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Galois Capital Declares Half of its Funds is Stuck with FTX

by Blockchain NewsNovember 12, 2022

Galois Capital, a crypto hedge fund that deals in over-the-counter trading has announced that almost half of its capital is trapped in FTX.

According to a Reuters news report, Kevin Zhou a Co-founder of Galois stated that the trapped fund is estimated at $100 million even though the company had initially pulled out some funds from the crypto exchange. He wrote to investors that he is deeply sorry about the situation as they didn’t see the 3AC situation coming. He added that it could take Galois a few years before it will recover from its present ordeal.

Galois Capital tweeted via the company’s official page that funds were not withdrawn using any Bahamian process as a significant amount is still stuck while responding to accusations that they transferred funds from FTX illegally by using Bahamian accounts. They also hinted that Galois does not have any debt, so it’s just their assets that took a hit.

“Galois is presently debating whether to continue operating normally, pursue an acquisition, or become a proprietary trading firm,” says Zhou.

The news comes after Galois had initially given suggestions on how FTX can overcome their financial crisis. Galois tweeted that FTX can apply a proportional debt haircut to all accounts, make a debt claim token in the style of Bitfinex for the amount of the haircut, and reduce staff while continuing to run FTX.

Crypto Exchanges Caught in the Web of FTX’s Crisis

Galois Capital is not the only crypto exchange that is experiencing disarray as a result of the fallout of the FTX exchange platform. BlockFi, a crypto lending exchange has recently put a hold on customers’ withdrawal following the financial crisis that has ensued with FTX.

BlockFi which was worth $3 million at one time announced earlier in the week that they will be putting a halt to withdrawals including deposits over a lack of uncertainty regarding issues with FTX. BlockFi had earlier in the year arranged a $680 million deal with FTX.US that included a $400 million credit facility and an option for FTX to purchase BlockFi.

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Elon Musk Weighs in on Sam Bankman-Fried Post FTX Meltdown

by Blockchain NewsNovember 12, 2022

The fallout of FTX, a crypto exchange platform has brought about turmoil in the blockchain industry.

Key industry experts and analyst have given their opinion on what they think resulted in the company’s liquidity issues and what they think about the CEO, Sam Bankman-Fried before and after the company’s crisis. Bankman-Fried has been alleged to have mishandled customers’ funds and is currently facing an investigation from regulatory agencies in the United States.

Elon Musk, the richest man on earth and the CEO of Twitter has shared his opinion on what he thinks about Bankman-Fried amidst the fallout of FTX in a Twitter space hosted by Mario Nawfal with over 60,000 listeners.

Musk said that Bankman-Fried reached out to him and that he was interested in collaborating with him to buy Twitter in March. He added that he hadn’t heard of Bankman-Fried prior to their half-hour conversation on phone. According to Musk, his bullshit meter alert came off during the conversation and he thinks that Bankman-Fried is full of Bullshit.

Musk also told listeners to be careful when transacting with crypto. “Not your keys, not your wallet,” says Musk. What this means is that if users’ money is on an exchange they do not own the keys, the exchange does. If things go wrong like with FTX, users do not have the rights to the crypto because they do not own it. But if your crypto is on a ledger customers own the key.

Turmoil in the Crypto Space

The ongoing issues in FTX have brought about a drop in crypto market capitalization. The total digital currency market capitalization has fallen below $900 billion for the first time since January 2021 and is now at $874.74 billion.

On the part of investors, crypto users have decided not to bear the brunt of failed crypto exchanges and so they have been withdrawing their money from crypto exchanges. Billions of dollars have been withdrawn across crypto exchange platforms since the fallout of FTX.

Many traders have taken the initiative to withdraw their funds into a wallet they control in order to avoid similar scenarios as those recorded in the cases of Voyager Digital and Celsius Network which went bankrupt and locked up investors’ funds to date.

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Tagged : Bankruptcy / Elon Musk / FTX / News / Sam Bankman-Fried

Binance CEO Says the Industry has been Setback a Few Years With FTX Saga

by Blockchain NewsNovember 12, 2022

The blockchain industry has been experiencing a lot of challenges due to the fallout of one of the biggest crypto exchanges, FTX.

So many notable industry experts and stakeholders have given their opinions on what they thought brought about the current crisis in FTX. Some have also highlighted what they think the industry will look like going forward.

The CEO of the largest cryptocurrency exchange, Binance, Changpeng Zhao, has shared his thoughts on how the cryptocurrency market would rebound following the demise of FTX. Zhao expressed his views during the most recent Indonesia Fintech Summit. Zhao stated that the incident with FTX was disastrous for the sector and significantly undermined customers’ confidence.

“I believe that we have essentially taken a couple of years back. Regulators will examine this industry much more closely going forward, which is probably for the best, to be honest”, says Zhao during the interview.

Zhao also highlighted that while retail investors may experience a setback in the short term due to the collapse of FTX, he believes that debates about how to manage risks throughout the crypto ecosystem should start now to avoid similar occurrences.

A Call to Action for Crypto Exchanges

In the midst of the ongoing saga with FTX, the Federal Deposit Insurance Corporation (FDIC), a US government agency burdened with the responsibility of preserving the financial industry, has issued a warning letter to five crypto companies to stop making false claims about their customers that they are insured. The erring companies include FTX US, Cryptonews.com, Cryptosec.info, SmartAsset.com, and FDICCrypto.com.

The FDIC’s letter highlighted a tweet from FTX.US regarding the situation where the President of FTX.US, Brett Harrison, stated that “direct contributions from employers to FTX and stocks are stored in FDIC-insured accounts.”

FTX.US and SmartAsset.com responded to the letter by saying that they have removed the content from their online platforms.

