Fintech

The Fintech Files: FTX fallout, MPs make Binance squirm, and crypto sector full of ‘f****** sociopaths’

It’s been seven days since Sam Bankman-Fried said: “FTX is fine. Assets are fine.” 

Many things remain unclear, but one thing is for certain: FTX was not fine, and the shockwaves continue to hit both crypto and traditional finance.

Here’s a timeline of everything that happened, from Binance selling off its holdings of FTX’s crypto token FTT, all the way to FTX’s insolvency filing on 11 November.

MPs make crypto execs squirm

Somewhat conveniently for crypto-sceptical British MPs, the collapse has come midway through a major parliamentary inquiry into the sector by the Treasury Select Committee. The second evidence session was on 14 November.

Committee chair Harriet Baldwin gave a withering assessment of the situation, telling industry representatives: “You must feel a bit awkward coming and talking to us after last week.”

Cue awkward silence.

Also conveniently, Binance’s vice president of government affairs for Europe, the Middle East and North Africa, Daniel Trinder, was on the panel to defend his boss, Changpeng ‘CZ’ Zhao, who Baldwin said was “a player” in the crisis.

Zhao’s decision to very publicly sell off Binance’s holdings in FTX’s token, FTT, was among the first events in a chain that eventually finished with FTX’s insolvency. Also later down the line, CZ said he would buy FTX, before pulling out of the deal 24 hours later. 

Referring to Zhao’s actions, Baldwin said: “It must have been apparent that that was likely to cause the collapse of FTX,” a claim which Trinder denied. 

Trinder agreed to submit written evidence on Binance’s discussions with FTX when the two were in deal talks, as well as on its decision-making in the lead up to it.

News in brief

What FTX execs knew about the crypto firm’s loan to Alameda with customer funds

New FTX CEO draws on Enron experience to tackle the biggest bankruptcy in crypto history

Nicola White appointed group CEO of B2C2

Ripple expands payments offering to Africa amid US regulatory pressure

Crypto.com customers pull funds after CEO admits company mishandled $400m transaction

Hedge funds ‘extremely surprised’ by FTX collapse, eye tighter due diligence

FTX liquidity crisis forces crypto hedge funds into rethink

Sector full of ‘sociopaths’, says crypto hedge fund manager

The collapse has already bruised the likes of BlackRock, VanEck and Sequoia Capital, and has seriously damaged the reputation of crypto in traditional finance circles. 

But in cryptoland, the mayhem spilled over into the following week. Travis Kling, a traditional hedge fund manager who founded crypto hedge fund Ikigai in 2018, took to Twitter on 14 November, admitting that a “large majority” of the firm’s funds were stuck on FTX.

In an impassioned takedown of the industry he joined four years ago, Kling added: “I’m at a loss for words at the depth & breadth of the pieces of s*** that permeate crypto. 


“So many f****** sociopaths were granted the opportunity to do so much damage. 

“It’s hard for me to imagine the space bouncing back quickly from this ordeal. Too many got burned too hard.”

Read the full thread here.

BlockFi, Voyager and Celsius all take a hit

Other major losers from the crisis are crypto exchange BlockFi, which FTX bailed out earlier this year. BlockFi has frozen withdrawals and says it will not be able to operate business as usual. 

On 14 November, the company said in a statement that it was “deeply saddened to see the devastation that is cascading” across the industry, and that it was evaluating its options. It said it has engaged lawyers at Hayes and Boone, and financial advisors at BRG to help it decide on next steps.

Elsewhere, Galaxy Digital said it had $76m on FTX, according to a 9 November statement.

CoinShares, Europe’s largest crypto asset manager, said on 10 November that despite having withdrawn funds in the last week, its exposure to FTX exchange was still more than one-tenth of the firm’s net asset value, at £26m.

Crypto hedge fund Galois Capital admitted that close to half its assets were stuck on FTX. The news was first reported by the Financial Times, which estimated the damage to be around $100m.

Bankrupt crypto lender Celsius (remember them?), said on 11 November that it had 3.5m tokens of the serum cryptocurrency on FTX, plus about $13m in loans to FTX-linked trading firm Alameda Research.

Singaporean crypto exchange Crypto.com said on 14 November it had about $10m on FTX at the time of the collapse. CEO Kris Marszalek has also moved to assuage concerns around the financial health of the company in recent days.

US broker Genesis Trading said on 10 November that it has about $175m in locked funds on FTX.

“Genesis has no material exposure to FTT or any other tokens issued by centralised exchanges,” the firm said the previous day.

Crypto exchange Kraken said on 10 November that it held about 9,000 FTT tokens on the FTX exchange. It added on 13 November that it had frozen the accounts of FTX, Alameda Research and their executives.

FTX won an auction for the customer accounts of bankrupt exchange Voyager Digital in September, but it turns out the deal had not been completed. Voyager said on 11 November that it had reopened the bidding process.

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The New York Times snagged an interview with Bankman-Fried himself, in which he said he expanded too fast and failed to see the warning signs. 

The FTX crisis has led several other exchanges, including Binance, to offer more transparency measures, reports Quartz. That’s the same Binance that joint venture partners in the UK alleged had made “grossly inaccurate” filings earlier this year, according to the Financial Times.

As if matters couldn’t get any worse, FTX was reportedly hacked for hundreds of millions of dollars in the hours after it filed for bankruptcy. Wired reports on the race to catch the thieves.

Crypto users pulled $3.7bn worth of bitcoin and $2.5bn of Ether in the week of the collapse, according to Bloomberg.

And finally…

In non-FTX related news, Oliver Wyman is getting paid nearly £400,000 by the Bank of England to carry out a review of the Bank’s approach to digital innovation, and put together a “digital strategy” going forward.

The consultant also won a contract to digest a 60-page paper on Central Bank Digital Currencies for the Bank, and put together a report on it. Cheap, at £32,000.

To contact the author of this story with feedback or news, email Alex Daniel

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