Cryptocurrencies, tokens, NFTs, virtual "assets" frauds

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FTX goes bankrupt: Sam Bankman-Fried fooled the crypto world and maybe even himself​

The scandal has shocked crypto players, who giddily celebrated Mr Sam Bankman-Fried as the J.P. Morgan of their times. PHOTO: NYTIMES


NOV 12, 2022

NEW YORK – Before the world began to grasp the truth about Mr Sam Bankman-Fried – before the panic, the investigations and, at last, the brutal collapse – an inkling of doom began to spread through his convoluted crypto empire.
All across FTX, the exchange that had transformed his mere initials into a symbol of a new kind of wealth and power, one question came up again and again: Where is SBF?
Mr Bankman-Fried, current and former employees say, seemed to have disappeared. Then, without explanation, a department nearly missed October payroll. Something was wrong.
Just how wrong is only now becoming blazingly clear. On Friday, after one of the most harrowing weeks in the young, freewheeling world of cryptocurrencies, his digital asset empire – all 130-plus entities – spiralled into bankruptcy.
The scandal has shocked the crypto players who giddily celebrated Mr Bankman-Fried as the J.P. Morgan of their times and left them grasping for parallels.
Is this crypto’s Lehman Brothers, a tale of unbridled risk? Or is it something darker: An Enron-style fiasco that could now expose rot and wrongdoing? The federal authorities are investigating just that.
As the Chapter 11 filings landed on Friday morning, questions were piling up, including the big one: Will some one million FTX customers ever get their money back? Some traders sensed trouble long before and ran for the exits before everyone else. Big names in Silicon Valley who embraced Mr Bankman-Fried seem certain to suffer humiliating losses.

By now, many of the broad outlines are widely known: Mr Bankman-Fried’s sinkhole of debt, blurred business interests and investigations into whether he misused customer funds; the unsteady assurance and the desperate race to raise money; the rivalry with Mr Zhao Changpeng and Binance, which threw FTX a lifeline only to take it back a day later.
But interviews with more than a dozen employees, former workers and people with direct knowledge of FTX and its sister companies paint a picture even more dire than previously realised. Mr Bankman-Fried, with his perpetual bedhead, tube socks and pledge to give away his fortune, had venture capital royalty, politicians and media personalities all fooled.
And he might have fooled himself along the way too.

Close ties​

Roughly two months before his unravelling, Mr Bankman-Fried was having trouble with a question that for most people would be simple: Where do you live?
“I, uh, so, sorry, I – I’m hesitating because I mostly sleep on a bag,” he said, in apparent reference to his beanbag chair. Mr Bankman-Fried was on a Zoom call, responding to questions from a group of reporters about the boundaries between FTX and Alameda Research, the crypto trading firm that functioned as his family office.
“I live, I don’t know, technically I live alone, but don’t sleep there. I mostly sleep on couches and beanbags,” he said. He was widely known to share a home in the Bahamas with roommates, including Alameda leadership.
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Left unsaid back then: There were few boundaries between the two companies. Mr Bankman-Fried at times dated Alameda chief executive Caroline Ellison, 27, crypto news site CoinDesk reported this week, citing people familiar with the matter.
An FTX spokesman could not immediately be reached for comment.
The ties between FTX and Alameda are at the heart of Mr Bankman-Fried’s downfall. The United States Securities and Exchange Commission is investigating how closely intertwined his businesses were and whether FTX mishandled customer funds.
The two companies played different roles: FTX was for trading, allowing customers to deposit funds and buy more than 300 tokens, using big loans to make larger, higher-risk bets.
It was also Mr Bankman-Fried’s brand. FTX’s logo was plastered on a Miami arena and patched on the uniforms of Major League Baseball umpires. It had star power: Supermodel Gisele Bundchen and National Football League quarterback Tom Brady held equity stakes and appeared in its Super Bowl ad, where they encouraged a cast of characters to join the fold of digital assets with a two-word question: “You in?”

Risky business​

Alameda, by contrast, mostly operated out of the spotlight. It had only about 30 employees, but minted US$1 billion (S$1.37 billion) in profit last year. Mr Bankman-Fried founded Alameda first, in 2017, after leaving trading firm Jane Street, where he was a trader who peers considered smart, if unspectacular. FTX came into existence two years later.
Pairing up a trading firm with an exchange is risky. To keep customer funds safe, these functions are separate in more regulated markets – rules that do not exist in crypto.
To some, it was an open secret that the two businesses had intricate financial ties. A person who raised money from Alameda Ventures, its venture capital arm, described receiving funds from FTX instead.
It was ultimately concerns about Alameda that threw Mr Bankman-Fried’s empire into crisis.
MORE ON THIS TOPIC
Rise and fall of crypto exchange FTX: A timeline
Explainer: How Binance and FTX sent shockwaves through the crypto world
Reports of an Alameda balance sheet showing outstanding debts to FTX through its FTT tokens made investors skittish. Panic fully set in on Nov 6, when Binance CEO Zhao, also known by his initials CZ, tweeted that his exchange was liquidating its holdings of FTT, worth more than US$500 million.
Mr Zhao offered to take over FTX on Tuesday, only to bail almost as quickly as he offered a rescue.
“The issues are beyond our control or ability to help,” Binance said on Wednesday.
Mr Zhao called it a “sad day”, and added a crying emoji.

Signs of trouble​

While FTX’s issues spilled out into public view only in recent days, Mr Bankman-Fried’s behaviour had been worrying direct reports for weeks.
Inside FTX, Mr Bankman-Fried disappeared for at least a month from top deputies, according to people familiar with the matter. One department had trouble meeting payroll weeks ago, with little explanation as to why, one of the people said.
It was not the first time that happened. Issues with pay started as early as the spring, when bonuses were delayed. All the while, the company pushed to have pay packages put in FTX equity, which is now worth next to nothing.

Mr Sam Bankman-Fried has come to embody two key tenets of the crypto industry – transparency and decentralisation. PHOTO: REUTERS
At the first sign of a liquidity crisis, and even earlier, the smart money headed for the exits. Prominent market makers and hedge fund traders began withdrawing millions of dollars from FTX, according to people familiar with the matter.
One red flag: Withdrawals that normally would take seconds required hours to go through, adding to concerns that something was off, one of the people said.
Still, large shareholders were blindsided. Many investors said they found out about FTX’s problems only when Binance extended its offer on Tuesday.
Even as the drama between FTX and Binance first unfolded, some investors and employees remained optimistic enough about FTX’s future that they were unwilling to sell their shares to prospective buyers, according to documents reviewed by Bloomberg. As at Monday, there were prospective FTX buyers who were unable to find willing sellers in the secondaries market, the documents showed.

Optimism erased​

That optimism quickly soured as the FTT token entered an 80 per cent freefall over the next 24 hours, leaving VC firms rushing to tally the damage. Sequoia Capital, one of FTX’s best-known backers, marked its stake down to zero, sharing its losses on Twitter.
Alongside customers, FTX employees described internal chaos as the crisis intensified. One said the balance sheet they had seen had not shown signs of liquidity problems, leading to fear there was a separate set of books.
Mr Bankman-Fried had come to embody two key tenets of the crypto industry – transparency and decentralisation. But behind the tweet threads and assurances about FTX’s position, those within the firm started to doubt what they really knew about him.
“There was this cult of personality around Sam Bankman-Fried, where he was viewed as this kind of visionary, once-in-a-lifetime mind,” said Ms Molly White, a 29-year-old software engineer and blogger behind “Web3 is Going Just Great”, which for more than a year chronicled stories of fraud in the world of virtual assets.
“People often ascribe genius to people who are just very wealthy, and I think that may have been a little what was happening,” she said.

Chasing cash​

As for that burning question – where was SBF as his empire collapsed – it is only starting to become clear.
Mr Bankman-Fried spent time in the Middle East desperately trying to raise capital in late October, holding meetings with Saudi Arabian sovereign wealth fund Public Investment Fund (PIF) and Abu Dhabi’s Mubadala Investment, according to people familiar with the matter. PIF and Mubadala representatives declined to comment.
Mr Anthony Scaramucci, who sold part of his SkyBridge Capital to FTX Ventures in September, helped raise capital.
“We were embarking upon helping him fund-raise. He had purchased 30 per cent of my business and so as good citizens, we were trying to help him around the world,” he said in a CNBC interview on Friday.
The talks failed to progress after FTX began its rapid implosion.
Meanwhile, with the boss away, some employees took matters into their own hands, looking for any way to raise cash.
Everything was up for grabs: FTX US Derivatives, an early platform for trading assets; clearing firm Embed, which handles trades; and even the naming rights to the Miami arena. Voyager, saved from bankruptcy by Mr Bankman-Fried, put out calls to investors in an attempt to buy itself back, according to a person familiar with the matter.
Though the companies that FTX.US approached figured they could offer cents on the dollar, several backed away and began ignoring the calls, according to people familiar with the matter. It looked too risky to contemplate a purchase, especially once bankruptcy was put on the table this week, they said.

