Crypto Crash...What's Next?
Crypto exchange FTX crashed in November, sinking major tokens in its wake. Here's what it means for U.S. investors
FTX, a major cryptocurrency exchange, and FTX.US, its U.S. branch, filed for Chapter 11 bankruptcy on Nov. 11, 2022. Former founder and CEO Sam Bankman-Fried was arrested on Dec. 12 in the Bahamas and will be extradited to the U.S., where he faces eight criminal charges including wire fraud and conspiracy to defraud investors.
According to a complaint filed by the Securities and Exchanges Commission (SEC), Bankman-Fried used customer funds as a “personal piggy bank” to make private investments including real estate and political campaign donations.
The new CEO of FTX is John J. Ray III, who led the infamous energy giant Enron through its bankruptcy and liquidation process about two decades ago. In the bankruptcy filing on Nov. 17, Ray exposed the severity of FTX’s murky finances, citing a “complete failure of corporate controls” and a “complete absence of trustworthy financial information.”
FTX’s crash has wide-reaching implications throughout the crypto market, as cryptocurrencies and exchanges with exposure to FTT or FTX face sinking prices and financial troubles.
What does this mean for U.S. customers?
FTX's Chapter 11 bankruptcy filing includes FTX.US, according to the press release. The companies aim to "maximize recoveries for stakeholders," said Ray, the new CEO, in the statement. But as of publication time, guidance for affected investors wasn't available.
FTX owes customers billions. In a court filing on Nov. 19, FTX listed its top creditors, the investors to whom the fallen exchange owes money. The exchange owes its top 50 creditors almost $3.1 billion combined, with almost over half of that amount ($1.45 billion) owed to just the top 10. The company could have over a million individual creditors and has been in contact with “dozens” of international financial regulators, according to CNN reports.
A “substantial portion” of assets held with FTX may be “missing or stolen,” Ray noted in the filing. As far as investors are concerned, he warned that it would not be “appropriate for stakeholders or the Court to rely on the audited financial statements as a reliable indication of the financial circumstances” of FTX.
FTX is reviewing its available assets and is preparing to sell or restructure to repay investors. Balance sheets included in the bankruptcy filing show that FTX’s assets are worth far less than Bankman-Fried had initially claimed.
Users are likely to have a hard time getting their money back in the near future. Bankruptcy proceedings began on Nov. 22, 2022, and many investors who had assets stored on FTX still couldn’t withdraw their funds from the platform.
Affected investors can now file a proof of claim form by mail to verify the funds they may have lost on the platform during its crash and bankruptcy. Electronic filings will be available at a later date, and a filing deadline has not yet been set.
Now we have seen the epic revelations of the crypto crash with FTX's Sam Bankman being fried and the fallout of other smaller crypto exchanges. There are only two main exchanges that seems to be holding on although one is more convincing than the other. Which two you may ask? Well of course Coinbase and a close second, Binance.
Binance.US, the U.S. branch of Binance, which is separately managed, posted on Twitter that Binance’s dealings with FTX would not affect U.S. users. Binance CEO Zhao posted yesterday that the exchange would be forming an “industry recovery fund” to help “otherwise strong” projects in a liquidity crisis.
Coinbase CEO Brian Armstrong tweeted that the platform has no material exposure to FTX, FTT or Alameda.
Let us hope that both individual's and businesses learn from this event and do what is right the first time and stop being so greedy and selfish. Money earn dishonestly, dwindles away. In Sam's case it went like a bullet.
Information has been sourced from: https://www.nerdwallet.com/