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FTX Founder Dismisses Balance Sheet Concerns After Rival Binance Announces Token Liquidation

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By Reuters | Updated: 8 November 2022

Sam Bankman-Fried, the billionaire founder of crypto exchange FTX, sought to reassure crypto investors on Monday after a rival exchange, Binance, said it would liquidate its holdings of FTX’s native token.

Binance’s CEO, Changpeng Zhao, said in a series of tweets on Sunday that his firm would sell its holdings of the FTX token “due to recent revelations that have come to light.” Zhao did not specify which revelations he was referring to or how much of the token Binance held.

2) FTX has enough to cover all client holdings.

We don’t invest client assets (even in treasuries).

We have been processing all withdrawals, and will continue to be.

Some details on withdrawal speed: https://t.co/tSjhJW3JlI

(banks and nodes can be slow)— SBF (@SBF_FTX) November 7, 2022

“A competitor is trying to go after us with false rumors,” FTX’s Bankman-Fried said in a series of tweets on Monday. “FTX is fine. Assets are fine.”

Bankman-Fried said in his tweets that FTX keeps “audited financials” and is “highly regulated”. He did not initially specify which competitor he was referring to, but tagged Zhao in a later tweet, saying “I’d love it, @cz_binance, if we could work together for the ecosystem.”

Crypto enthusiasts had raised questions on Twitter last week about FTX’s token, following a report from crypto news website CoinDesk about a leaked balance sheet from Alameda Research, a crypto trading firm founded by Bankman-Fried that maintains close ties with FTX.

According to CoinDesk’s report, much of Alameda’s $14.6 billion (roughly Rs. 1,19,300 crore) in assets are held in FTX’s token, which is called FTT. Reuters was unable to independently verify the accuracy of the report or the origin of the leaked balance sheet.

Since the CoinDesk report on November 2, FTX’s token has shed around $400 million (roughly Rs. 3,200 crore) from its market cap as traders sold the token. It is trading near its lowest since February last year, according to CoinGecko data.

Alameda CEO Caroline Ellison also said in a tweet that the “balance sheet info which has been circulating recently” only showed a subset of Alameda’s corporate entities. The firm has more than $10 billion in assets that are not reflected in the CoinDesk report, she said.

Crypto investors have been on edge following a rocky summer, which saw token prices plunge as rising interest rates and a broader financial market downturn prompted investors to ditch riskier assets.

Mainstays in the industry like Singapore-based crypto hedge fund Three Arrows Capital and crypto lenders Celsius Network and Voyager Digital have filed for bankruptcy. FTX won a bid in September to buy the assets of Voyager, and Bankman-Fried has said his exchange is working to return money to Voyager customers.

© Thomson Reuters 2022

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FTX Collapse: Sam Bankman-Fried Reportedly Faces Market Manipulation Inquiry by US Prosecutors

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US prosecutors are looking into whether Sam Bankman-Fried controlled the prices of two interlinked currencies, TerraUSD and LUNA.
By Reuters | Updated: 8 December 2022

US federal prosecutors are investigating whether FTX’s founder Sam Bankman-Fried manipulated the market for two cryptocurrencies this May that led to their collapse and resulted in the implosion of his own cryptocurrency exchange, the New York Times reported on Wednesday.

The prosecutors are looking into whether Bankman-Fried controlled the prices of two interlinked currencies, TerraUSD and LUNA, to benefit the entities he controlled including FTX and Alameda Research, the report said.

The investigation is in its early stages, the newspaper said, adding that it is not clear whether prosecutors have determined any wrongdoing by Bankman-Fried, or when they began looking at the TerraUSD and Luna trades.

US federal prosecutors are investigating whether FTX’s founder Sam Bankman-Fried manipulated the market for two cryptocurrencies this May that led to their collapse and resulted in the implosion of his own cryptocurrency exchange, the New York Times reported on Wednesday.

The prosecutors are looking into whether Bankman-Fried controlled the prices of two interlinked currencies, TerraUSD and LUNA, to benefit the entities he controlled including FTX and Alameda Research, the report said.

The investigation is in its early stages, the newspaper said, adding that it is not clear whether prosecutors have determined any wrongdoing by Bankman-Fried, or when they began looking at the TerraUSD and Luna trades.