Missing leaders​

If Mr Bankman-Fried was out of his depth earlier this year as the crypto industry began to teeter, he did not show it. But the departure of two members of his inner circle from Alameda and FTX.US earlier in the summer drew attention within the firms.
Mr Bankman-Fried, who ran both Alameda and FTX until last year, handed the reins to Ms Ellison and Mr Sam Trabucco as co-heads in October 2021.
But Mr Trabucco left in August under scantly explained circumstances, tweeting that he had “significantly reduced” his role in the company for months – suggesting he was heading for the exits after just entering the role. He said he was unsure of how he would spend his time, but that he had bought a boat.
Mr Brett Harrison, who ran FTX.US, left shortly thereafter, also without immediately saying where he was headed.
By Thursday night, with his supporters dwindling, Mr Bankman-Fried seemed resigned to his fate. Despite tweeting earlier in the day about letters of intent and term sheets, he had not secured a financing plan.
Mr Bankman-Fried cancelled an investor call, putting out one more short note for a lifeline.
“Realistically, we would need to be able to have at least US$4 billion committed by morning if this pathway was going to work,” he wrote. “And I am not optimistic about that.”
He said that “unless someone has a billion at the ready to sign on in an hour’s notice”, speaking to investors did not make sense.

What now?​

On Friday, Mr Bankman-Fried’s downfall was complete. He resigned as CEO of FTX Group after putting his empire in bankruptcy. Worth an estimated US$15.6 billion at the start of the week, his major assets now have zero value, according to the Bloomberg Billionaires Index. Charities counting on his money appear likely to be left in the lurch.
Regulation, which the crypto industry has long sought to avoid, appears inevitable. Congressional leaders are wondering about when to send subpoenas, according to a person familiar with the matter.
“A lot of people have compared this to Lehman. I would compare it to Enron,” former Treasury secretary Lawrence Summers said on Friday in a Bloomberg TV interview. “The smartest guys in the room. Not just financial error but – certainly from the reports – whiffs of fraud.”
Mr John J. Ray III, who was appointed to replace Mr Bankman-Fried as CEO, is a turnaround and restructuring expert who previously served senior roles in bankruptcies – including Enron’s.
All the while, about one million customers will likely remain in limbo, wondering when, if ever, they will get their money back from the curly-haired boy genius they trusted to lead them into a new frontier of finance. The fact that investors and employees were equally duped will likely be of little solace.
Despite all that has transpired, a few true believers are still betting on Mr Bankman-Fried.
On Polymarket, a crypto platform for wagering on event outcomes, users are betting on the question: “Will SBF be federally indicted by end of year?” Odds are about 80 per cent that he will avoid indictment.
There appears to be less optimism in the Miami offices of Mr Bankman-Fried’s US exchange. By Thursday, someone had removed the small-lettered signage on the office door of FTX.US. BLOOMBERG

 

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‘It’s all gone’: FTX bankruptcy has retail traders bracing for losses​

FTX US customers are ensnared in a swift financial collapse that has rattled the broader industry and shocked investors. PHOTO: REUTERS
UPDATED

NOV 12, 2022

NEW YORK – For a little while, it appeared that some of FTX’s American customers might escape the worst-case scenario confronting the beleaguered crypto platform.
FTX US, a separate entity from Mr Sam Bankman-Fried’s FTX.com, tweeted on Thursday that it was still operational and withdrawals were being processed as normal, even as the rest of the company came crashing down.
But after Mr Bankman-Fried’s empire filed for Chapter 11, or bankruptcy protection, on Friday, FTX US customers were ensnared in a swift financial collapse that has rattled the broader industry, shocked investors and left retail traders facing a long slog to get any of their money back.
Investors with crypto on the FTX platform – who numbered more than five million worldwide at the peak – will be closely watching the bankruptcy proceedings for any hope they might be refunded. However, many are resigning themselves to the fact that their holdings may be gone forever.
“The company and Sam Bankman-Fried seemed trustworthy,” said Mr Justin Zhang, a 34-year-old engineer in Los Angeles. “I thought FTX US was different because of all the regulations put in place, but it is not.”
While the FTX app said his withdrawal has been processed, Mr Zhang said his bank told him it has not received the notification or the funds. He fears that all his assets in FTX US, which include Bitcoin, Ether and Golden Warrior non-fungible tokens worth US$11,000 (S$15,000), may be lost for good.
CoinDesk reported that FTX US stopped processing withdrawals on Friday after the bankruptcy filing.

Bankruptcy process​

FTX customers likely have a frustrating time ahead of them now that the exchange is in bankruptcy protection. Customers of Voyager Digital and Celsius Network, two crypto platforms that went bust earlier this year, are still mostly locked out of their accounts and unsure of how much money they will recover.
In general, the larger and more complex a company is, the longer it takes for insolvency proceedings to play out – and the bankruptcy of FTX appears to be the largest corporate failure so far this year.
FTX has so far said little about how it intends to repay creditors. Initial court filings offer almost no hint of a plan, and a statement from the company’s new chief executive made clear that advisers have been hired only very recently.


That is one reason why Mr Christ Keuchkerian in Quebec is resigning himself to the fact that his money is lost. He had approximately C$4,500 (S$4,660) invested on FTX.com in tokens like Bitcoin and Ether.
“I hope I am wrong, but I have come to accept that it is just all gone,” the 36-year-old said. “I am not getting one cent back.”
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FTX goes bankrupt: Investors who put US$2 billion into crypto exchange face scrutiny too
FTX goes bankrupt: Sam Bankman-Fried fooled the crypto world and maybe even himself

Failed withdrawals​

Mr Garv Thakur, a 22-year-old in India who has been using FTX.com for more than a year, said he has around US$40,000 stuck on the exchange – about 80 per cent of his savings. He withdrew about US$1,000 on Tuesday at the advice of his friends, but he did not take their warnings seriously and left most of his money on the platform. Now, it is in limbo – and Mr Thakur said he is basically writing it down to zero.
Mr Thakur has not been turned off crypto entirely, but for now, he has withdrawn from all other exchanges and plans to use Binance for future crypto investing. FTX, he had thought, was a “top tier” exchange.
“I never expected this from Sam,” he said.

Still trying​

Some customers are still attempting to take their money out, with little luck. FTX.com user John Pederson has about €9,000 (S$12,800) worth of crypto stuck in the now-bankrupt exchange.
The 26-year-old, who is based in Dublin, began moving his holdings in small increments to other exchanges on Nov 6. But by Tuesday morning, a request to withdraw €2,000 worth of Bitcoin failed to go through, and subsequent withdrawal requests have been stalled.


On Thursday, FTX announced it would allow users to withdraw funds by buying select tokens from the Tron network, which they could then swap to external wallets.
Mr Pederson bought TRX tokens shortly after the announcement, which were trading at an inflated price on FTX compared with other major crypto exchanges. He said his requests to transfer the TRX tokens to an external wallet have yet to be processed.
Now, about one-third of his total crypto holdings are stuck in limbo.
“I don’t think I will ever see the whole amount of it,” he said. “This was a pretty expensive lesson.” BLOOMBERG

 

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FTX founder Sam Bankman-Fried’s sudden turn from white knight to washout​

Until this week, Mr Sam Bankman-Fried was seen as a darling in the digital asset industry. PHOTO: NYTIMES


NOV 12, 2022

NEW YORK – Mr Sam Bankman-Fried earned a reputation as saviour of the crypto industry when he bailed out two platforms earlier this year. But when FTX, the exchange he co-founded and led until Friday, needed a lifeline, none was forthcoming.
Until this week, the 30-year-old American, known in financial circles by his initials SBF, was seen as a darling in digital assets who amassed billions in personal wealth by running one of the world’s largest crypto platforms.
But as traders rushed to withdraw funds from FTX, Mr Bankman-Fried was in denial and told investors he was convinced the business would be rescued, according to a source familiar with the situation. By Friday, FTX had filed for bankruptcy. Mr Bankman-Fried apologised, repeatedly.
“Nobody was saying that anything was wrong with SBF,” said Mr Marius Ciubotariu, co-founder of the Hubble Protocol, a decentralised lending platform. The company’s collapse caught markets by surprise because Mr Bankman-Fried was seen as a business-savvy founder adept at striking deals, he said.
Mr Bankman-Fried had become a prominent and unconventional figure in the industry. He sported his signature wild hair, T-shirts and shorts on panel appearances with statesmen such as former US president Bill Clinton and former British prime minister Tony Blair, as well as supermodel Gisele Bundchen.
Mr Bankman-Fried also quickly became one of the largest Democratic donors in the United States, contributing US$5.2 million (S$7.1 million) to President Joe Biden’s 2020 campaign.
The crypto wunderkind started his career at trading firm Jane Street, a choice he has said was influenced by a desire to make money to pursue his interest in effective altruism, a movement that encourages people to prioritise donations to charities.


