Latest from FTX: Crypto fears contagion as it owes billions to creditors

(Bloomberg) — Sam Bankman-Fried’s failed crypto exchange FTX owes its top 50 unsecured creditors a total of $3.1 billion. FTX Trading Ltd. and about 100 related companies are beginning a strategic review of global assets.

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Investors continue to pull funds from digital asset exchanges despite the latter’s efforts to reassure markets about their stability. Crypto lender BlockFi Inc. is on the verge of its own Chapter 11 filing.

Crypto markets are in reverse, sustaining weekly losses that pushed bitcoin – the largest token – to around $16,000. Second-ranked Ether also struggled amid indications that some of the $663 million drained from FTX as it slipped to bankruptcy, they are now transferred from the token.

Key stories and developments:

  • FTX owes its 50 largest unsecured creditors more than $3 billion

  • Crypto markets shrink as funds drained from FTX shift from Ether

  • Wall Street Beat: FTX Tutorial on Debt and Token Funding

  • FTX’s point of no return was Ellison’s tweet, Trade Data Show

  • Bankman-Fried’s Island Haven has been gaining attention since the end of FTX

(Time references are New York unless otherwise noted.)

Crypto Markets Lower as Funds Ditch Ether (12:00pm HK)

Bitcoin has lost about 3% in two days, while the second Ether is roughly 7% lower. Meme token Dogecoin is down 11%.

Ether has recently underperformed bitcoin in part amid speculation that some of the $663 million drained from FTX since it went bankrupt is now being transferred from the token. The person or entity that attacked FTX emerged last week as one of the world’s largest holders of Ether, holding around $288 million.

Ballet’s Lee says we need to overcome ‘amateurs’ in digital asset sector (11:45am HK)

Bobby Lee, CEO and founder of crypto storage provider Ballet Global, said in an interview that “bad actors” who are poorly managed must be “cleaned up” to restore faith in crypto. He added that “we need to get past this early amateur stage in crypto.”

Lee said the recent problems with virtual coins will set the industry back a year or two. He predicts that Bitcoin could fall to $10,000 if crypto markets are hit by more major crashes.

Bill Ackman says he’s invested in crypto (6:25am HK)

The CEO of Pershing Square said in tweets, laying out his thoughts on the crypto industry, that he has investments in a number of crypto projects, including venture capital funds and firms that help comply with or reduce fraud in the industry. Crypto investments represent less than 2% of his assets, he added.

Ackman said he remains positive about crypto in general despite recent problems, comparing its potential future impact on the economy and society to that of the telephone and the Internet.

Celsius has been weak on crypto custody, Examiner finds (12:45pm HK)

A new report on the bankrupt crypto lender details flaws in the controls and operations of two of the company’s product offerings.

The programs, Custody and Withhold, allowed users to keep their digital coins with the lender while retaining ownership of them. Users of the programs argue that they should not be lumped in with other unsecured creditors and should be reimbursed in full.

Researcher Shoba Pillai found that Celsius launched the Custody program “without sufficient accounting and operational controls or technical infrastructure.” As a result, the Custody portfolios were overfunded by June 10th, but then became underfunded by $50.5 million – a 24% deficit – by June 24th.

Vitalik Buterin: FTX Offers Crypto Tutorials (23:00 HK)

Despite the recent upheaval, Buterin said the underlying blockchain layers and decentralized finance protocols are working “flawlessly.”

“What happened at FTX was, of course, a huge tragedy,” he told Bloomberg. “However, many in the Ethereum community also see the situation as confirmation of what they’ve believed all along: centralized everything by default is suspect.”

FTX owes top 50 unsecured creditors more than $3 billion (22:45 HK)

Bankman-Fried’s bankrupt crypto empire owes its top 50 unsecured creditors a total of $3.1 billion, court documents show.

FTX-related entities owe its largest unsecured creditor more than $226 million, according to a redacted list in court documents filed late Saturday.

They are all listed as clients and 10 have claims of more than $100 million each, the filings show.

The top 50 claims are from customers owed $21 million or more.

FTX begins global asset review as part of Chapter 11 (3:18am)

FTX Trading Ltd. and about 100 subsidiaries are beginning a strategic review of global assets as part of the Chapter 11 bankruptcy process.

“Based on our review this past week, we are pleased to learn that many of FTX’s regulated or licensed subsidiaries, in and outside the US, have solvent balance sheets, responsible management and valuable franchises,” FTX Group’s new CEO John J. Ray III said in a statement.

The FTX companies, known as the FTX Debtors, have engaged Perella Weinberg Partners LP as the lead investment bank and have begun preparing certain assets for sale or reorganization, according to the statement.

FTX Fires Sam Bankman-Fried’s Top Deputies, WSJ Reports (10:07 PM)

FTX said it fired three senior deputies to former CEO Sam Bankman-Fried, the Wall Street Journal reported.

FTX co-founder and chief technology officer Gary Wang, engineering director Nishad Singh and Caroline Ellison, who ran Alameda Research, were fired from their positions, the paper said, citing an FTX spokeswoman late Friday. The newspaper did not say whether it had tried to contact the executives for comment.

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