The crypto exchange filed for bankruptcy last month after a liquidity crisis that saw at least $1 billion (roughly Rs. 8,200 crore) of customer funds vanish. FTX’s demise comes after a string of meltdowns that have taken down other key players including Voyager Digital and Celsius Network and led some global investors to question the viability of the cryptocurrency sector.

In recent weeks, US authorities have sought information from investors and potential investors in FTX, according to two sources with knowledge of the requests.

Federal prosecutors in New York are asking for details on any communications such firms have had with the crypto firm and its executives, including Bankman-Fried, the sources said. Bloomberg previously reported the information requests.

FTX and Alameda research did not respond to Reuters request for comments.

© Thomson Reuters 2022

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iPod Co-Creator Tony Fadell Launches Ledger Stax Offline Cryptocurrency Wallet: All You Need to Know

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Tony Fadell's new hardware wallet, the Ledger Stax, is a credit-card sized device featuring a curved spine and electronic-ink display.
By Reuters | Updated: 7 December 2022

Tony Fadell, a well-known Silicon Valley executive known as the father of the iPod, on Tuesday unveiled his latest project – a hardware wallet used to store cryptocurrency offline. Fadell, 53, spent almost a decade at Apple under Steve Jobs, where he oversaw the design of the portable music player, and later helped create the company’s best-known device, the iPhone.

After quitting Apple in 2008, he launched Nest Labs, a smart home-devices company. Nest was later acquired by tech giant Google for $3.2 billion (roughly Rs. 26,400 crore).

Now Fadell has teamed up with Ledger, the French technology firm, to design a new offline cryptocurrency wallet.

Trading crypto requires the use of complex cryptographic keys, which are used to authorise transactions. These keys are typically stored online, for example with an online exchange, which can leave them more susceptible to hacking or theft.

The recent collapse of crypto exchange FTX, which has seen more than $1 billion (roughly Rs. 8,250 crore) of customer funds vanish, prompted an unprecedented surge in demand for offline, or “self-custody”, services such as Ledger.

Previous models released by Ledger, such as the Nano S and Nano S, have been shaped like USB memory sticks. Fadell’s new design, the Ledger Stax, is a credit-card sized device featuring a curved spine and electronic-ink display.

“All of the secure hardware up to this point was like all the MP3 players before the iPod, and it was time for an iPod,” Ian Rogers, chief experience officer at Ledger, told Reuters.

Fadell had previously expressed scepticism of some elements of “Web 3.0,” a catch-all term encompassing a host of next-generation decentralised technologies, including cryptocurrency and the metaverse.

The Ledger Stax will sell for $279 (roughly Rs. 23,000) online from early 2023.

© Thomson Reuters 2022

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Goldman Sachs Looking at Buying, Investing in Bargain Crypto Firms Impacted by FTX Collapse

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Goldman is doing due diligence on a number of different crypto firms, according to Goldman Sachs' head of digital assets.
By Reuters | Updated: 6 December 2022

Goldman Sachs plans to spend tens of millions of dollars to buy or invest in crypto companies after the collapse of the FTX exchange hit valuations and dampened investor interest.

FTX’s implosion has heightened the need for more trustworthy, regulated cryptocurrency players, and big banks see an opportunity to pick up business, Mathew McDermott, Goldman’s head of digital assets, told Reuters.

Goldman is doing due diligence on a number of different crypto firms, he added, without giving details.

“We do see some really interesting opportunities, priced much more sensibly,” McDermott said in an interview last month.

FTX filed for Chapter 11 bankruptcy protection in the United States on November 11 after its dramatic collapse, sparking fears of contagion and amplifying calls for more crypto regulation.

“It’s definitely set the market back in terms of sentiment, there’s absolutely no doubt of that,” McDermott said. “FTX was a poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform.”

While the amount Goldman may potentially invest is not large for the Wall Street giant, which earned $21.6 billion (roughly Rs. 1,78,129 crore) last year, its willingness to keep investing amid the sector shakeout shows it senses a long term opportunity.

Its CEO David Solomon told CNBC on November 10, as the FTX drama was unfolding, that while he views cryptocurrencies as “highly speculative”, he sees much potential in the underlying technology as its infrastructure becomes more formalised.

Rivals are more sceptical.

