The bankruptcy filing of crypto exchange FTX on Friday did not stop the chaos around the once prominent and trusted crypto trading place.
Because of the filing that includes 135 affiliated companies, millions of dollars in crypto have been stolen from the company, which is facing a shortfall between $6 billion and $10 billion. Bahamian officials are also investigating the matter.
“I don’t think it’s an understatement to predict that the FTX bankruptcy will be the most complicated in US history,” Caitlin Long, founder and CEO of Custodia Bank, told Yahoo Finance Live. “These are leveraged players who are just rolling the dice. This is a casino. Welcome to them.”
From Friday to Sunday, the global market capitalization for crypto assets fell 3% from $856 billion to $831 billion. Since November 1, it has dropped 18% from just under $1 trillion, according to the report Coinmarketcap.
Here’s what was revealed over the weekend.
Friday’s heist FTX
On Friday night, approximately $663 million in crypto mysteriously flowed out of wallets linked to the now bankrupt exchange.
John Jay Ray III, the restructuring officer and new CEO who was appointed less than 24 hours earlier, said. statement Saturday morning: “Unauthorized access to certain assets has occurred.”
Of the total outflow, approximately $477 million is estimated to have been stolen, while the rest has been moved to cold storage by FTX for safeguarding, according to the blockchain analytics firm, Elliptical.
“The process was accelerated this evening – to reduce the damage when we see illegal transactions,” FTX US general counsel, Ryne Miller, said on Twitter.
FTX declined to comment further on the matter.
Meanwhile, thieves have been identified trying to transfer and sell funds through US-based crypto exchange Kraken, the company. chief security officer said Saturday.
“We are committed to working with law enforcement to ensure they have everything they need to investigate this matter,” Kraken said.
How much of the stolen funds will be returned. The Financial Times reported that FTX held approximately $900 million in liquid crypto and $5.4 in illiquid venture capital investments against $9 billion in liabilities the day before it filed for bankruptcy.
FTX in the Bahamas
On Sunday, the Bahamian police have also given a statement said they are working with state securities regulators to probe FTX for criminal conduct.
A person familiar with the matter confirmed to Yahoo Finance that Bahamian law enforcement is “compelling [Sam Bankman-Fried] remain in the Bahamas “as of Saturday night. This followed speculation that Bankman-Goreng and other top executives of the company – chief technology officer Gary Wang and head of engineering Nishad Singh – who tried to flee.
In Chapter 11
FTX will deal with the same “big legal questions” as crypto lenders Celsius Network and Voyager, Greg Plotko, legal partner with Crowell & Moring, told Yahoo Finance. That is whether the crypto held in the customer’s account belongs to the customer himself or to the bankruptcy estate.
Unlike Celsius and Voyager, where the line of ownership is less clear, it is service requirements on FTX.com states to customers that “none of the Digital Assets in your Account belong to, or shall or may be loaned to, FTX Trading.”
“There is also almost certainly an amount of criminal fraud that led to this scenario and as a result, we can expect this to be a messy public hearing that will lead to bad publicity and regulatory backlash for [crypto] industry,” Haseeb Quershi, managing partner with venture firm, DragonFly Capital, told Yahoo Finance.
“If you have this situation, there are many institutions that want to leave their positions. They do not want to be stuck in bankruptcy for two years, waiting for payouts,” said Plotko. There are many holes about where all the money goes. Institutions and individuals may want to sell.”
FTX’s bid for Voyager Digital’s assets has been completed
In September, bankrupt crypto lender Voyager announced that FTX through its US subsidiary (FTX US) had made the winning bid for its assets. But that “$1.4 billion offer to buy Voyager Digital’s customer accounts is now in serious jeopardy,” Jason DiBattista, head of legal analysis with LevFin Insights, told Yahoo Finance.
Voyager Digital has reopened the bidding process for its assets, according to a Press release Friday from the committee of unsecured creditors.
At the time of FTX’s bankruptcy filing, Voyager held approximately $3 million worth of crypto tokens that could not be withdrawn.
Crypto lender BlockFi has also been silent since the official proclaim a freeze on customer withdrawals Thursday night. Since then, a number consumer have noted that their BlockFi credit card does not work.
While BlockFi was not included in FTX’s Chapter 11 filing, the firm is expected to become a major creditor after it took an emergency credit line of $400 million from FTX in late June.
As recently as Monday, BlockFi trying to re-launch the resulting product. On Tuesday, COO Flori Marquez announced that the firm “fully operational.” BlockFi did not respond for comment on its status over the weekend.
(This story is developing and will be updated with information)
David Hollerith is a senior reporter at Yahoo Finance covering cryptocurrency and the stock market. Follow him on Twitter at @DsHollers