The FTX saga is revealed more after the cryptocurrency exchange’s filing for bankruptcy

Cryptocurrency exchange FTX’s filing for bankruptcy on Friday didn’t stop the chaos surrounding the once important and trusted cryptocurrency trading venue.

From the filing that included 135 affiliated companies, millions of dollars worth of cryptocurrencies were stolen from the company, which is facing a deficit of between $ 6 billion and $ 10 billion. Bahamian officials are also investigating the matter.

“I don’t think it’s an understatement to predict that FTX’s bankruptcy will be the most complex in US history,” Caitlin Long, founder and CEO of Custody Bank, told Yahoo Finance Live. nut. This used to be a casino. Good release to them “.

From Friday to Sunday, the global cryptocurrency market cap fell 3% from $ 856 billion to $ 831 billion. Since November 1, it’s down 18% from just over $ 1 trillion, according to Coinmarketcap.

Here’s what took place over the weekend.

The FTX 100 Dollar Bill Crypto Coin Logo is displayed for illustrative purposes. FTX has filed for bankruptcy in the United States, seeking judicial protection while looking for a way to return money to users. (Photo illustration by Jonathan Raa / NurPhoto via Getty Images)

The FTX robbery on Friday

On Friday night, some $ 663 million worth of cryptocurrencies mysteriously came out of the wallets linked to the now failed exchange.

John Jay Ray III, the new CEO and CEO who was appointed less than 24 hours earlier, said in a declaration Saturday morning: “Unauthorized access to certain assets has occurred.”

According to blockchain analysis firm, Elliptic, of the total outflow, it is estimated that around $ 477 million was stolen, while the rest was moved to cold storage by FTX to safeguard it.

“The process has been accelerated tonight – to mitigate damage after observing unauthorized transactions,” FTX US General Counsel Ryne Miller, said on Twitter.

FTX declined to comment on the matter further.

Meanwhile, the thief was identified trying to transfer and sell funds through the US-based cryptocurrency exchange Kraken, the head of security said Saturday.

“We are committed to working with law enforcement to ensure they have everything they need to sufficiently investigate this matter,” said Kraken.

How much of those stolen funds will be returned matters. The Financial Times reported that FTX held approximately $ 900 million in liquid cryptocurrencies and $ 5.4 in illiquid venture capital investments against $ 9 billion in liabilities the day before filing for bankruptcy.

FTX in the Bahamas

On Thursday, the Bahamas security regulator froze the assets of FTX Digital Markets. On Saturday, the regulator announced that FTX had begun processing Bahamian fund withdrawals for which they had not been authorized.

On Sunday, the Bahamian police also gave a declaration stating that they are working with the country’s securities regulator to investigate FTX for criminal misconduct.

A person familiar with the matter confirmed to Yahoo Finance that Bahamian law enforcement “is forcing [Sam Bankman-Fried] to stay in the Bahamas “starting Saturday night. This followed speculation that Bankman-Fried and the company’s other top executives – technology chief executive Gary Wang and chief engineering officer Nishad Singh – were attempting to run away.

Under chapter 11

FTX will address the same “big legal issue” as cryptocurrency lenders Celsius Network and Voyager, Greg Plotko, legal partner of Crowell & Moring, told Yahoo Finance. This is whether the cryptocurrencies held in client accounts belong to the clients themselves or to the bankruptcy estate.

Unlike Celsius and Voyager, where the ownership line was less clear, the terms of service on FTX.com state to customers that “none of the digital assets in your account are owned, or will be or could be loaned to, FTX Trading. . ”

“There is also almost certainly an enormous amount of criminal fraud that has led to this scenario and as a result, we can expect this to be a very messy public process that will lead to bad publicity and regulatory backlash for the [crypto] industry, “Haseeb Quershi, a managing partner of venture capital firm, DragonFly Capital, told Yahoo Finance.

Like Quershi Dragonfly’s firm, several large crypto hedge funds and market makers have assets trapped on FTX, including Galaxy Digital, Multicoin Capital, Skip the tradeInvernomuto e Galois Capital.

“When you have these situations, there are a lot of institutions that want to get out of their positions. They don’t want to be stuck in bankruptcy for two years, waiting for payments,” Plotko said. There are already many holes in where all the money has gone. Institutions and individuals may want to sell out. “

FTX’s offering for Voyager Digital assets has ended

In September, bankrupt cryptocurrency lender Voyager announced that FTX through its US subsidiary (FTX US) had made the winning bid for its assets. But that “$ 1.4 billion offer to buy Voyager Digital customer accounts is now in serious jeopardy,” Jason DiBattista, head of legal analysis with LevFin Insights, told Yahoo Finance.

Voyager Digital has reopened the bidding process for its assets, according to a press release Friday from its unsecured creditors committee.

At the time of FTX’s filing for bankruptcy, Voyager held approximately $ 3 million worth of crypto tokens which it is unable to withdraw.

BlockFi?

Cryptocurrency lender BlockFi has also officially gone silent since then announcing a hold on customer withdrawals on Thursday night. Since then, a number of customers have noticed that their BlockFi credit cards no longer work.

Although BlockFi is not included in the FTX Chapter 11 filing, the company is expected to be a major creditor after taking out a $ 400 million emergency line of credit from FTX in late June.

Recently, on Monday, BlockFi attempted to relaunch its yield product. On Tuesday, COO Flori Marquez announced that the company was “fully operational. “BlockFi did not respond to comments on his status over the weekend.

(This story is in development and will be updated with information)

David Hollerith is a senior reporter at Yahoo Finance dealing with cryptocurrency and stock markets. Follow him on Twitter at @DsHollers

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