“I don’t think it’s a fad or going away, but I can’t put an intrinsic value on it,” Morgan Stanley CEO James Gorman said at the Reuters NEXT conference on December 1.

HSBC CEO Noel Quinn, meanwhile, told a banking conference in London last week he has no plans to expand into crypto trading or investing for retail customers.

Goldman has invested in 11 digital asset companies that provide services such as compliance, cryptocurrency data and blockchain management.

McDermott, who competes in triathlons in his spare time, joined Goldman in 2005 and rose to run its digital assets business after serving as head of cross asset financing.

His team has grown to more than 70 people, including a seven-strong crypto options and derivatives trading desk.

Goldman Sachs has also together with MSCI and Coin Metrics launched data service datonomy, aimed at classifying digital assets based on how they are used.

The firm is also building its own private distributed ledger technology, McDermott said.

‘Trusted’ players

The global cryptocurrency market peaked at $2.9 trillion (roughly Rs. 2,39,07,000 crore) in late 2021, according to data site CoinMarketCap, but has shed about $2 trillion (roughly Rs. 1,64,96,900 crore) this year as central banks tightened credit and a string of high-profile corporate failures hit. It last stood at $865 billion (roughly Rs. 7,100 crore) on December 5.

The ripple effects from FTX’s collapse have boosted Goldman’s trading volumes, McDermott said, as investors sought to trade with regulated and well capitalised counterparties.

“What’s increased is the number of financial institutions wanting to trade with us,” he said. “I suspect a number of them traded with FTX, but I can’t say that with cast iron certainty.”

Goldman also sees recruitment opportunities as crypto and tech companies shed staff, McDermott said, although the bank is happy with the size of its team for now.

Others also see the crypto meltdown as a chance to build their businesses.

Britannia Financial Group is building its cryptocurrency-related services, its chief executive Mark Bruce told Reuters.

The London-based company aims to serve customers who are eager to diversify into digital currencies, but who have never done so before, Bruce said. It will also cater to investors who are very familiar with the assets, but have become nervous about storing funds at crypto exchanges since FTX’s collapse.

Britannia is applying for more licenses to provide crypto services, such as doing deals for wealthy individuals, he said

“We have seen more client interest since the demise of FTX,” he said. “Customers have lost trust in some of the younger businesses in the sector that purely do crypto, and are looking for more trusted counterparties.”

© Thomson Reuters 2022

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US FTC Investigating Several Crypto Firms Over ‘Possible Misconduct’ Concerning Digital Assets

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The FTC has also pursued companies that presented themselves as cryptocurrency-related firms but which were allegedly nothing more than scams.
By Reuters | Updated: 6 December 2022

A US agency that probes allegations of deceptive conduct confirmed on Monday that it had investigations open into several cryptocurrency firms for “possible misconduct.” The Federal Trade Commission spokesperson declined to name the firms or say precisely what actions prompted the investigations.

“While we can’t comment on current events in the crypto markets or the details of any ongoing investigations, we are investigating several firms for possible misconduct concerning digital assets,” the spokesperson said in a statement.

Bloomberg said in a report that the investigation was linked to misleading advertising but the FTC spokesperson declined to confirm this.

The spectacular implosion of FTX recently sent fresh shock waves through the cryptocurrency industry, with the value of Bitcoin down sharply this year.

The Securities and Exchange Commission, which also has regulations mandating disclosures from individuals promoting securities, has cracked down on celebrity endorsements, including reality TV star Kim Kardashian on allegations of promoting a crypto token on her Instagram account without proper disclosure that she had been paid.

The FTC has also pursued companies that presented themselves as cryptocurrency-related firms but which were allegedly nothing more than scams.

Back in June, the FTC said in a report that more than 46,000 people reported losing over $1 billion (roughly Rs. 8,233 crore) in cryptocurrency scams since the start of 2021.

Nearly half the people who reported losing digital currencies in a scam said it started with an ad, post or a message on a social media platform, according to the FTC.

The craze for cryptocurrencies was at a fever pitch last year with Bitcoin hitting a record high of $69,000 (roughly Rs. 56 lakh) in November 2021.

Nearly four out of every ten dollars lost in a fraud originating on social media was lost in crypto, far more than any other payment method, with Instagram, Facebook, WhatsApp and Telegram being the top social media platforms in such cases, according to the FTC’s report.

