The legal repercussions of the circumstances that led to the collapse of cryptocurrency exchange FTX in less than two weeks and the company's filing for Chapter 11 bankruptcy on November 11 are likely to take considerably longer to manifest. A lot of crypto enterprises and businesses outside the sector, in addition to over a million individual investors, had exposure to FTX. As new details emerge, the list below is probably going to get longer.
KEY LESSONS
- A rising number of businesses with a focus on cryptocurrencies have admitted to having some exposure to the defunct FTX exchange.
- Among them are Binance, Genesis, Galaxy Digital, Coinshares, Coinbase, and numerous other businesses.
- Given that FTX has sought Chapter 11 bankruptcy protection, it is uncertain if these companies will be able to recoup their FTX-related funds.
Binance
Binance, an industry leader and FTX rival, disclosed that it had previously held $580 million worth of FTT, FTX's native coin. On November 14, CEO Changpeng "CZ" Zhao stated that Binance had sold "quite a little part" of its holding, indicating that it may still be heavily exposed to FTX.
With CZ publicly announcing in early November that his exchange would sell its share in FTT, and then agreeing to and swiftly withdrawing from a proposal to bail out the struggling cryptocurrency exc.
BlockFi
Due to its exposure to FTX, cryptocurrency lender BlockFi is on the verge of going out of business. BlockFi received a $400 million revolving credit facility from FTX in July 2022, along with the option to purchase the lender for up to $240 million. Early in the month, BlockFi put a halt to withdrawals from its platform due to a lack of clarity on FTX.
Trading Genesis
Genesis Trading is another cryptocurrency business that has a substantial exposure to FTX. On Nov. 10, the cryptocurrency broker reported having around $175 million in funds parked on FTX. Nevertheless, Genesis had no direct contact with FTT. Due to the FTX situation, Genesis postponed some withdrawals through its platform. The trading company of FTX founder Sam Bankman-Alameda Fried's Research suffered a loss of around $7 million as a result of Genesis's "hedged and sold collateral," according to a separate announcement made by Genesis on Nov. 9. Gemini, a cryptocurrency exchange and a lending partner of Genesis' Earn product, announced delays on withdrawals after learning the news.
Galois Financial
FTX is heavily exposed to the non-crypto firm Galois Capital, a hedge fund. Kevin Zhou, the fund's co-founder, revealed at the beginning of November that around $100 million, or about half of its capital, was "stuck" on FTX. Unspecified fraction of the assets may take "a few years" to recover, according to Zhou.
Samsung Digital
As of the beginning of November, Galaxy Digital, a provider of financial services for cryptocurrencies, has exposure to FTX worth close to $77 million. Of those monies, over $47 million were in the "withdrawal process," albeit as of mid-November, it was unclear where they stood.
Multicoin Investments
In a statement to partners of the company's "Master Fund," the major cryptocurrency venture capital firm Multicoin Capital stated that around 10% of the fund's total assets under management were held in pending withdrawals on FTX. The amount of assets locked on FTX in dollars was not mentioned in the letter.
Explorer Digital
What happens to FTX will have a significant impact on Voyager Digital's future for a number of reasons. When FTX declared bankruptcy, the bankrupt crypto lender had a balance of almost $3 million. In September of this year, FTX made a $1.4 billion winning offer for the assets of Voyager. Voyager is currently seeking a new bidder following the failure of FTX. According to Voyager's legal counsel, FTX broke its agreement to save Voyager from bankruptcy.
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Crypto.com
Prior to FTX's failure, the Singaporean cryptocurrency exchange Crypto.com transferred about $1 billion to it. However, by early November, the majority of these money had been recovered, leaving Crypto.com's exposure during the FTX liquidity crisis to be only $10 million or less.
CoinShares
A statement dated Nov. 10 states that European digital asset management CoinShares has exposure to FTX worth more than $30 million. Considering CoinShare's net asset value at the end of the third quarter, which was over $282 million, this risk is rather minor. In recent weeks, according to CoinShares, it "substantially cut" its FTX exposure.