In early November, FTX faced a crisis after an investigation on the CoinDesk website alleging that the organization was insolvent. Clients began to withdraw their assets. Because of this, FTX turned to the largest crypto exchange Binance for help. She agreed to support FTX customers, but after verification, she refused to buy a former competitor. Given the fact that cryptocurrency is beginning to take its place in the list of traditional economic assets, it remains poorly regulated. “At the moment when the cryptocurrency began to collapse sharply, people began to withdraw funds, there was a liquidity shortage on the exchange, which could not be eliminated in any way, except through the bankruptcy procedure of the organization,” analysts say.
On November 6, the head of Binance, Changpeng Zhao, announced his desire to get rid of FTX Token (FTT), which, together with BUSD, for a total of ~ $ 2.1 billion, were the result of the company’s withdrawal from the portfolio investment in FTX. He promised to minimize the impact of the transaction on the market and expressed his willingness to complete it within a few months. Caroline Ellison, CEO of Alameda Research, owned by Sam Bankman-Fried, announced her readiness to buy a utility token from Binance at a price of $22 per unit.
On the morning of November 8, the market began to storm. Bitcoin plunged below $20,000, and investors rushed to get rid of assets associated with FTX and Alameda Research. Among them, in addition to FTT, were Solana, Serum and BitDAO (BIT). At the same time, there was a significant outflow of liquidity from FTX. As it turned out later, $ 6 billion was withdrawn from the platform in 72 hours. In the evening of the same day, the exchange reported that the queue for withdrawal requests was being reduced to a “reasonable level”, and Bankman-Freed assured that the assets were in order. At this time, the network continued to massively complain about the impossibility of withdrawing funds.
A few hours later, the CEO of Binance announced that FTX was facing a liquidity crisis and turned to her for help. The strategic agreement also assumed a possible takeover of FTX International (this story did not affect the American branch). Bitcoin reacted to the news with a sharp rise of $1,000. When the euphoria passed, the quotes began to fall rapidly. By evening, the rate had tested $17,000. Investors were also in a hurry to get rid of FTT.
On the evening of November 9, Binance abandoned the purchase of FTX, noting significant discrepancies in the company’s balance sheet. By this point, the fact that Bankman-Freed was using client funds had become frankly more obvious. Following Binance’s refusal to buy the platform, Tron founder Justin Sun said he was working with FTX on a possible solution.
On the night of November 10, Bitcoin fell below 16,000, and Ethereum fell below $1,100. The rapid correction sent Solana’s validators into a panic. Due to links with Alameda, the latter decided to withdraw a significant amount of assets from staking (30 million SOL). The Crypto.com platform has even suspended USDC and USDT withdrawals on Solana. A joint decision with Justin Sun was a limited withdrawal of funds in TRX, JST, BTT and other assets affiliated with him. Users had no choice but to buy these coins. The difference in the course with other sites provoked additional losses.
The media began to massively report on the “hole” in the balance of FTX. According to various estimates, it ranged from $4 to $8 billion. The company’s branches began to close due to pressure from local regulators. The Bahamas Securities Commission blocked FTX’s assets, and in Cyprus they decided to revoke the company’s license, which allowed it to do business in Europe. Inside the main office, layoffs began, employees said they had lost funds. At the request of law enforcement officers, Tether froze FTX’s $46 million in USDT during the investigation. However, despite everything, Bankman-Fried said that despite the liquidity crisis, the value of FTX’s assets exceeds customer deposits. Justin Sun announced his readiness to provide “billion dollar assistance.” However, it probably wasn’t enough. The media indicated that in meetings with investors, Bankman-Fried announced a figure of $10 billion.
On November 11, FTX filed for bankruptcy in the US, facing a liquidity crunch.
A possible reason for the sudden collapse was first named at Coin Metrics – head of R&D Lucas Nuzzi suggested that FTX loaned Alameda Research a $4.19 billion FTT. He noted that the problems of the Three Arrows Capital hedge fund and the collapse of the Terra ecosystem that preceded this were the starting point. . Alameda then “survived” only thanks to funding from FTX, concluded Luzzi.