In a bid to ensure safety in the crypto space, Cyprus officials are reportedly about to suspend the FTX’s European license due to its recent instability.

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Tagged : Binance / Changpeng Zhao / Crypto / FTX / Industry Expert

FTX Officials Says the Exchange Has Been Compromised by Hackers

by Blockchain NewsNovember 12, 2022

The collapse of the FTX exchange has been received by shock amongst crypto users and industry experts. A recent news update has revealed that the FTX exchange was compromised by hackers.

FTX Telegram admin gave the report on Telegram while warning customers not to open the FTX website because it has been hijacked by scammers. The admin initially stated that funds were removed from the website, but that statement has been retrieved. The admin, however, hinted that some funds were retrieved.

Rynes Miller, a General Counsel at FTX.US has commented following the alleged hack on the FTX exchange.

He stated on Twitter that the examination of unusual wallet movement patterns associated with the consolidation of foreign exchange accounts across exchanges is uncertain because facts as regards moves are not clear. He, however, promised to share more information if anything surfaces.

While there is not much information on the current situation of FTX, some users have commented that they can no longer log into FTX applications and websites. Others have also commented that their wallet balance is showing 0.

The news is coming shortly after FTX promised to resume withdrawals on Ethereum (ETH) on Friday. “Matic – if you would like to withdraw Matic please cancel your withdrawal and request it as erc20 Matic”, as announced on the FTX Twitter page.

FTX Files for Bankruptcy

FTX has announced filing for bankruptcy protection in the United States following its financial situation. Around 130 additional associated businesses were listed in the bankruptcy petition, including FTX US and Alameda Research, the trading firm for the exchange. This was announced shortly after Sam Bankman-Fried resigned as the CEO of FTX.

The new CEO of FTX, John J. Ray III stated on Twitter that the file for bankruptcy in the U.S. is necessary at the moment so that FTX can assess its current situation and proffer solutions on how stakeholders can revolver their funds.

Ray also highlighted that FTX possesses important assets that can only be managed profitably through a planned, collaborative process.

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Tagged : Cybercrime / Exchanges / FTX / Hack

FTX to Have Its European Operating License Suspended

by Blockchain NewsNovember 12, 2022

Following its turmoil, the FTX’s European license is now said to be soon suspended by Cyprus regulators, according to a report.

The finalization of the suspension would happen on Friday, said Bloomberg, citing people with knowledge of the matter. Meanwhile, on Nov 9, CySEC requested FTX Europe to “suspend its operations and to proceed immediately with a number of actions for the protection of the investors”

About two months ago, crypto exchange FTX announced it had acquired an EU license that enables it to operate across Europe. FTX was granted the license by the Cyprus Securities and Exchange Commission. The exchange had to meet some requirements outlined in the European Union’s MiFID II directive. Some of the conditions included the segregation and protection of client funds, business transparency, and capital adequacy.

Meanwhile, months after obtaining the license, FTX was investigated when a balance sheet relating to its sister company Alameda Research was leaked. The balance sheet revealed crucial liabilities and holdings of FTT – FTX’s exchange token.

Following that, Binance CEO Changpeng Zhao (CZ) announced it would be liquidating all of its holdings of FTT. According to Binance Co-founder Yi He, the company’s decision to sell its FTT holdings was based solely on a pure investment-related exit decision.

However, some believed there was more to it, causing investors to panic and the FTT token to crumble, affecting the crypto market and the exchange’s reputation. As reported by Blockchain.News, FTX’s fall might hurt the crypto regulation lobby.

Chairman of the Securities and Exchange Commission (SEC) Gary Gensler, in an interview with CNBC, said since the exchange has a huge influence in the space with many top-profile celebrities as its ambassadors, it gives it a massive sway over investors.

According to Gensler, investors and the public can fall prey to celebrity promotions – a trait that showed up as very prominent over the past year. Gensler added, “I think that investors need better protection in this space. It’s a field that’s significantly non-compliant, but it’s got regulation.”

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Tagged : Binance / Bitcoin / Blockchain / FTX / News / Regulators

FTX Enters Bankruptcy as Sam Bankman-Fried Steps Down as CEO

by Blockchain NewsNovember 12, 2022

Troubled crypto exchange FTX filed for Chapter 11 bankruptcy protection in the U.S., with Sam Bankman-Fried resigning as the CEO.

The bankruptcy application included approximately 130 more affiliated companies including Alameda Research, the exchange’s trading firm, and FTX US, the company’s U.S. subsidiary.

According to an FTX statement posted on Twitter, John J. Ray III took over as the CEO of the FTX Group.

Ray pointed out:

“The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders.”

FTX also indicated that it comprised at least 100,000 creditors, with assets ranging between $10 billion and $50 billion. Liabilities were valued at a similar range.

Ray noted:

“The FTX Group has valuable assets that can only be effectively administered in an organized, joint process. I want to assure every employee, customer, creditor, contract party, stockholder, investor, governmental authority and other stakeholder that we are going to conduct this effort with diligence, thoroughness, and transparency.”

In a matter of days, FTX’s valuation nosedived from $32 billion to bankruptcy based on a liquidity crisis, given that customer withdrawals went through the roof. Reportedly, a giant withdrawal surge of $6 billion in cryptocurrencies was witnessed in just 72 hours.

Furthermore, the Binance takeover bid was halted, citing FTX’s misappropriation of customer funds, Blockchain.News reported.

“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com,” Binance stated.

Therefore, the liquidity crunch at FTX might have emanated from Sam Bankman-Fried secretly transferring at least $4 billion to boost Alameda Research, with part of the funds being customer deposits.

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Tagged : Alameda Research / Bankruptcy / Crypto Exchange / Cryptocurrencies / Exchanges / FTX / Sam Bankman-Fried