FTX collapse: The latest update on the cryptocurrency crisis

New Delhi
Business CNN

Aftershock from massive earthquake in the trillion-dollar crypto industry last week continues to reverberate on Monday.

Digital currency prices fell again as the crisis engulfed the market deepened over the weekend. Bitcoin, the world’s largest cryptocurrency, has plummeted about 65% so far this year. It was trading at about $16,500 on Monday, according to CoinDesk. Analysts believe that it can go down below $10,000.

ether, The second most valuable cryptocurrency in the world, is faring better. It was trading at about $1,230 on Monday, after sinking more than 20% over the last week, CoinDesk data showed.

The plunge comes as investors continue to grapple with the stunning implosion of FTX, one of the biggest and most powerful players in the industry.

Some industry insiders have said the company’s downfall has triggered the “Lehman moment,” referring to the 2008 collapse of the investment bank that sent shockwaves around the world.

The episode not only destroyed confidence in the crypto industry, but will also embolden global regulators to tighten the screws. Some of the biggest names in the business said they would welcome scrutiny, if it helps restore faith in the industry.

There are “a lot of risks,” said Changpeng Zhao, who runs Binance, the largest crypto exchange. “We have seen in the last week some crazy things in the industry, so we need some regulations, we need to do this properly,” he added.

CZ, as he is known, spoke at a conference in Indonesia on Monday. He said last week that comparing the current crypto turmoil to the global financial crisis of 2008 is “maybe the analogy is accurate.”

Binance had reached a temporary rescue deal with FTX last time week, but the transaction almost immediately fell apart.

FTX has continued its downward spiral after filing for bankruptcy on Friday. Another big name from the industry has also admitted mishandling funds, spooking investors even more.

Here’s how things unfolded in the past few days, showing the crisis has only just begun.

FTX moved its headquarters from Hong Kong to the Bahamas last year, with former CEO Sam Bankman-Fried hailing it as “one of the few places to set up a comprehensive framework for crypto” at the time.

On Sunday, authorities in the Bahamas said they were investigating the potential evil behavior around the implosion of the company.

“Due to the global collapse of FTX and the temporary liquidation of FTX Digital Markets Ltd., a team of financial investigators from the Financial Crimes Investigation Branch is working closely with the Bahamas Securities Commission to investigate if any criminal activity has occurred,” Royal Royal said. The Bahamas Police Force said in a statement.

It is unclear what aspects of the rapid collapse of FTX’s authority are under investigation.

Bankman-Fried, founder of the 30-year-old exchange, that one of the types of crypto industry, amassing a fortune once amounting to $ 25 billion that has since disappeared. He has been regarded as the white knight of the crypto world, going above and beyond to save struggling companies in the aftermath. collapse of TerraUSD stablecoin in May.

FTX, backed by elite investors like BlackRock and Sequoia Capital, has quickly become one of the biggest crypto exchanges in the world. The collapse began with the decision to lend billions of dollars in customer assets to finance risky bets by Alameda, Bankman-Fried’s crypto hedge fund, The Wall Street Journal reported on Thursday.

The Bahamas probe comes days after the bankruptcy exchange said it was launching its own investigation.

On Saturday, FTX said it was looking into why stolen crypto assets. Crypto risk management firm Elliptic said $473 million in crypto assets were apparently seized from FTX.

FTX General Counsel Ryne Miller said Saturday the company “initiated precautionary steps” on Friday and moved all of its digital assets offline. The process was accelerated Friday evening “to reduce the damage when looking at unauthorized transactions.”

Miller said that FTX is “investigating Abnormalities” regarding movements in crypto wallets “related to the consolidation of FTX balances on exchanges.”

The facts are still unclear, and the company will share more information as soon as possible, he added.

As scrutiny of big players in the crypto world mounts, Singapore-based Crypto.com admits to accidentally sending more than $400 million worth of ether to the wrong account.

CEO Kris Marszalek said Sunday that the transfer of 320,000 ETH was made three weeks ago to the company’s account in the competing exchange Gate.io, instead of to one of its offline, or “cold,” wallets.

Even though the funds were recovered, users withdrew funds from the platform, fearing it might collapse like FTX.

“We have strengthened our processes and systems to manage these internal transfers,” Marszalek tweeted Sunday. The platform’s native token has fallen over 20% in the last 24 hours, according to CoinDesk.

Marszalek said Monday that his firm has acted as a “responsible, regulated player since the beginning” and will soon “prove all the naysayers … wrong with our actions.”

Crypto.com has 70 million people on its platform globally, and its business model is “very different” from FTX, he added.

“We never take third-party risks, we don’t run hedge funds, we don’t trade customer assets,” he said.

Marszalek said his firm will publish an audited report showing its reserves soon.

At a conference in Bali, Binance boss Zhao indicated that regulating the industry will not be easy.

Authorities’ “natural response is to borrow regulations from the traditional banking system … but crypto exchanges operate very, very differently from banks,” he said.

“It’s very, very normal for banks to transfer users’ assets to invest and try to get them back,” he explained. If crypto exchanges operate that way it’s “almost guaranteed to go down,” he said. adding that the industry collectively has a role to play in protecting consumers.

“Regulators have a role … but they cannot protect bad players,” he said.

— Matt Egan, Ramishah Maruf and Allison Morrow contributed to this report.

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