He amassed a fortune, estimated as high as U$26.5 billion by Forbes a year ago, by taking advantage of the price differences in Bitcoin in Asia and the United States. Mr Bankman-Fried eventually started crypto trading firm Alameda Research in 2017 and founded FTX a year later. It was valued in January at US$32 billion.
FTX’s meltdown sent Bitcoin plunging to a two-year low this week amid concern that the company’s woes will spread to other crypto firms. Employees were blindsided by its collapse, with some sending apologetic notes to clients expressing shock at what had happened, according to a person familiar with the matter.
FTX appointed Mr John J. Ray III, a restructuring expert, as chief executive on Friday. He oversaw the liquidation of Enron, the energy trading giant that collapsed in scandal and bankruptcy in 2001.
“A lot of people have compared this to Lehman – I would compare it to Enron,” said former Treasury secretary Larry Summers in an interview with Bloomberg TV.
For all his recent celebrity endorsements, notoriety and big-name backers, Mr Bankman-Fried was not confident about FTX’s prospects back in its early days.
“I thought we would fail,” Mr Bankman-Fried said at a June conference weeks before FTX and Alameda extended lifelines to two struggling crypto platforms. “I thought we would fail because no one would ever use it.” REUTERS

 

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Bankrupt FTX hit by mysterious outflow of over $900m in tokens in 24 hours​

FTX officials confirmed rumours of a hack and have instructed customers to delete FTX apps and avoid its website. PHOTO: AFP

NOV 12, 2022

NEW YORK – Mr Sam Bankman-Fried’s bankrupt digital asset exchange FTX was hit by a mysterious outflow of about US$662 million (S$908.5 million) in tokens over a span of 24 hours, the latest twist in one of the darkest periods for the crypto industry.
This comes as FTX officials appeared to confirm rumours of a hack on the bankrupt crypto exchange’s Telegram channel and have instructed customers to delete FTX apps and avoid its website, according to news outlet CoinDesk.
Customers still coming to terms with the platform’s Friday plunge into Chapter 11 proceedings were subsequently confronted with what the general counsel of its US arm, Mr Ryne Miller, described as “abnormalities with wallet movements”.
Mr Miller said on Twitter that FTX is expediting the process of moving digital assets into cold storage – which is unconnected to the Internet – “to mitigate damage upon observing unauthorised transactions”.
Blockchain analytics firm Nansen believes that the coins flowed out of both FTX’s international and United States exchanges.
Mr Paolo Ardoino, chief technology officer at stablecoin issuer Tether, referenced a tweet suggesting that more than US$30 million of the “FTX attacker’s” holdings in the token has been blacklisted.
“It is unclear exactly who is making the transactions, but you would not expect to see these on-chain trades at this time,” said Mr Alex Svanevik, chief executive at Nansen.

The latest developments are another blow for the crypto sector, which is reeling from a year-long rout, as well as the implosion of Mr Bankman-Fried’s exchange and sister trading house Alameda Research.
If the outflows are a security exploit, they would add to what is shaping up to be a record year for attacks on the digital token industry.
The main wallet belonging to FTX was drained of its entire balance in FTT during the incident, according to Nansen. The FTT coins are native to the exchange. Nansen said the overall outflows from FTX eventually ceased.
FTX’s descent into bankruptcy capped the downfall of one of crypto’s wealthiest moguls. The US Securities and Exchange Commission is investigating how closely intertwined Mr Bankman-Fried’s businesses were and whether FTX mishandled customer funds.
Twitter was rife with protests apparently from aggrieved clients. They cited a community Telegram chat warning, as reported by CoinBase, that FTX had been compromised, and that some client accounts were drained.
FTX, Alameda and about 130 of its other companies filed for bankruptcy court protection from creditors in Delaware.
REUTERS, BLOOMBERG

 

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Rise and fall of crypto exchange FTX: A timeline​

FTX had been struggling to raise billions of dollars in funds to stave off collapse after a wave of withdrawals. PHOTO: AFP


NOV 12, 2022

NEW YORK - In a spectacular collapse that sent shivers through the industry, crypto exchange said on Friday that it was commencing bankruptcy proceedings in the United States and its chief executive officer Sam Bankman-Fried has resigned.
Here is a history of FTX since its foundation in 2019:

2019​

May: Former Wall Street trader Sam Bankman-Fried and former Google employee Gary Wang found FTX, the owner and operator of FTX.COM cryptocurrency exchange.

2021​

July: A US$900 million (S$1.24 billion) funding round valued FTX at US$18 billion.
September: FTX signs a sponsorship deal with Mercedes’ Formula 1 team.
October: FTX raises capital at a valuation of US$25 billion from investors, including Singapore’s Temasek and Tiger Global.

2022​

Jan 27: FTX’s US arm says it was valued at US$8 billion after raising US$400 million in its first funding round from investors, including SoftBank and Temasek.

Jan 31: FTX raised US$400 million from investors, including SoftBank, at a valuation of US$32 billion.
June 4: FTX signs a reportedly US$135 million sponsorship deal for naming rights of American professional basketball team Miami Heat’s home court, a multipurpose arena.
July 1: FTX signs a deal with an option to buy embattled crypto lender BlockFi for up to US$240 million.


July 22: FTX offers a partial bailout of bankrupt crypto lender Voyager Digital. Voyager calls it a “low-ball bid”.
Aug 19: A US bank regulator orders FTX to halt “false and misleading” claims it had made about whether funds at the company are insured by the government.
Nov 2: Crypto news website CoinDesk reports a leaked balance sheet that showed Alameda Research, Mr Bankman-Fried’s crypto trading firm, was heavily dependent on FTX’s native token, FTT. Reuters was unable to verify the report.
Nov 6: Binance chief executive officer Changpeng Zhao says his firm will liquidate its holdings of FTT due to unspecified “recent revelations”.
MORE ON THIS TOPIC
FTX goes bankrupt: Investors who put US$2 billion into crypto exchange face scrutiny too
‘It’s all gone’: FTX bankruptcy has retail traders bracing for losses
Nov 7: Mr Bankman-Fried says “FTX is fine. Assets are fine”.
Nov 8: Binance says it is planning a deal to acquire FTX.
Nov 9: Binance decides against pursuing a non-binding agreement to bail out FTX.
Nov 10: FTX suspends on-boarding of new clients as well as withdrawals until further notice.
Nov 10: Mr Bankman-Fried tells staff in a memo that he is seeking a capital raising and had held talks with Mr Justin Sun, founder of the crypto token Tron.
Nov 10: Reuters reports that Mr Bankman-Fried is seeking to put together a rescue package of up to US$9.4 billion for FTX.
Nov 11: FTX starts voluntary Chapter 11 proceedings in the United States, along with its American unit, Alameda Research, and nearly 130 other affiliates. Mr Bankman-Fried resigns as chief executive officer. REUTERS

 

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Singapore investors in bankrupt FTX crypto exchange resigned to writing off losses​

Institutional investors who backed FTX may face scrutiny for possibly allowing the company to run with little oversight. PHOTO: REUTERS
Yong Li Xuan


NOV 12, 2022

SINGAPORE - When news broke earlier this week about a liquidity crunch at cryptocurrency exchange FTX, financial adviser Ng Ming Jie was among those who tried to withdraw crypto from the platform.
The 33-year-old, who had been trading on FTX since mid-2021, was introduced to the platform by financial influencers, or finfluencers, online and stayed because of the comparatively low fees and functionality.
After FTX filed for bankruptcy on Friday and began investigating a potential hack, Mr Ng has accepted he may never recover the “tens of thousands of dollars” he had invested on the platform.
“I didn’t put my life savings into it,” he said. “But it’s tens of thousands of dollars. I could have bought a new MacBook, television, refrigerator, washing machine and gone on a trip to Japan and still have money left over.
“That little bit of faith I had left in cryptocurrency is lost,” added Mr Ng who had invested about $70,000 in crypto exchanges since 2020.
Due to the volatility of crypto and the interest rate hike at the start of 2022, he had pulled back on his crypto investments from 30 per cent to less than 10 per cent of his investment portfolio.
Still, Mr Ng said FTX’s collapse was “super unexpected” because it was one of the largest crypto exchanges and many finfluencers such as personal finance expert Graham Stephan had promoted the platform actively on social media. “It’s almost equivalent to DBS, OCBC or UOB going under,” he added.