© Thomson Reuters 2022

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FTX Collapse: US Authorities Reportedly Approach Investors for Information on FTX, Sam Bankman-Fried

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By Reuters | Updated: 2 December 2022

US authorities are asking crypto investors and trading firms who worked closely with FTX to hand over information on the company and its key figures including Sam Bankman-Fried and Caroline Ellison, Bloomberg News reported on Thursday.

The US Attorney’s Office for the Southern District of New York recently sent out a series of requests, asking recipients to hand over information on a list of FTX employees and associates, the report said, citing people familiar with the case.

Attorneys from the US Securities and Exchange Commission’s enforcement division also sent similar requests for information to companies that invested in or traded on FTX, the report added.

The regulator is trying to get a better sense of what FTX representatives told investors and whether any misrepresentations were made that would violate securities laws, according to the report.

The US Department of Justice’s bankruptcy watchdog earlier on Thursday called for an independent investigation into the collapse of crypto exchange FTX.

Sam Bankman-Fried, 30, founded FTX in 2019 and rode cryptocurrency boom to a net worth that Forbes pegged a year ago at $26.5 billion (roughly Rs. 2,16,560 crore). Bankman-Fried resigned as FTX’s chief executive officer the same day as the firm’s bankruptcy filing.

The liquidity crunch came after Bankman-Fried secretly moved $10 billion (roughly Rs. 81,700 crore) of FTX customer funds to his proprietary trading firm, Alameda Research, Reuters reported, citing two people familiar with the matter.

FTX’s downfall will be examined in several more congressional hearings this month, with the House Financial Services Committee set to hold the first in a series of meetings on December 13.

Last month, newly-appointed FTX CEO John Ray had said in a US court filing that there was flawed regulatory oversight and a lack of corporate control of the bankrupt crypto exchange founded by Sam Bankman-Fried.

US Attorney’s Office for SDNY, SEC, FTX and Caroline Ellison did not immediately respond to Reuters requests for comment. Bankman-Fried could not be immediately reached.

© Thomson Reuters 2022

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Kraken Crypto Exchange to Cut Global Workforce by 30 Percent Amid Crypto Winter

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By Reuters | Updated: 1 December 2022

Cryptocurrency exchange Kraken said on Wednesday it would cut its global workforce by 30 percent, or about 1,100 employees, citing tough market conditions that have crippled demand for digital assets this year. Higher interest rates and worries of an economic downturn have roiled cryptocurrencies as investors fled risky assets, with recent bankruptcies adding to the uncertainty.

“Since the start of this year, macroeconomic and geopolitical factors have weighed on financial markets,” the company said.

Kraken said it has seen a drop in trading volumes and fewer client sign-ups, adding that the layoffs will take total headcount to where it was 12 months ago.

Earlier this month, crypto exchange Coinbase slashed jobs in its recruiting and institutional onboarding teams.

Kraken, which earlier slowed hiring and pulled back marketing spending, said it was forced to cut jobs as it had exhausted other measures to bring expenses in line with current demand.

Meanwhile, the implosion of crypto exchange FTX, the highest-profile casualty of the year’s market turmoil, continues to ripple across the industry, with BlockFi filing for bankruptcy earlier this week.

The meltdown has dragged the price of the largest cryptocurrency, Bitcoin, to around a two-year low.

Global regulators have since been circling crypto firms with many seeking to set tough rules to govern the largely unregulated sector.

On Monday, the US Treasury Department’s Office of Foreign Assets Control said that Kraken had agreed to pay a fine to settle civil liability related to apparent violations of sanctions on Iran.

As part of the settlement with OFAC, Kraken will pay about $362,000 (roughly Rs. 3 crore), and “invest an additional $100,000 (roughly Rs. 81,18,000) in certain sanctions compliance controls.”

According to the OFAC statement, Kraken’s platform processed 826 transactions for users located in Iran between roughly October 2015 to June 2019.

At the time, Kraken maintained controls intended to prevent users from initially opening an account while in a jurisdiction subject to sanctions, but did not implement IP address blocking based on geolocation across its platform, the statement added.

In October, the Treasury Department had also fined crypto exchange Bittrex Inc $29 million (roughly Rs. 235 crore) in fines for “apparent violations” of sanctions on certain countries and anti-money laundering law.

© Thomson Reuters 2022

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