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Bitcoin turns negative as FTX fallout spreads; Biance CEO sees “cascading effects” By Investing.com

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By Geoffrey Smith 

Investing.com — prices turned negative again on Friday, unable to sustain an overnight bounce as the fallout from FTX’s collapse spread.

By 09:20 ET (14:20 GMT), Bitcoin was down 5.6% on the day at $16,619, as platforms and networks with exposure to Sam Bankman-Fried’s empire took drastic steps to insulate themselves, while the head of the world’s biggest crypto exchange warned that worse is still to come.

FTX, until recently the white knight of a crypto universe damaged by the sharp drop in digital assets earlier this year, had hurtled toward oblivion on Thursday after allegations of wrongdoing at the exchange finally triggered regulatory intervention against it. 

The Wall Street Journal reported that the Department of Justice and Securities and Exchanges Commission are investigating its founder and CEO for suspected fraud, even though the self-styled ‘SBF’ had tried to ringfence his regulated U.S. business from the troubles of its Bahamas-based parent, FTX.Com. The WSJ reported that FTX had misappropriated client deposits, lending them to a hedge fund affiliate, Alameda Research, which subsequently lent the money back to FTX in ways designed to cover up their investment losses. 

The Securities Commission of the Bahamas – whose job it was to stop fraudulent behavior by FTX’s owners and managers – froze its assets after reading the WSJ’s report and applied to put it into provisional liquidation. Regulators in Japan and Australia also took similar action against FTX’s local subsidiaries. 

The knock-on effects were immediate. BlockFi, a platform that Bankman-Fried had rescued with a total of $650 million loan in liquidity at the time of the Terra/Luna collapse in the spring, said it had again suspended customer withdrawals.

BlockFi’s action made clear that FTX’s troubles extended not only to the Bahamas-based parent, given that its CEO Flori Marquez had reassured clients earlier in the week that it would not be affected by FTX.com’s troubles, since its $400M revolving credit facility was agreed with FTX.US.

Binance CEO Changpeng Zhao, who earlier in the week had pulled out of a mooted rescue deal for FTX.com after less than a day of due diligence, said he expects to see further contagion.

“With FTX going down, we will see cascading effects,” Zhao told a conference in Indonesia. “Especially for those close to the FTX ecosystem, they will be negatively affected.”

Story Credit: investing.com

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