Due to backing from institutional investors such as Sequoia Capital and Singapore global investment company Temasek and a high trading volume, FTX was one of the more reputable exchanges, said Blockchain Association Singapore co-chairman Chia Hock Lai.
But after a CoinDesk article claimed last week that much of sister company Alameda’s assets were made up of FTX tokens (FTT) issued by FTX, allegations that FTX had offered extreme leverage – borrowing from some customers to lend to others – also surfaced.
“No one could have known they had bad practices,” said Mr Chia, noting that an exchange this large has never failed in this manner.

Institutional investors who backed FTX may face scrutiny for possibly allowing the company to run with little oversight.
“This is going to be a drawn-out process. A lot of skeletons in the closet will be dug out,” Mr Chia said.

Temasek, which is among FTX’s prominent institutional investors, said it had no further comments at this time. Temasek had previously told Reuters: “We are aware of the developments between FTX and Binance, and are engaging FTX in our capacity as shareholder.”
Mr Chia said he expects regulators to clamp down on crypto exchanges by restricting them from using customers’ funds or offering leverage, which will increase the cost of compliance to exchanges.
The Monetary Authority of Singapore (MAS) on Oct 26 published two consultation papers proposing regulatory measures to reduce the risk of consumer harm from cryptocurrency trading and support the development of stablecoins.
Some of the proposed measures could require exchanges to disclose risks to retail investors so they can make informed decisions, as well as ban leverage by retail investors for crypto trading.
Ironically, some investors said in WhatsApp and Telegram crypto chats that they had moved to FTX because MAS stopped Binance from operating in Singapore.
For now, industry players are concerned about how FTX’s meltdown would affect its projects and other companies linked to it.
Though crypto prices across the board have fallen because of the collapse, crypto that FTX invested in, such as Solana, have seen prices plummet because investors expect FTX to liquidate all assets during the bankruptcy process.
Mr Daniel Lee, head of Web3 at Banking Circle who helped to set up the DBS Digital Exchange in 2018, expressed concern for the industry.
“Like it or not, crypto is part of the financial infrastructure. It is no longer just a small sideshow,” the 53-year-old said. “People could lose their jobs and there are a lot of jobs related to crypto.”


Mr El Lee, who invested in FTT and used FTX, said he is saddened by how the collapse transpired, but he remains committed to crypto.
“The industry will recover from the incident, but FTX will not,” said the co-founder of Digital Treasures Center who has been in the crypto industry since 2015. “I’ve never sold any of my major cryptocurrencies before. People might think it’s silly, but I’m a believer.”
The 36-year-old has written off all his investments tied to FTX and does not intend to try to recover them, but he may move his crypto assets to exchanges or wallets closer to home because of tighter regulations and accountability.
Bloomberg reported that investors with crypto on the FTX platform numbered more than five million worldwide at its peak, and many are resigning themselves to the fact that their holdings may be gone forever.
Investors who traded on the platform will have an idea of how much FTX’s assets are worth after the bankruptcy is finalised, but they are unlikely to recover much of their assets, Mr Chia said.
“Crypto is a very risky asset class, retail investors should avoid it,” he said, adding that retail investors should invest not more than 5 per cent of their net worth in it. “You could lose everything.”

 

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Bahamas police interview FTX’s Bankman-Fried amid mystery outflows​

The inquiries add to the mounting legal pressure that Mr Bankman-Fried is facing since his FTX empire crumbled over the past week. PHOTO: NYTIMES


NOV 13, 2022

LONDON – A day after Mr Sam Bankman-Fried’s digital-asset empire filed for Chapter 11 protection, the former crypto mogul was interviewed by police and regulators in the Bahamas, according to a person familiar with the matter.
Mr Bankman-Fried lives in the Bahamas.
The inquiries add to the mounting legal pressure that Mr Bankman-Fried is facing since his FTX empire crumbled over the past week.
FTX filed for bankruptcy on Friday, one of the highest profile crypto blowups, after traders rushed to withdraw US$6 billion (S$8.2 billion) from the platform in just 72 hours, and rival exchange Binance abandoned a proposed rescue deal.
FTX chief executive John J. Ray III said on Saturday that the company was working with law enforcement and regulators to mitigate the problem, and was making “every effort to secure all assets, wherever located”.
“Among other things, we are in the process of removing trading and withdrawal functionality,” he said.
The exchange’s dramatic fall from grace has seen its 30-year-old founder, Mr Bankman-Fried, known for his shorts and T-shirt attire, morph from being the poster child of crypto’s successes to the protagonist of the industry’s biggest crash.

The turmoil at FTX has seen at least US$1 billion of customer funds vanish from the platform, sources told Reuters on Friday.
Mr Bankman-Fried had transferred US$10 billion of customer funds to his trading company, Alameda Research, the sources said.
New problems emerged on Saturday when FTX’s US general counsel, Mr Ryne Miller, said in a Twitter post that the firm’s digital assets were being moved into so-called cold storage “to mitigate damage upon observing unauthorised transactions”.

Cold storage refers to crypto wallets that are not connected to the Internet to guard against hackers.
Blockchain analytics firm Nansen said it saw US$659 million in outflows from FTX International and FTX US in the last 24 hours.
A separate blockchain analytics firm Elliptic said around US$515 million worth of cryptoassets were “suspected to have been stolen”, while US$186 million were likely moved into secure storage by FTX.
Crypto exchange Kraken said: “We can confirm our team is aware of the identity of the account associated with the ongoing FTX hack, and we are committed to working with law enforcement to ensure they have everything they need to sufficiently investigate this matter.”

FTX Trading said it has US$10 billion to US$50 billion in assets, US$10 billion to US$50 billion in liabilities, and more than 100,000 creditors.
Mr Ray, a restructuring expert, was appointed to take over as CEO.
A document that Bankman-Fried shared with investors on Thursday and was reviewed by Reuters showed FTX had US$13.86 billion in liabilities and US$14.6 billion in assets.
However, only US$900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy.
The collapse shocked investors and prompted fresh calls to regulate the cryptoasset sector, which has seen losses stack up this year as cryptocurrency prices collapsed.
“Things will continue to simmer after the FTX crash,” said Mr Alan Wong, operations manager of Hong Kong Digital Asset Exchange. “With a gap of US$8 billion between liabilities and assets, when FTX is insolvent, it will trigger a domino effect, which will lead to a series of investors related to FTX going bankrupt or being forced to sell assets.” REUTERS, BLOOMBERG

 

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Big investors are giving up on crypto markets going mainstream​

Many professional money managers are saying the case for crypto as a portfolio diversifier or digital gold has been debunked. PHOTO: AFP
UPDATED



LONDON – Institutional investors were already souring on cryptocurrencies even before this week. The sudden downfall of Mr Sam Bankman-Fried’s FTX.com may have permanently damaged their prospects of being included in mainstream portfolios.
While plenty of industry die-hards remain, many professional money managers are saying the case for crypto as a portfolio diversifier or digital gold has been debunked.
The losses are too great, and the market structure is too risky, they say.
“What’s become clear is it will not find a home in institutional asset allocation,” said Mr Hani Redha, a multi-asset portfolio manager at Pinebridge Investments in London. “There was a period when it was being considered as a potential asset class that every investor should have in their strategic asset allocation and that’s off the table entirely.”
The implosions and scandals of the past few months have laid waste to the key arguments of crypto boosters, and all but obliterated the notion of Bitcoin as safe haven in turbulent times.
But none of those events – from the TerraUSD collapse to the Celsius bankruptcy – were as damning as the revelation that even FTX, until recently considered one of the most blue-chip names in crypto, was unsound.
The FTX collapse is “raising questions on the viability of the crypto ecosystem”, said Mr Salman Ahmed, chief investment strategist at Fidelity International, which oversees US$646 billion (S$887 billion) from London. “It was always tough to make a case for including crypto, but the set up has come under more pressure.”

His firm launched a Bitcoin exchange-traded product in February, aimed at professional European investors. It has lost about 55 per cent since inception.
Just a year ago, crypto mania was at its height. Bitcoin had topped US$67,000. In January, Bridgewater estimated that 5 per cent of Bitcoin was held by institutional-level investors.
Frothy predictions were everywhere back then.

JPMorgan Chase & Co strategist Nikolaos Panigirtzoglou wrote Bitcoin could theoretically reach US$146,000 in the long-term by crowding out gold. A survey by PWC from April found that 42 per cent of crypto hedge funds were predicting Bitcoin to trade between US$75,000 and US$100,000 by the end of 2022.
Now, the views among investors are more restrained.
Mr Panigirtzoglou said in a report this week that Bitcoin could revisit the summer lows of US$13,000. Bitcoin traded under US$17,000 on Friday.
“The argument in investing in crypto as diversification died some time ago,” he said in an interview.
Bitcoin has crashed and recovered before. Some believers see hubris in the market is being flushed out, which will eventually put the industry on a path to maturity.

