Five Things Investors Should Be Aware Of As Crypto Fallen Stars Pile on Sam Bankman-Fried
Traders and investors looking for an edge have had to find another way to invest in the crypto markets. It’s a new world and there’s no doubt that the fall of some of the biggest names in the space has shaken confidence in the industry. As a result, it’s become a race to get into the crypto market, and some investors are taking risks that they never would have before. But some are also taking the risk of losing their money in the process. Here are five things investors should be aware of as the crypto market continues to struggle.
FTX collapse
FTX founder and former CEO Sam Bankman-Fried is being investigated for his role in the FTX collapse. Bankman-Fried’s alleged mismanagement of FTX’s finances has been blamed for the collapse of the crypto exchange. A number of federal prosecutors and other investigators have begun looking into the case. Bankman-Fried has been accused of inappropriate behavior and may face criminal charges.
FTX was launched in the Bahamas, where financial regulation is lax. The exchange promoted itself as a way to buy and sell virtual currencies. It attracted thousands of small investors and promoted itself as a new technology startup. Bankman-Fried’s team promoted the exchange as an important part of the crypto market.
Bankman-Fried’s relationship with Alameda Research, a onetime pillar of the crypto market, has been a point of contention. Alameda traded heavily on the FTX platform. When the crypto market crashed, Alameda faced a huge funding gap. If FTX had not liquidated the position, the fund would have gone bankrupt.
Genesis’ lending unit had about $2.8 billion in active loans in the third quarter
Earlier this year, Genesis suffered major losses as a result of the failure of hedge fund Three Arrows Capital. Genesis had loaned more than two billion dollars to Three Arrows, and Genesis now has a claim for $1.2 billion against Three Arrows. The firm filed for bankruptcy in the US.
As a result, Genesis Global Capital halted withdrawals and ceased accepting new redemptions. Genesis Global Capital, which is a unit of Digital Currency Group, caters to institutional consumers and financial institutions. Genesis Global Trading, which acts as Genesis Global Capital’s broker-dealer, also temporarily halted new loan originations and redemptions.
Genesis Global Capital, which has been one of the major crypto lenders, has sought new advisers to help resolve its liquidity problems. Genesis hired financial consulting firm Alvarez & Marsal, and investment banking firm Moelis & Company. They will help Genesis explore all options and provide advice to Genesis on how to address the liquidity crisis.
Binance’s deal to acquire FTX
Earlier this week, Binance announced its plans to acquire rival FTX, which is controlled by crypto tycoon Sam Bankman-Fried. The announcement came after months of public battles between the two firms.
According to Axios, Binance and FTX jointly shared the news of their deal on social media before publicly announcing the news to investors. The two firms later announced that the deal was a non-binding agreement.
The news of Binance’s plan to acquire FTX was followed by a dramatic drop in the value of FTX’s native token. The FTT price crashed by 80% in a single day. The value of the token fell by around $2 billion in the days after the announcement.
A day after the announcement, Binance and FTX announced a non-binding agreement to acquire the other’s businesses for an undisclosed amount. However, Binance said it would not proceed with the acquisition because it is “not ready to consummate the deal.” FTX said the deal is still in the works.
Semafor
FTX was one of the world’s largest cryptocurrency exchanges. The company was also a big sponsor of Formula One. The company’s biggest blunders included its alleged failure to register its own coins and its misuse of customer funds, which led to a crisis. Some legal experts claim that FTX was a Ponzi scheme.
The company’s illustrious founder, Sam Bankman-Fried, was a notable political donor, contributing tens of millions of dollars to Democratic party politicians, non-profit media vehicle organizations, and other worthy causes. Bankman-Fried was also one of the early investors in Semafor, a crypto startup which was reportedly making $50 million in annual revenue.
Bankman-Fried was also a big fan of the Semafor sexiest-looking website. Its most prominent feature was the ability to buy and sell crypto in exchange for fiat currency. The site has also been accused of selling unregistered securities.
Three Arrows Capital
FTX, the crypto exchange owned by Sam Bankman-Fried, has filed for Chapter 11 bankruptcy protection in the United States. It is the latest in a string of troubled crypto projects. This has led to a massive rush to retrieve funds from the stricken firm.
FTX’s demise is also affecting other cryptocurrency platforms. As its assets were converted to ether in recent days, investors have piled in with bearish bets. These include Robinhood and Coinbase stocks, which closed down 14% and 10%, respectively. The collapse of Bankman-Fried’s crypto empire could further ravage the worst performing asset class.
FTX’s collapse has also given Sam Bankman-Fried’s trading arm, Alameda Research, an opportunity to join the fray. Bankman-Fried’s trading firm holds the FTX token, which grants holders discounts on trading fees.
