by
New Delhi
CNN Business
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Aftershocks from Massive Trillion Dollar Crypto Industry Earthquake Last Week Continued to Reverberate on Monday.
Digital currency prices fell again as the crisis engulfing the market deepened over the weekend. Bitcoin, the world’s largest cryptocurrency, is down about 65% so far this year. It traded at about $16,500 on Monday, according to CoinDesk. Analysts think it could fall below $10,000.
Ether, the world’s second most valuable cryptocurrency, doesn’t do much better. It traded at about $1,230 on Monday, after falling more than 20% in the past week, CoinDesk data showed.
The plunge comes as investors continue to grapple with the stunning implosion of FTX, one of the industry’s largest and most powerful players.
Some industry insiders have said the company’s demise had triggered a “Lehman moment,” referring to the investment bank’s 2008 collapse that sent shockwaves across the world.
The episode has not only destroyed confidence in the crypto industry, but will also encourage global regulators to tighten the screws. Some of the industry’s biggest names said they would welcome the research if it helps restore confidence in the industry.
There is a “a lot of risk,” said Changpeng Zhao, who runs Binance, the largest crypto exchange. “We’ve seen things go crazy in the industry over the past week so we do need some regulation, we have to get this right,” he added.
CZ, as he is known, spoke at a conference in Indonesia on Monday. He said last week that comparing the current crypto turmoil to the global financial crisis of 2008 is “probably an accurate analogy”.
Binance had previously reached a preliminary rescue agreement with FTX week, but that transaction fell apart almost immediately.
FTX has continued its downward spiral after filing for bankruptcy on Friday. Another big name in the industry has also admitted to mishandling funds, scaring investors even more.
This is how things have developed in recent days, showing that the crisis has only just begun.
FTX moved its headquarters from Hong Kong to the Bahamas last year, with former CEO Sam Bankman-Fried labeling it as “one of the few places to set up a comprehensive framework for crypto” at the time.
On Sunday, authorities in the Bahamas said they were investigating possible criminal misconduct surrounding the company’s implosion.
“In light of the global collapse of FTX and the preliminary liquidation of FTX Digital Markets Ltd., a team of financial investigators from the Financial Crimes Investigation Branch is working closely with the Bahamas Securities Commission to investigate whether criminal misconduct has occurred” , according to the Royal That reports the Bahamas police.
It is not clear what specific aspect of the rapid collapse of the FTX authorities is being investigated.
Bankman-Fried, the 30-year-old founder of the stock exchange, was one of the faces of the crypto industry, which once amassed a fortune totaling $25 billion that has since disappeared. He has been seen as the white knight of the crypto world, who previously intervened to rescue companies struggling after the TerraUSD stablecoin collapse in May.
Backed by elite investors such as BlackRock and Sequoia Capital, FTX quickly became one of the largest crypto exchanges in the world. The collapse was preceded by the decision to borrow billions of dollars in client assets to fund risky betting by Bankman-Fried’s crypto hedge fund Alameda, The Wall Street Journal reported Thursday.
The Bahamas investigation came a day after the bankrupt stock exchange said it was launching its own investigation.
On Saturday, FTX said it is investigating whether crypto assets have been stolen. Crypto risk management firm Elliptic said $473 million in crypto assets appear to have been looted from FTX.
FTX General Counsel Ryne Miller said on Saturday that the company “took precautions” on Friday and took all of its digital assets offline. The process was speeded up Friday night “to limit the damage in the detection of unauthorized transactions.”
Miller said FTX was “examining anomalies” regarding movements in crypto wallets “related to consolidation of FTX balances across exchanges.”
The facts are still unclear and the company will share more information as soon as possible, he added.
As scrutiny of major players in the crypto world grows, Singapore-based Crypto.com admitted to accidentally sending more than $400 million in ether to the wrong account.
CEO Kris Marszalek said on Sunday that the transfer of 320,000 ETH was made three weeks ago to a corporate account with rival exchange Gate.io, rather than to one of its offline or “cold” wallets.
Although the funds have been recovered, users are withdrawing their funds from the platform, fearing that it could collapse like FTX.
“Since then, we have strengthened our process and systems to better manage these internal transfers,” Marszalek tweeted on Sunday. According to CoinDesk, the platform’s native token is down more than 20% in the past 24 hours.
Marszalek said Monday that his company has acted as a “responsible, regulated player since its inception” and will soon “prove all the naysayers…wrong with our actions.”
Crypto.com has 70 million people worldwide on its platform and its business model is “completely different” from FTX, he added.
“We’ve never taken any third-party risks, we don’t have a hedge fund, we don’t trade client assets,” he said.
Marszalek said his company will soon publish an audited report detailing its reserves.
At the Bali conference, Binance boss Zhao signaled that regulating the industry will not be easy.
The authorities’ “natural response is to borrow regulation from traditional banking systems…but crypto exchanges work very, very differently from banks,” he said.
“It’s very, very normal for a bank to move user assets for investments and try to recoup,” he explained. If a crypto exchange operates that way, it is “almost guaranteed to go down,” he said. adding that the industry collectively has a role to play in protecting consumers.
“Regulators have a role… but none can protect a bad player,” he said.
— Matt Egan, Ramishah Maruf and Allison Morrow contributed to this report.