FTX’s troubles may actually benefit established companies with a track record of risk management, like Nasdaq Stock Market and CBOE Global Markets, wrote Mr Mike Cyprys, an analyst at Morgan Stanley.
However, to Mr Mark Dowding, the chief investment officer at BlueBay Asset Management, the case for Bitcoin becoming a version of digital gold is bogus. It’s only a matter of time until even more investors bail and crypto prices plunge again, he said.
“It should have been clear that an industry that has been producing nothing, burning cash and offering alluring returns, was destined to fail,” he said. BLOOMBERG

 

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Singapore’s Temasek to write down over US$200 million in FTX​

Another backer, Sequoia Capital, wrote down the full value of its US$214 million bet on FTX. REUTERS

Nov 16, 2022

SINGAPORE – Singapore’s state-owned investor, Temasek International, invested between US$200 million and US$300 million into cryptocurrency firm FTX before its implosion, according to people familiar with the matter.
Temasek is now preparing to write off the entire amount, one of the people said, asking not to be identified as the matter is private. Another backer, Sequoia Capital, wrote down the full value of its US$214 million bet on the exchange, while a person with knowledge of the situation said SoftBank Group Corp. is expecting a loss of around US$100 million on its investment.
A Temasek representative declined to comment.
The meltdown of Sam Bankman-Fried’s FTX empire and the evaporation of capital from its institutional backers is shaking confidence throughout the crypto world. The firm had been considered by some investors as one of the safer bets in the sector thanks to its size and role as an exchange, rather than being just an active manager of digital currency.
A potential FTX writedown wouldn’t have a major impact on Temasek’s overall financial standing. The Singaporean firm, which managed S$403 billion in assets as of March 31, said in July it didn’t invest in crypto directly, focusing instead on building the ecosystem. When asked about the valuations of FTX and Amber Group, another crypto company it backed, Temasek US West Coast head Martin Fichtner expressed confidence in the long-term performance of its portfolio companies.
“What we focus on is this: Are the businesses healthy and are they growing, and do we think the prospects are strong?” he said at the time. “We feel strongly about the companies in our portfolio performing well over time, and we’ll see cycles in terms of multiples go up and down as the cycles occur.”
Since then, FTX has filed for Chapter 11 bankruptcy and Bankman-Fried has stepped down as its chief executive officer. Amber, which was seeking to raise funds at a US$10 billion valuation earlier this year, is now aiming for a US$3 billion value. BLOOMBERG

 

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Crypto broker Genesis, which has S’pore unit, halts withdrawals in wake of FTX collapse​

Digital currency broker Genesis Trading said it made the move after consulting its financial advisors and counsel. PHOTO: REUTERS

Claire Huang
Business Correspondent


NOV 16, 2022

SINGAPORE - Digital currency broker Genesis Trading, which has a Singapore arm, has stopped withdrawals in its lending business, becoming the latest casualty of crypto exchange FTX’s implosion.
In a series of Twitter posts on Wednesday night, the company said: “FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests which have exceeded our current liquidity.”
The company, whose Singapore arm is Genesis Asia Pacific, said its first priority “is to serve our clients and preserve their assets”.
After consulting its financial advisers and counsel, Genesis Trading said it will take the “difficult decision to temporarily suspend redemptions and new loan originations in the lending business”.
The company said the default of bankrupt hedge fund Three Arrows Capital had negatively impacted the liquidity and duration profiles of its lending entity, Genesis Global Capital.
It tried to reduce risks and shore up its liquidity profile, as well as the quality of its collateral, but was hit by a crypto run after the fall of FTX.
Genesis Trading said its spot and derivatives trading and custody businesses remain fully operational, while its broker-dealer Genesis Global Trading that holds its BitLicense is “independently capitalised and operated” and separate from all other Genesis entities.

The Monetary Authority of Singapore (MAS) had in late June granted in-principle approvals to Genesis Asia Pacific, along with exchange Crypto.com and digital assets solutions company Sparrow.
Genesis Asia Pacific, incorporated in January 2020, has a staff count of up to 10, with an office in Robinson Road, based on information from the Singapore Fintech Association.
Mr Hayden Hughes, chief executive of trading platform Alpha Impact, told The Straits Times that Genesis’ Singapore arm handled lending on behalf of the parent company.

Singapore users, he said, would have faced the Singapore entity and he thinks “it’s still potentially a tricky situation for Singaporeans”.
“The Singapore entity is not technically bankrupt, but if there was commingling of funds then Singapore users could be affected by this,” Mr Hughes said.
The Winklevoss brothers’ platform, Gemini Trust Co, has suspended withdrawals from its Earn programme after partner Genesis Global Capital did the same. This is a scheme where investors may choose to lend crypto to certain institutional borrowers to earn interest.
In an email seen by ST, Gemini said it is not able to meet customer redemptions within the agreed five business days. It added that “this does not impact any other Gemini products and services”.
Gemini’s Singapore entity, Gemini Trust Company, is applying for a licence in Singapore. In the meantime, it is allowed to offer crypto services under an MAS exemption from holding a licence under the Payment Services Act.
Genesis’ parent company is Digital Currency Group (DCG), a venture capital firm that owns crypto asset manager Grayscale. Other portfolio firms listed on its website are exchange Coinbase, wallet Circle and media outfit CoinDesk.
The group said on Twitter on Wednesday that the withdrawal halt at Genesis “has no impact on the business operations of DCG and our other wholly owned subsidiaries”.
Last week, it said Genesis Trading’s derivatives business has about US$175 million in locked funds on FTX.

 

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Why did we put so much faith in the crypto whizz-kid?​

Even so, FTX’s collapse may not kill our obsession with the archetype.​

Margaret O’Mara

Mr Sam Bankman-Fried leaned into the Silicon Valley stereotype and then some. PHOTO: NYTIMES

Nov 17, 2022

Dishevelled, young and exceedingly brainy, Mr Sam Bankman-Fried perfectly fit the role of a Silicon Valley mogul in the making. The 30-year-old founder of cryptocurrency exchange FTX leaned into the Silicon Valley stereotype and then some, while pitching investors and wearing a T-shirt and shorts onstage with Mr Bill Clinton and Mr Tony Blair.
Blue-chip investors fell for his persona, and Mr Bankman-Fried profited greatly, with his estimated net worth reaching over US$26 billion (S$35.7 billion) at one point.
That net worth is now close to zero. Last week’s sudden collapse of FTX – which nine months ago was the star of a Larry David Super Bowl ad – evaporated billions as revelations emerged of questionable transfers between FTX and Mr Bankman-Fried’s trading company. Law enforcement is now investigating, which could lead to criminal charges.

Unhealthy societal tendency​

We’ve seen this movie before: A casually attired whizz-kid emerges from seemingly nowhere, is proclaimed both savant and saviour, and takes the world by storm. Growing concern about Big Tech’s power and intense criticism of one-time wunderkinds like Mr Mark Zuckerberg and Mr Jeff Bezos set the stage perfectly for a figure like Mr Bankman-Fried.
Amid power-hungry moguls and crypto hustlers, here was a white-knight superhero in the perfect costume, championing philanthropy and pledging to make the world a better place – for real, this time.
But even Mr Bankman-Fried’s collapse probably won’t kill the whizz-kid archetype. This all-American notion has fuelled some spectacular meltdowns – but also scored big wins. The willingness of US investors and customers to take bets on the young, untested and brainy has delivered world-transforming innovations and companies – a computer on every desk, a smartphone in every hand.
But the whizz-kid fixation also reflects a less healthy societal tendency to overstate the importance of individual “genius” and gloss over other things critical to any whizz-kid’s success – especially connections, timing and luck. It also devalues experience and maturity. We invest so much in the ideal that it excludes those who don’t fit the part, and places too much faith in those who do.

Silicon Valley’s whizz-kids owe their mythology to America’s very beginnings. Ben Franklin, who conducted electrical experiments in lightning storms in the 1750s, shocked the bewigged and bejewelled French court in the 1770s by arriving in a homespun coat and frontiersman’s fur cap. Thomas Jefferson, Virginia planter and perpetually tinkering inventor, padded around the White House wearing the early 1800s version of work-from-home sweatpants.
Their get-ups deliberately sent a message to their fellow citizens and to European rulers: Americans were democratic, humble and uninterested in dressing to show off their wealth. They were too busy working and inventing to bother.
The Great Inventor himself, Thomas Edison, holder of over 1,000 patents, cannily cultivated an eccentric-genius reputation. At the peak of his fame in the 1870s and 1880s, Edison wore rumpled suits and played pranks on co-workers using dangerous chemicals. Admirers pointed to these quirks as further signs of Edison’s brilliance.

And while Edison had detractors, he was never as controversial as the railroad barons, steel kings and financiers whose sharp-elbowed and sometimes fraudulent dealings drove the boom-and-bust Gilded Age economy.
The whizz-kid myth lay largely dormant until the 1970s, when the buttoned-up business type was under siege, and once unassailable American brands were being battered by oil shocks, stagflation and foreign competition.

