Government agencies in several countries conduct investigations into the activities of the crypto exchange FTX. This includes the United States, where a class action lawsuit was filed against the company, and the country’s authorities intend to extradite Sam Bankman-Fried for testimony.
The crisis around FTX Group keeps escalating, though the cryptocurrency market has recovered quickly from the shock and regained some ground. Since the last post on this topic, there have been many miscellaneous events, but CoinsPaid Media has put the key ones together in a single article.
Sam Bankman-Fried (SBF) told Vox in an interview that filing for bankruptcy was a mistake forced on him by his inner circle. Now he regrets it. SBF said if he hadn’t filed for bankruptcy, things “would be ~70% fixed right now.” However, the bankruptcy filing in the U.S. Federal Court for the District of Delaware shows that FTX had over 1 million creditors, although a previously published “petition” referred to 100,000 creditors.
Meanwhile, a class action lawsuit was filed in District Court in Miami on behalf of a large number of celebrities, athletes, and even sports teams actively involved in the promotion and operation of FTX Trading LTD and West Realm Shires Services Inc. Total damages from FTX’s scam scheme are estimated at $11 million.
Nearly 4,000 people signed a petition urging Congress to investigate the role played by Gary Gensler, Chair of the Securities and Exchange Commission, in the activities of FTX. It has become known that FTX’s crash is already being investigated by the Manhattan District Attorney’s Office, reported Reuters.
Amid this background, Bloomberg reported that U.S. authorities and the Bahamas discussed the possibility of SBF’s extradition to the U.S. for questioning. The Bahamas is where FTX Digital Markets, the main international legal entity of FTX, is registered. Local officials question the legality of FTX’s bankruptcy filing in the United States. The Supreme Court of the Bahamas approved Kevin Cambridge and Peter Greaves of PricewaterhouseCoopers as “joint provisional liquidators” of FTX. However, the Securities Commission of The Bahamas (SCB) officials said that all FTX Digital Markets (FDM) assets would be transferred to the regulator’s wallet for now.
Investigative actions against FTX are underway in other countries. For example, the Turkish Financial Authority joined the U.S. and Bahamas in the investigation. There was a regional branch of FTX Turkey, whose users were also deprived of access to their funds. A similar situation occurred with 132 companies and more than 30,000 users of FTX Australia. The Australian Securities and Investments Commission (ASIC) suspended the exchange’s license and started investigating.
The crisis affects more and more crypto companies directly or indirectly related to FTX. For instance, the Japanese exchange Liquid owned by FTX reported a suspension of withdrawals. BlockFi acknowledged having a “significant exposure” on FTX and related entities, which was followed by rumors of a possible bankruptcy of the company. Another crypto loan platform SALT notified users that it would suspend withdrawals and deposits, citing the impact of FTX’s collapse.
Galois Capital, New Huo Technology, Nestcoin, Genesis, Wintermute, Multicoin Capital, CoinShares, Galaxy Digital, and many other crypto firms had their funds frozen in FTX’s accounts. Investors from Amber Group, Pantera Capital, Sequoia Capital, and others liquidated their FTX assets, recording varying losses. FTT tokens were completely excluded from trading on BitMEX and KuCoin, with plans to cancel the FTT listing announced by Zipmex. Only FTT/BUSD tokens are still traded on Binance.
Analysts at CoinGeco presented a report on the dynamics of layoffs in the cryptocurrency sector, which warned of a significant increase in layoffs in the coming months when the effect of FTX’s sudden collapse will become fully evident. Coinbase’s study predicts that FTX’s crunch could prolong the crypto crisis until late 2023, as it triggered liquidity shortages in the market and undermined investor confidence.
Certik analysts report that an unknown hacker continues to steal assets from wallets linked to FTX entities. ZachXBT, an independent expert, believes that it’s spoofing. The hacker’s address, labeled “FTX Accounts Drainer,” contains 241,471 ETH at the time of writing, which is approximately $294.3 million. This puts him among the largest holders of Ethereum in ETH volume.
While the aftermath of FTX’s collapse shook the cryptocurrency market, Sam Bankman-Fried started posting strange tweets that provoked rumors about the entrepreneur’s drug addiction and intentions to fake insanity if he had to stand trial. A series of more sane excuses, apologies, and revelations soon followed. John Ray III, a new FTX CEO, denied any SBF’s allegations on behalf of the company.
Yet, the already mentioned Vox interview and the New York Times article came out, which were blatantly contractual in nature and made no mention of FTX’s fraudulent actions. This caused an extremely negative reaction from the cryptocurrency community on Twitter, which was supported by many prominent figures, including Elon Musk.
Changpeng Zhao (CZ), CEO of Binance, doesn’t stay away from the situation either. During an AMA session on Twitter, he urged users not to shift responsibility for their investment decisions to others. He also noted that Binance never shorted FTT tokens. After announcing plans to sell $580 million worth of FTX tokens, the company sold only a small portion. Recall that CZ is considered by many to be behind the events, and there are good reasons for that.
