March 22, 2023

Unlicensed Transactions Hit Collapsed FTX As $1B Crypto Disappears – National |

Crypto exchange FTX was plunged into further chaos on Saturday after the company said it had detected unauthorized transactions and analysts said millions of dollars in assets had been moved off the platform under “suspicious circumstances”.

FTX filed for bankruptcy on Friday after traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance rejected a proposed rescue deal.

At least $1 billion in customer funds have disappeared from the platform, sources told Reuters on Friday. According to sources, the company’s founder, Sam Bankman-Fried, had transferred $10 billion of client funds to his trading company, Alameda Research.

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New issues emerged Saturday when FTX’s U.S. general counsel Ryne Miller said in a tweet that the company’s digital assets were being moved to so-called cold storage to “mitigate the damage from detection of unauthorized transactions.”

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Cold storage refers to crypto wallets that are not connected to the internet to protect against hackers.

Blockchain analytics firm Elliptic said about $473 million worth of crypto assets “were transferred from FTX wallets under suspicious circumstances early this morning,” but could not confirm that the tokens were stolen.

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FTX’s dramatic fall from grace has seen 30-year-old Bankman-Fried, known for his shorts and t-shirts, go from the poster child for crypto success to the protagonist of the industry’s highest-profile collapse.

The collapse rattled investors and prompted renewed calls for regulation of the crypto-asset sector, which has seen losses so far this year as cryptocurrency prices tumble.

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“Things continue to boil over after the FTX crash,” said Alan Wong, chief operating officer of the Hong Kong Digital Asset Exchange.

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“The $8 billion difference between liabilities and assets when FTX defaults will trigger a domino effect that will result in a number of FTX-related investors going bankrupt or having to sell their assets. In an illiquid bear market, the event will lead to another fall in cryptocurrencies and liquidation of leverage.”

Since its inception in 2019, FTX has raised over $2 billion from top investors including Sequoia, SoftBank, BlackRock and Temasek. In January, FTX had raised $400 million from investors at a valuation of $32 billion.

SoftBank and Sequoia Capital announced that they will cut their FTX investment to zero.

Cryptocurrency exchange Coinbase Global Inc COIN.O will also exit its investment in FTX in 2021, according to a person familiar with the matter.

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READ MORE: Cryptocurrencies plunge after Binance withdraws from FTX trading

Bitcoin fell below $16,000 for the first time since 2020 after Binance abandoned its bailout on Wednesday.

On Saturday, it was trading at about $16,831, down more than 75% from its all-time high of $69,000 set in November last year. BTC=BTSP.

FTX’s token FTT FTT=CCCL dropped about 91% this week. Shares of cryptocurrency and blockchain-related companies have also fallen.

“We believe the cryptocurrency market is still too small and too quiet to cause contagion in financial markets, with a market capitalization of $890 billion compared to $41 trillion for US stocks,” Citi analysts wrote.

“FTX raised $1.8 billion over four years from VCs and pension funds. This is the primary way financial markets could suffer, as it could have other minor consequences for portfolio blinds in a volatile macro system.

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In its bankruptcy filing, FTX Trading said it has $10 billion to $50 billion in assets, $10 billion to $50 billion in liabilities and more than $100,000 in liabilities. Restructuring specialist John J. Ray III was appointed CEO.

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The U.S. Securities and Exchange Commission is investigating’s handling of customer funds amid a liquidity crisis, as well as its crypto-lending operations, a source familiar with the investigation said.

Half of the assets of hedge fund Galois Capital were trapped in FTX, the Financial Times reported on Saturday, citing a letter to investors from founding member Kevin Zhou, estimating the amount to be around $100 million.

(Additional reporting by Angus Berwick; Editing by Pravin Char)

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