Enter Mr Steve Jobs of Apple and Mr Bill Gates of Microsoft: impossibly young, tousle-haired, looking nothing like typical business executives. One venture capitalist who visited Apple’s first headquarters – in Mr Jobs’ parents’ suburban garage – quipped that the wispy-bearded entrepreneur and his business partner Steve Wozniak looked like “renegades from the human race”.
Freckled and slight, Mr Gates looked more like a teenager and could behave that way as well. “At times during an interview, he slumped so far in his chair as to be almost prone,” wrote a Seattle Times reporter in 1982. Mr Gates’ co-founder, Mr Paul Allen, was “a large, heavily bearded, mild-mannered man who wore a rumpled corduroy sports jacket”. To become a tech millionaire, it seems, you need to avoid using an iron.
Then the dot.com boom took the stereotype into hyperdrive, largely because being a tech whizz-kid now meant becoming really, really rich. “The Golden Geeks” exclaimed a headline on the cover of Time magazine in early 1996 featuring Mr Marc Andreessen, the 24-year-old co-founder of Netscape, sitting (barefoot, of course) on a gilded throne.
The dot.com bust tanked companies and investment portfolios. Instead of dispensing with the whizz-kid model, however, Silicon Valley doubled down. Venture capitalists lost money when the bubble burst, but they were still far wealthier than before the boom, and they knew that the Internet age was only getting started.
Out of another garage came Mr Sergey Brin and Mr Larry Page of Google, who took that brand of iconoclasm and scaled it up to an entire enterprise. Six years later, in 2004, out of a Harvard dorm room came Mr Zuckerberg of Facebook – similarly single-minded and geeky, readily posing barefoot, making the hoodie into a shorthand signal for business genius.

Perils of trusting too much​

As the tech world and its group of golden geeks got larger, wealthier and ever more dominant, one thing stayed the same. The whizz-kids were, almost exclusively, male, white and young. Women could never get away with being such slobs.
They could, however, dress the part in other ways. Less than a decade ago, Theranos chief executive Elizabeth Holmes seized the public’s imagination by wearing Steve Jobs-style black turtlenecks and professing a single-minded devotion to changing the world.
She had a seemingly monastic routine, an awkward affect and an unvarying wardrobe – like Mr Zuckerberg, she explained that she wore the same thing every day to avoid having to make one more decision. All these things had become so strongly associated with successful tech founders that they served as proxies for her credibility.
Revelations that Theranos’ vaunted blood-testing technology didn’t work led to Holmes being tried and convicted of criminal fraud. Last week, Holmes was denied a retrial and will soon be sentenced. The downfall of “the female Steve Jobs” may have made it even more difficult for women and other under-represented entrepreneurs to obtain funding.
We are waiting to learn whether Mr Bankman-Fried’s actions crossed the line from questionable to fraudulent. But the fact that the rocketing rise and sudden tumble of him and Holmes – magnetic, charismatic and remarkably good at getting rich people to give them money – occurred so close together should serve as a warning.
It is not surprising that a nation born from the overthrow of hereditary wealth has long celebrated self-made inventors who forge an independent path. But the startling fall of Mr Bankman-Fried is a good moment to reflect on the perils of placing so much money, faith and power in the hands of a few golden geeks. NYTIMES

• Margaret O’Mara is a professor of American history at the University of Washington.

 

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FTX investors sue Tom Brady, Gisele Bundchen and other celebrity endorsers as crypto contagion spreads​

American football star Tom Brady and his supermodel former wife Gisele Bundchen helped promote FTX, which declared bankruptcy in the US last week. PHOTO: AFP

Nov 17, 2022

NEW YORK – High-profile US sports stars and personalities have been named in a lawsuit over deceptive practices targeting investors who became victims of the stunning collapse of cryptocurrency exchange FTX.
The celebrities helped promote the exchange, which declared bankruptcy in the United States last week in a meltdown that has reverberated across the digital currency landscape and drawn scrutiny from the authorities in multiple countries.
Treasury Secretary Janet Yellen on Wednesday was the latest official to call for more oversight of the crypto industry.
American football star Tom Brady and his supermodel former wife Gisele Bundchen, retired basketball great Shaquille O’Neal, tennis Grand Slam champion Naomi Osaka, actor/comedian Larry David and Shark Tank investor Kevin O’Leary were among those named alongside FTX founder Sam Bankman-Fried in the suit filed in Miami federal court on Tuesday.
Investor Edwin Garrison of Oklahoma filed the suit on behalf of other investors to seek damages from losses suffered in the FTX implosion, accusing the company of “misrepresentations and omissions”.
“FTX’s fraudulent scheme was designed to take advantage of unsophisticated investors from across the country,” the lawsuit alleged.
Some of the biggest names in sports and entertainment “have either invested in FTX or been brand ambassadors for the company” and hyped the exchange in ads and on social media, the document said.

David appeared in a television commercial during this year’s American football Super Bowl championship game, a coveted and costly promotional spot.
The exchange “needed celebrities... to continue funnelling investors into the FTX Ponzi scheme, and to promote and substantially assist in the sale” of the accounts, “which are unregistered securities”, the court documents said.

‘Regulatory gaps’​

The turmoil at FTX, which until recently had been valued at US$32 billion (S$44 billion), came after Binance, the world’s biggest cryptocurrency platform, backed out of a buyout deal amid reports about mismanagement of client funds and potential investigations by regulators.

“The recent failure of a major cryptocurrency exchange and the unfortunate impact that has resulted for holders and investors of crypto assets demonstrate the need for more effective oversight of cryptocurrency markets,” Dr Yellen said in a statement.
US agencies have highlighted the risks involved in the crypto industry, which could eventually spill over into the traditional financial system, and she called on Congress “to move quickly to fill the regulatory gaps the Biden administration has identified”.
Meanwhile, the House Financial Services Committee earlier on Wednesday announced it would hold a hearing next month to investigate the company’s collapse.
“The fall of FTX has posed tremendous harm to over one million users, many of whom were everyday people who invested their hard-earned savings into the FTX cryptocurrency exchange, only to watch it all disappear within a matter of seconds,” committee chair Maxine Waters said in a statement.
“Unfortunately, this event is just one out of many examples of cryptocurrency platforms that have collapsed just this past year.”


The lawsuit alleges that the company used money from new investors to “pay interest to the old ones and to attempt to maintain the appearance of liquidity”.
The collapse came amid rising doubts over the financial stability of FTX. Attention had focused on the relationship between the exchange and Alameda Research, a trading house also owned by Mr Bankman-Fried, and reports that he shifted funds out of the exchange, even as he tried to fill a US$7 billion gap.
It was a spectacular reversal of fortune for the founder and one-time cryptocurrency wunderkind.
The disgraced executive apologised on Twitter and resigned. But after the company filed for bankruptcy, it said it was the victim of “unauthorised transactions”. AFP

 

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Crypto lender BlockFi plans bankruptcy filing within days in FTX fallout​

FTX US and BlockFi are closely tied. PHOTO: BLOCKFI/FACEBOOK

Nov 17, 2022

NEW YORK – Cryptocurrency lender BlockFi is preparing to file for bankruptcy within days, according to people with knowledge of the matter, who asked not to be named because discussions are private.
The lender paused client withdrawals, citing uncertainties with crypto exchange FTX, while saying it had adequate liquidity and was exploring options with outside advisers.
A representative for BlockFi declined to comment. The Wall Street Journal earlier reported that the company was weighing a bankruptcy filing.
FTX US and BlockFi are closely tied. In July, FTX US provided the lender with a US$400 million (S$548 million) revolving credit line, which came with an option to purchase the company. BlockFi has also given loans to now-bankrupt Alameda Research, Bloomberg reported.
The sudden unravelling and subsequent bankruptcy of FTX – once seen as a saviour to struggling crypto firms – is reverberating across the digital asset landscape. Bankrupt Voyager Digital, which FTX founder Sam Bankman-Fried was going to rescue in a US$1.4 billion deal, is now scrambling to find a replacement buyer for its assets.
Separately, Crypto brokerage Genesis is exploring options after suspending redemptions and new loan originations amid a liquidity shortfall. BLOOMBERG

 

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Once valued at US$10 billion, crypto empire behind Genesis caught up in FTX turmoil​

Cracks started to surface after Genesis got caught up in the bankruptcy of hedge fund Three Arrows Capital. PHOTO: REUTERS

