund bets at Alameda Research, a no-no in traditional markets, according to reports.

Cuban, who is one of the stars of the investing show “Shark Tank” and owns the NBA’s Dallas Mavericks, is a big investor in crypto and blockchain-related platforms. According to a CNBC report, he has said that 80% of his investments that aren’t on Shark Tank are crypto-centric.

See: Tom Brady, Steph Curry and Kevin O’Leary set to lose big from FTX bankruptcy filing

For his part, Cuban is part of a class-action lawsuit accused of misleading investors into signing up for accounts with crypto platform Voyager Digital, which filed for bankruptcy in July. The suit alleges that Cuban touted his support for Voyager and referred to it “as close to risk-free as you’re gonna get in the crypto universe.”

Cuban mentioned Voyager in his Friday interview. Representatives for the billionaire investor didn’t immediately respond to a request for comment.

The Mavericks owner took to Twitter on Saturday to say that the crypto implosions “have been banking blowups. Lending to the wrong entity, misvaluations of collateral, arrogant arbs, followed by depositor runs.”

Cuban’s net worth is $4.6 billion, according to Forbes.

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November 12, 2022
Crypto exchange giant FTX collapses, files for bankruptcy

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NEW YORK — It took less than a week for FTX to go from the third-largest cryptocurrency exchange in the world to bankruptcy court.

The embattled cryptocurrency exchange, short billions of dollars, sought bankruptcy protection after the exchange experienced the crypto equivalent of a bank run. FTX, the hedge fund Alameda Research, and dozens of other affiliated companies filed a bankruptcy petition in Delaware on Friday morning. FTX US, which originally was not expected to be included in any financial rescue, was also part of the company’s bankruptcy filing.

CEO and founder Sam Bankman-Fried has resigned, the company said. Bankman-Fried was recently estimated to be worth $23 billion and has been a prominent political donor to Democrats. His net worth has all but evaporated, according to Forbes and Bloomberg, which closely track the net worth of the world’s richest people.

“I was shocked to see things unravel the way they did earlier in the week,” Bankman-Fried wrote in a series of posts on Twitter.

FTX’s unraveling is causing ripple effects. Already companies that backed FTX are writing down their investments. Politicians and regulators are ramping up calls for stricter oversight of the crypto industry. And this latest crisis has put pressure on the prices of bitcoin and other digital currencies. The total market value of all digital currencies dropped by about $150 billion in the last week, according to CoinMarketCap.com.

FTX’s failure goes beyond finance. The company had major sports sponsorships as well, including Formula One racing and a sponsorship deal with Major League Baseball. Miami-Dade County decided Friday to terminate its relationship with FTX, meaning the venue where the Miami Heat play will no longer be known as FTX Arena. Mercedes said it would remove FTX from its race cars starting this weekend.

FTX and Bankman-Fried, as well as his brother, were also early investors in Semafor, the high-profile news startup run by former BuzzFeed editor-in-chief and New York Times columnist Ben Smith.

Bankman-Fried has other problems as well. On Thursday, a person familiar with the matter said the Department of Justice and the Securities and Exchange Commission were looking into FTX to determine whether any criminal activity or securities offenses were committed. The person could not discuss details of the investigations publicly and spoke to The Associated Press on condition of anonymity.

The investigation is centered on the possibility that FTX may have used customers’ deposits to fund bets at Alameda Research. In traditional markets, brokers are expected to separate client funds from other company assets. Violations can be punished by regulators. Financial company MF Global effectively failed for a similar practice roughly a decade ago when it intermingled client assets with its own bets.

In its bankruptcy filing, FTX listed more than 130 affiliated companies circled around the globe. The company valued its assets between $10 billion to $50 billion, with a similar estimate for its liabilities. The company appointed as its new CEO John Ray III, a long-time bankruptcy litigator who is best known for having to clean up the mess made after the collapse of Enron.

FTX’s bankruptcy is certainly to be one of the most complicated bankruptcy cases in years. The company listed more than 100,000 creditors on its filing, and with all of its customers effectively being creditors because they deposited their funds with FTX, it will take months to sort out who is owed what, bankruptcy lawyers said. Cryptocurrencies have no protections under law, and politicians on both sides of the aisle issued statements opposing any Lehman Brothers-like bailout for crypto investors.

“Unlike a case where there’s (securities insurance in the failure of a brokerage) or where the FDIC steps in with a bank failure, these customers are totally exposed,” said Daniel Besikof, a partner at Loeb & Loeb LLP who specializes in bankruptcy law.

FTX had agreed earlier this week to sell itself to bigger rival Binance after experiencing the cryptocurrency equivalent of a bank run. Customers fled the exchange after becoming concerned about whether FTX had sufficient capital.

The crypto world had hoped that Binance, the world’s largest crypto exchange, might be able to rescue FTX and its depositors. However, after Binance took a look at FTX’s books, it concluded that the smaller exchange’s problems were too big to solve and backed out of the deal.

