Sam Bankman-Fried’s arrest in the Bahamas pending a possible extradition to the US opens a fresh chapter in efforts to untangle whether his crypto empire was built using fraudulent methods.
Sam Bankman-Fried’s arrest in the Bahamas pending a possible extradition to the US opens a fresh chapter in efforts to untangle whether his crypto empire was built using fraudulent methods.
Regardless of the outcome, the demise of his digital-asset exchange FTX continues to shake the wider crypto market’s foundations.
Skittish investors are pulling money out of rival exchanges, fearful of having their assets stuck should any of those venues collapse. At least one major crypto firm has filed for bankruptcy in the wake of FTX’s unraveling, while two others were forced to suspend some withdrawals. A decentralized lending project has been rocked by a large default.
Below is a list of crypto companies and projects that are grabbing the spotlight as investors try to assess where vulnerabilities in the roughly decade-old industry could appear next.
Binance
With FTX gone and Bankman-Fried in a cell, Binance — personified by outspoken CEO Changpeng “CZ” Zhao — looms as the giant of the crypto industry. The exchange, which has licenses to operate in jurisdictions around the world but no formal headquarters, boosted its market share to more than 52% in spot trading, according to data from CryptoCompare. But while it’s benefited from some extent from FTX’s implosion, Binance has also been affected by the overall hit to investor confidence. Withdrawals totaled some $1.14 billion “today,” according to a tweet from Zhao posted Tuesday morning, New York time. Data from research firm Nansen, compiled earlier that same day, found that net outflows of digital assets from Binance amounted to roughly $3.7 billion over the past week. Nansen estimates that Binance has around $60 billion in assets.
Tether
Tether’s stablecoin USDT is a key pillar of the crypto architecture, enabling traders to move money onto and off crypto exchanges and serving as a safe haven among volatile digital assets. It’s market value of almost $67 billion is comfortably ahead of main competitors USDC and BUSD, a Binance-branded stablecoin. After FTX imploded in early November, users rushed to redeem USDT, briefly knocking the token from its dollar peg. Circulation has since bounced back slightly in the weeks since, now standing at around $65.8 billion according to data from CoinMarketCap.com.
Solana
Solana’s token was associated with Bankman-Fried, who supported the coin and its crypto ecosystem. The token has plunged around 60% since early November, compared to Bitcoin’s decline of closer to 15%. Bankman-Fried had pledged to support Solana projects, including a pledge of $100 million in gaming projects on its blockchain as part of a consortium of venture capital firms. Since early November, gaming tokens in Solana’s crypto ecosystem have plunged in value.
Digital Currency Group
Trouble has rippled through Digital Currency Group’s vast empire, beginning with Genesis. The crypto broker’s balance sheet revealed $2.8 billion in outstanding loans, with 30% of lending made to related parties including DCG, its parent company. Genesis is said to have warned of bankruptcy if it fails to raise sufficient funds, while its creditors have begun to organize and consult with restructuring lawyers. Gemini Trust Co., a key partner of the broker, said customer withdrawals were delayed on its Earn product in response to Genesis’s suspension of withdrawals. Meanwhile, a hedge fund is suing Grayscale Investments, also owned by Barry Silbert’s DCG, for information to investigate possible conflicts of interest and mismanagement of its Bitcoin fund.
Jump Crypto
Jump Crypto, a unit of the Chicago-based trading firm Jump Trading, is a major crypto market maker and a key backer of the Solana blockchain ecosystem. The company hasn’t disclosed a figure for its exposure to FTX’s collapse. Jump has tweeted its “exposure to FTX was managed in accordance with our risk framework,” and it is “well capitalized” and actively investing and trading. Jump also joined Binance’s Industry Recovery Initiative, contributing $25 million in initial commitment.
Signature Bank
Signature Bank, where FTX has bank accounts, said deposits from FTX represented less than 0.1% of the bank’s overall deposits. It does not lend crypto or provide crypto custody. As part of its plan to pullback from the crypto sector, Signature plans to shed as much as $10 billion in deposits from digital asset clients.
Silvergate
Silvergate, a crypto-friendly bank based in La Jolla, California, held deposits for FTX units and Alameda Research. US Senators are questioning Silvergate’s control, given findings that FTX received customer deposits through Alameda’s bank accounts. Silvergate CEO Alan Lane said the bank had conducted “significant due diligence” on both entities, and FTX represented less than 10% of its total deposits from digital asset customers. After BlockFi filed for bankruptcy, Silvergate disclosed that the crypto lender held less than $20 million in deposits at the bank.