Nov 17, 2022

NEW YORK - Suspended withdrawals at cryptocurrency brokerage Genesis amid the widening crypto-market meltdown have cast an unwanted spotlight on Mr Barry Silbert, the man at the helm of the Digital Currency Group (DCG) empire.
DCG’s reach is vast: In addition to embattled lender Genesis, it also controls digital asset manager Grayscale Investments, which offers the world’s largest crypto fund. DCG is also the parent of crypto-mining service provider Foundry Digital, news publication Coindesk and exchange Luno, among others. DCG declined a request for an interview with Mr Silbert.
Within the crypto space, DCG’s might is well known. The private firm’s portfolio has over the years included everything from exchanges like Coinbase to hardware-maker Ledger to crypto-focused bank Silvergate.
With Genesis’ halted redemptions, the health of DCG has been called into question, a spiral that follows the shocking blow-up of crypto exchange FTX and its former chief executive officer Sam Bankman-Fried. Genesis was the crown jewel of Mr Silbert’s kingdom, having established itself as one of the largest and most well-known brokers, allowing funds and market makers to borrow dollars or digital currencies to amplify their trades.
Mr Silbert, who rarely does press interviews or speaks at the multitude of industry conferences, founded US-based crypto conglomerate DCG in 2015, according to the 46-year-old’s LinkedIn profile. Last year, DCG’s valuation reached US$10 billion (S$13.7 billion), after it sold US$700 million of stock in a private sale led by SoftBank Group. DCG had 66 employees at the start of November and holds more than 200 companies in its portfolio.
Mr Silbert first bought Bitcoin in 2012, when the industry was in its early aughts. Among the firm’s earliest employees were Mr Michael Moro, who departed the CEO role at Genesis in August, as well as Mr Ryan Selkis, co-founder of researcher Messari, and Ms Meltem Demirors, the chief strategy officer of rival digital-asset investment firm CoinShares.
Grayscale has been relatively unscathed by the latest upheaval – the firm was quick to say on Wednesday that its products are functioning as normal. Even still, the asset manager is dealing with its own set of issues. The US$10.7 billion Grayscale Bitcoin Trust (ticker GBTC) is trading at a record discount to the Bitcoin it holds, given that the trust’s structure does not allow it to redeem shares. Grayscale sued the US Securities and Exchange Commission in June after the regulator denied the firm’s application to convert GBTC into an exchange-traded fund.

But even with the record discount, GBTC is seen as a cash cow for Grayscale – and by extension, for DCG. The trust charges shareholders a 2 per cent annual fee. That means that even though GBTC has shed billions of dollars in value since total assets peaked at more than US$40 billion last November, Grayscale would still collect more than US$200 million in fees from the trust per year at current asset levels, according to calculations by Bloomberg.
Genesis’ move on Wednesday affects only its lending business, according to interim chief executive Derar Islim, who said the company’s spot and derivatives trading and custody businesses “remain fully operational”. However, the decision to halt withdrawals comes after a painful stretch for the brokerage.
Cracks started to surface after Genesis got caught up in the bankruptcy of hedge fund Three Arrows Capital. Genesis was the biggest creditor ensnared in that collapse after the fund failed to meet margin calls. DCG assumed some liabilities and filed a US$1.2 billion claim against Three Arrows, which is under liquidation. Genesis said in October – before the FTX blow-up – that lending plunged 80 per cent in the third quarter.
“Genesis Global Capital, Genesis’ lending business, made the difficult decision to temporarily suspend redemptions and new loan originations. This decision was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion,” said company spokesman Amanda Cowie. “This impacts the lending business at Genesis and does not affect Genesis’ trading or custody businesses. Importantly, it has no impact on the business operations of DCG and our other wholly owned subsidiaries.”
Amid the recent brewing turmoil, DCG has reshuffled its C-suite. Mr Mark Murphy was promoted to president from chief operating officer as part of a restructuring that saw about 10 employees exit the company. Meanwhile, a handful of Genesis’ trading-desk personnel have also departed, as have its head of market insights and its chief risk officer. BLOOMBERG

 

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FTX founder Bankman-Fried says filing for bankruptcy was a mistake​

Mr Sam Bankman-Fried said those in charge of FTX’s Chapter 11 bankruptcy process were “trying to burn it all to the ground out of shame”. PHOTO: AFP

Nov 17, 2022

BENGALURU - The founder of collapsed crypto exchange FTX, Mr Sam Bankman-Fried, said he regretted his decision to file for bankruptcy and, in an interview published by Vox, criticised regulators.
Mr Bankman-Fried said later on Twitter that the basis of the interview, an exchange of messages on the same platform, was not supposed to be public.
The collapsed company, which filed for bankruptcy last week, has appointed five new independent directors at each of its main affiliated companies, including Alameda Research. The five new directors and newly appointed chief executive John J. Ray are working to navigate through the bankruptcy process.
In the interview, Mr Bankman-Fried said those in charge of FTX’s Chapter 11 bankruptcy process were “trying to burn it all to the ground out of shame”, and that he had two weeks in which to raise US$8 billion (S$11 billion) and save the company.
“That’s basically all that matters (raising the money) for the rest of my life,” he said.
His single biggest mistake had been “Chapter 11. If I hadn’t done that, withdrawals would be opening up in a month with customers fully whole”.
Regulators make everything worse, he added. “They don’t protect customers at all.”

In a statement published on Twitter, Mr Ray said Mr Bankman-Fried had no ongoing role at FTX, FTX US or Alameda Research and did not speak on their behalf.
FTX has said it is in contact with dozens of global regulators, including the United States Securities and Exchange Commission.
After Vox published the interview, Mr Bankman-Fried said some of what he had said had been “thoughtless or overly strong” and that he was venting about something that was not intended to be public.
“It’s *really* hard to be a regulator. They have an impossible job: to regulate entire industries that grow faster than their mandate allows them to,” he wrote on Twitter, adding that the message exchange with Vox’s reporter was “not intended to be public”.
A Vox spokesman said all communication with Vox reporters was on the record unless the subject and reporter had agreed otherwise.
“Our reporter is clearly identified as such in her Twitter bio, has previously interviewed Mr Bankman-Fried, and in this instance, as an additional courtesy, notified him via e-mail that she planned to write about their on-the-record exchange. He made no objection in his reply prior to publication.”
Mr Bankman-Fried did not immediately respond to a Reuters request for further comment. REUTERS

 

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At least US$1 billion of client funds missing at failed crypto firm FTX: Sources​

This file photo illustration taken on Feb 09, 2022, shows a smart phone screen displaying the logo of FTX, the crypto exchange platform, with a screen showing the FTX website in Arlington, Virginia. (Photo: AFP/OLIVIER DOULIERY)

12 Nov 2022

NEW YORK: At least US$1 billion of customer funds have vanished from collapsed crypto exchange FTX, according to two people familiar with the matter.
The exchange's founder Sam Bankman-Fried secretly transferred US$10 billion of customer funds from FTX to Bankman-Fried's trading company Alameda Research, the people told Reuters.
A large portion of that total has since disappeared, they said. One source put the missing amount at about US$1.7 billion. The other said the gap was between US$1 billion and US$2 billion.
While it is known that FTX moved customer funds to Alameda, the missing funds are reported here for the first time.
The financial hole was revealed in records that Bankman-Fried shared with other senior executives last Sunday, according to the two sources. The records provided an up-to-date account of the situation at the time, they said. Both sources held senior FTX positions until this week and said they were briefed on the company's finances by top staff.
Bahamas-based FTX filed for bankruptcy on Friday after a rush of customer withdrawals earlier this week. A rescue deal with rival exchange Binance fell through, precipitating crypto’s highest-profile collapse in recent years.
In text messages to Reuters, Bankman-Fried said he "disagreed with the characterisation" of the US$10 billion transfer.
"We didn't secretly transfer," he said. "We had confusing internal labeling and misread it," he added, without elaborating.
Asked about the missing funds, Bankman-Fried responded: "???"
FTX and Alameda did not respond to requests for comment.
In a tweet on Friday, Bankman-Fried said he was "piecing together" what had happened at FTX. "I was shocked to see things unravel the way they did earlier this week," he wrote. "I will, soon, write up a more complete post on the play by play."
At the heart of FTX's problems were losses at Alameda that most FTX executives did not know about, Reuters has previously reported.