FTX is the latest in a series of cascading disasters that have shaken the crypto sector, now under intense pressure from collapsing prices and circling financial regulators. Its failure is already being felt throughout the crypto universe.

On Thursday, the venture capital fund Sequoia Capital said Thursday it is writing down its total investment of nearly $215 million in FTX.

The cryptocurrency lender BlockFi announced on Twitter late Thursday that it is “not able to do business as usual” and pausing client withdrawals as a result of FTX’s implosion.

In a letter posted to its Twitter profile late Thursday, BlockFi — which was bailed out by Bankman-Fried’s FTX early last summer — said it was “shocked and dismayed by the news regarding FTX and Alameda.”

The company ended by saying any future communications about its status “will be less frequent that what our clients and other stakeholders are used to.”

Bitcoin tumbled immediately after the letter was posted and is trading below $17,000. The original cryptocurrency, bitcoin had been hovering around $20,000 for months before FTX’s problems became public this week, sending it down briefly to around $15,500.

Shares of the publicly traded cryptocurrency exchange Coinbase and the online trading platform Robinhood each rose nearly 12%.

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Reporters Matt Ott and Michael Balsamo in Washington contributed.

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November 11, 2022
Embattled crypto exchange FTX files for bankruptcy

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NEW YORK — It took less than a week for FTX to go from the third-largest cryptocurrency exchange in the world to bankruptcy court.

The embattled cryptocurrency exchange, short billions of dollars, is seeking bankruptcy protection after the exchange experienced the crypto equivalent of a bank run. FTX, its affiliated hedge fund Alameda Research, and dozens of other companies filed a bankruptcy petition in Delaware on Friday morning.

CEO and founder Sam Bankman-Fried has resigned, the company said. Bankman-Fried was recently estimated to be worth $23 billion and has been a prominent political donor to Democrats. His net worth has all but evaporated, according to Forbes and Bloomberg, which closely track the net worth of the world’s richest people.

Bankman-Fried has other problems as well. On Thursday, a person familiar with the matter said the Department of Justice and the Securities and Exchange Commission were looking into FTX to determine whether any criminal activity or securities offenses were committed. The person could not discuss details of the investigations publicly and spoke to The Associated Press on condition of anonymity.

The investigation is centered on the possibility that FTX may have used customers’ deposits to fund bets at Alameda Research. In traditional markets, brokers are expected to separate client funds from other company assets. Violations can be punished by regulators.

FTX had agreed earlier this week to sell itself to bigger rival Binance after experiencing the cryptocurrency equivalent of a bank run. Customers fled the exchange after becoming concerned about whether FTX had sufficient capital.

The crypto world had hoped that Binance, the world’s largest crypto exchange, might be able to rescue FTX and its depositors. However, after Binance had a chance to look at the books of FTX, it became clear that the smaller exchange’s problems were too big to solve and Binance backed out of the deal.

FTX is the latest in a series of cascading disasters that have shaken the crypto sector, now under intense pressure from collapsing prices and circling financial regulators. Its failure is also sending tsunami-like waves throughout the crypto universe.

Cryptocurrency lender BlockFi announced on Twitter late Thursday that it is “not able to do business as usual” and pausing client withdrawals as a result of FTX’s implosion.

In a letter posted to its Twitter profile late Thursday, BlockFi — which was bailed out by Bankman-Fried’s FTX early last summer — said it was “shocked and dismayed by the news regarding FTX and Alameda.”

The company ended by saying any future communications about its status “will be less frequent that what our clients and other stakeholders are used to.”

Bitcoin tumbled immediately after the letter was posted, losing close to 5% before inching back above $17,000 overnight. The original cryptocurrency, bitcoin had been hovering around $20,000 for months before the FTX’s problems became public this week, sending it briefly to around $15,500.

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Reporters Matt Ott and Michael Balsamo in Washington contributed.

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November 11, 2022
FTX’s Sam Bankman-Fried: ‘I was shocked to see things unravel the way they did’

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Sam Bankman-Fried, co-founder at crypto exchange FTX, tweeted Friday that he was “shocked to see things unravel the way they did,” after he quit as chief executive and the company and its related entities filed for bankruptcy.

See: Sam Bankman-Fried resigns as CEO of FTX as cryptocurrency exchange files for Chapter 11 U.S. bankruptcy

The bankruptcy “doesn’t necessarily have to mean the end for the companies or their ability to provide value and funds to their customers chiefly, and can be consistent with other routes,” Bankman-Fried tweeted Friday.

Bankman-Fried has seen his net worth plunge to almost zero from $16 billion in less than a week, according to Bloomberg Billionaires index.

FTX was once the third largest cryptocurrency exchange by trading volume. Bitcoin
BTCUSD,
+0.10%
fell 3.4% Friday to around $16,838, hovering at around a two-year low, according to the CoinDesk data.

A representative at FTX didn’t respond to a request seeking comment.

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November 11, 2022