Leading players were quick to deny the connection to FTX and Alameda. Among them are Coinbase, Circle, Kraken, Bitfinex, Cumberland, Deribit and several others. During the process of negotiating the terms of the deal, Changpeng Zhao called for refraining from FTT trading and stated that the difficulty of a competitor is not a victory for Binance. In a letter to staff, he noted that Bankman-Fried’s request for help came as a surprise to him. However, according to the CEO of the ASTL investment project Andjei Korotkewič, the greatest responsibility for what happened lies directly with the Binance crypto exchange and its management. “As for Binance, this exchange played a significant role in the development of this conflict. If this happened with traditional exchange instruments, Binance could be recognized as a market manipulator. But since the cryptocurrency market is not subject to securities market regulation, no action will be taken against Binance We have seen a similar situation with [SpaceX CEO] Elon Musk in the history of buying cars with cryptocurrencies.The situation with FTX is much more complex and tragic, but it clearly shows that the cryptocurrency market is far from fully regulated, and the risks of investors are still high,” he concluded. “The situation that was observed in the part of the FTX token scandal suggests that the regulatory authorities do not have a real opportunity to ensure the security of cryptocurrency payments and guarantee the liquidity of those tokens that exist on the market.”
Experts are already assessing the extent of losses for crypto funds due to the collapse of FTX. According to experts, the crisis affected 25-40% of industry investment structures that invested in FTX or its utility token FTT. Crypto Fund Research CEO Josh Gnaizda clarified that we are talking about 7-12% of assets under management of funds. “When it clears up, we expect hedge funds and venture capital firms to lose more than $1 billion at best, and possibly as much as $5 billion, directly due to the collapse of FTX,” he said.
Paradigm and Sequoia Capital have already reported that potential losses due to the FTX crisis could be $278 million and $213 million, respectively. Genesis Trading reported that approximately $175 million was blocked from its derivatives division in its account on the platform. As of Nov. 8, Mike Novogratz’s Galaxy Digital had $76.8 million in cash and digital assets related to FTX, of which $47.5 million were in the process of being withdrawn, the firm said in its third-quarter financial results. Multicoin Capital told The Block that it has invested $25 million in the US division of FTX and also held $2 million in USDC on the exchange itself. The venture capital firm made a $430 million investment in FTX US through a $430 million Venture Fund III created in July. Investments in the bankrupt platform account for 5.8% of the fund’s funds, Multicoin noted. Crypto Fund Research experts estimated the value of Pantera Capital’s FTX-related assets at approximately $100 million. The company did not confirm the data, but said earlier that the collapse of the exchange “slightly” affected Pantera’s business.
Thus, the losses of cryptocurrency funds due to the bankruptcy of FTX could be up to $5 billion, Blockworks reports, citing a study by Crypto Fund Research. Analysts also expect a record number of investor requests for refunds from crypto funds in November – up to $ 2 billion. The previous maximum – $ 1.3 billion – was recorded in Crypto Fund Research in June after the collapse of Terra.
All the tragic events of the last two weeks and the unstable position of cryptocurrencies did not affect, thank God, the position of the capitalization of the ASTL investment project, since, according to CFO Konstantinas Sizovas, all crypto-currency assets were transferred to USDT even before the new wave of “fall” began and rally on the major stock exchanges. Moreover, against the background of all this “disgrace”, the project even managed to slightly increase the capitalization of the cryptocurrency basket. That is, the ASTL investment project demonstrates great prospects. Already, the creators have managed to attract more than $ 5 million into it, and the pace of investment continues to grow rapidly, especially since the new, second stage of pre-sales with an increase in cost started on time. If we analyze other similar projects in the cryptocurrency market, we can conclude that the price of ASTL tokens may increase several times when listings on exchanges start.