Customer withdrawals had surged last Sunday after Changpeng Zhao, CEO of giant crypto exchange Binance, said Binance would sell its entire stake in FTX's digital token, worth at least US$580 million, "due to recent revelations". Four days before, news outlet CoinDesk reported that much of Alameda's US$14.6 billion in assets were held in the token.
That Sunday, Bankman-Fried held a meeting with several executives in the Bahamas capital Nassau to calculate how much outside funding he needed to cover FTX's shortfall, the two people with knowledge of FTX's finances said.
Bankman-Fried confirmed to Reuters that the meeting took place.
Bankman-Fried showed several spreadsheets to the heads of the company's regulatory and legal teams that revealed FTX had moved about US$10 billion in client funds from FTX to Alameda, the two people said. The spreadsheets displayed how much money FTX loaned to Alameda and what it was used for, they said.
The documents showed that between US$1 billion and US$2 billion of these funds were not accounted for among Alameda's assets, the sources said. The spreadsheets did not indicate where this money was moved, and the sources said they don't know what became of it.
In a subsequent examination, FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a "backdoor" in FTX's book-keeping system, which was built using bespoke software.
They said the "backdoor" allowed Bankman-Fried to execute commands that could alter the company's financial records without alerting other people, including external auditors. This set-up meant that the movement of the US$10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX, they said.
In his text message to Reuters, Bankman-Fried denied implementing a "backdoor".
The US Securities and Exchange Commission is investigating FTX.com's handling of customer funds, as well its crypto-lending activities, a source with knowledge of the inquiry told Reuters on Wednesday. The Department of Justice and the Commodity Futures Trading Commission are also investigating, the source said.
FTX's bankruptcy marked a stunning reversal for Bankman-Fried. The 30-year-old had set up FTX in 2019 and led it to become one of the largest crypto exchanges, accumulating a personal fortune estimated at nearly US$17 billion. FTX was valued in January at US$32 billion, with investors including SoftBank and BlackRock.
The crisis has sent reverberations through the crypto world, with the price of major coins plummeting. And FTX's collapse is drawing comparisons to earlier major business meltdowns.
On Friday, FTX said it had turned over control of the company to John J Ray III, the restructuring specialist who handled the liquidation of Enron Corp – one of the largest bankruptcies in history.

 

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Monday, 14 November 2022 10:47

FTX, Alameda Execs Reportedly Knew About Internal Lending​

Senior executives at fallen crypto exchange FTX and affiliated trading firm Alameda Research reportedly had knowledge about the former lending customer funds to support the latter.
Revelations about FTX continue to emerge rapidly with the latest report that its senior executives had knowledge about lending customer funds to support affiliated trading unit Alameda Research, also founded and owned by Sam Bankman-Fried.
According to a «Wall Street Journal» report over the weekend citing unnamed sources, Alameda chief executive Caroline Ellison said she, Bankman-Fried and two other FTX executives were aware of the decision to send customer funds to Alameda. The two executives are Nishad Singh, director of engineering and Gary Wang, chief technology officer as well as FTX co-founder.

Separately, the report noted that the funds were used as loans to support illiquid venture investments.

Swift Downfall
In a matter of just days, FTX has experienced a swift downfall from being a multi-billion dollar crypto exchange to complete collapse.
Last Wednesday, Binance announced the signing of a non-binding agreement to acquire FTX before pulling out one day later on Thursday. And on Friday, FTX filed for US bankruptcy protection and Bankman-Fried resigned as CEO.

 

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FTX.com not required to migrate S’pore users to local subsidiary Quoine: MAS​

The FTX saga has raised several issues, the key of which was why Singapore users and their assets are not parked under Quoine. PHOTO: AFP

Claire Huang
Business Correspondent


NOV 14, 2022

SINGAPORE - The funds of Singapore investors in bankrupt cryptocurrency exchange FTX.com are not parked under its local subsidiary Quoine Pte Ltd as the two are separate legal entities, said the Monetary Authority of Singapore (MAS).
“Singapore users have the choice to deal with either FTX.com or Quoine. MAS has not required FTX.com to migrate Singapore users to Quoine,” the regulator said on Monday.
It was responding to media queries following a commentary in The Straits Times that raised the issue of why Singapore users of FTX.com – which has filed for protection from bankruptcy – were not parked under its local subsidiary.
Some observers had argued that had the funds been parked under Quoine, they would not have been stuck when FTX.com faced a liquidity crunch.
Instead, local subsidiaries of FTX.com, like the one in Japan, would have collateral assets to back their local obligations.
Investors in Singapore currently stand to get burned as FTX, once a darling of the crypto world, has fallen owing to a lack of liquidity.
On Monday, MAS explained the legal situation surrounding FTX.com and its subsidiary.

It said FTX.com is not licensed to operate in Singapore and that it is “not possible” to stop Singapore users from directly accessing overseas service providers.
“FTX.com was therefore able to onboard Singapore users. MAS has consistently reminded the public of the risks of dealing with unlicensed entities,” the regulator said.
On the other hand, Quoine, which was acquired by FTX in April, was granted an exemption from holding a licence under Singapore’s Payment Services Act. This meant that it was able to onboard Singapore users while MAS processed its licence application. The company was to be renamed FTX Singapore if it received the licence.

On Monday, the regulator said that taking into account recent developments, it is carefully reviewing Quoine’s licence application.
FTX’s filing last Friday showed that there were over 100,000 creditors and tens of billions in assets and liabilities, according to The Wall Street Journal.
Many Singapore users of FTX.com caught in the shocking collapse said they previously had to move their funds from rival player Binance to FTX.com after Binance was stopped from onboarding customers from Singapore and placed on the Investor Alert List (IAL) in September 2021.
Binance was launched in July 2017, while FTX.com was set up in May 2019.
MAS said on Monday that Binance was not banned from operating in Singapore.
The crypto exchange did not have the requisite licence to solicit customers from Singapore and had to cease doing so, it said, adding that putting a firm on the list is meant to prevent people from wrongly perceiving that the firm is regulated by MAS.
This was the case for Binance.com, it said. “It would not be meaningful for MAS to list all unlicensed entities on the IAL. MAS did not have cause to list FTX on the same basis as Binance.”
Digital payment token service providers licensed by MAS under the Payment Services Act are regulated for money laundering and terrorism financing risks as well as technology risks, but not safety and soundness, the regulator said.
Similar to the situation in other jurisdictions, the firms are not, for now, subject to risk-based capital or liquidity requirements, nor are they required to safeguard customer monies or digital tokens from insolvency risk, it noted.
“It is also why MAS has been continually reminding the general public since 2017 that dealing in cryptocurrency is highly hazardous,” added the regulator.
MAS had issued a consultation paper on Oct 26 proposing regulatory measures to reduce risks to consumers from cryptocurrency trading.
The proposals include ringfencing Singapore retail investors’ assets from a crypto firm’s overall assets, and forbidding players from lending out retail investors’ digital payment tokens – practices that are common in the industry.
MAS said: “Notwithstanding these measures, consumers must continue to exercise utmost caution when trading in cryptocurrency. Regulations cannot protect consumers from losses arising from the inherently speculative and highly risky nature of cryptocurrency trading.”

 

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How the pandemic fuelled crypto’s incredible rise and fall​

There is too much money sloshing around the global financial system.​

Robert Burgess

As the global financial system was overwhelmed with cash in a remarkably short period of time during the pandemic, the crypto world became a key relief valve. PHOTO: REUTERS


NOV 15, 2022

When historians look back on the spectacular rise and collapse of the cryptocurrency market, they will conclude that it could not have happened without the pandemic. And they would be right.
Back in 2020, when much of the world was locked down and economies shuttered due to the spread of Covid-19, financial assets of all stripes began a spectacular rally that carried through 2021. This was hard to explain even for the experts.
In the end, they chalked it up to too much money sloshing around the global financial system. Trite? Yes, but very true.

More money​

The combined money supply of the United States, China, the euro zone, Japan and eight other major developed economies surged by US$21.5 trillion (S$29.6 trillion) over 2020 and 2021 to a record US$102.3 trillion, according to data compiled by Bloomberg. Put another way, more money was created in 2020 and 2021 than in the previous seven years combined.
This unprecedented increase had two sources: generous government spending programmes designed to support economies through the pandemic, and central bank policies that in essence printed money to inject directly into the financial system to keep it from collapsing.
In hindsight, it is clear that governments and central banks overreacted. The financial system was overwhelmed with cash in a remarkably short period of time. It was as if new assets had to be invented to soak up all the new money, especially with bonds paying nothing and stock values at historical highs.
The crypto world became a key relief valve. The number of digital currencies exploded, rising from fewer than 3,000 near the end of 2019 to about 10,000 by the time 2022 rolled around, according to research company Statista. The crypto market’s value went from less than US$200 billion to US$3 trillion.

Money flooded in despite crypto having very little practical use other than pure speculation. It is not like you can walk into any restaurant, car dealership or department store and pay with Bitcoin. That day may come, but it is a very long way off.

The invention of the NFT​

The financial engineers did not stop there. They soon invented the non-fungible token, a cousin of crypto.
NFTs are essentially digital certificates of authenticity. An NFT is a unique, irreplaceable identifier created by an algorithm – a distinct barcode for a digital piece of art or collectible. It helps to address a problem that has long faced digital artists, which is how to create scarcity for an item that can be infinitely reproduced.


Like crypto, the NFT market exploded. Trading reached US$17.6 billion in 2021, an increase of 21,000 per cent from 2020, according to Nonfungible.com. Investors went crazy for bored apes, cryptokitties and penguins wearing hats.
The price to join the Bored Ape Yacht Club by purchasing an NFT of an image of a bored ape soared to US$420,430. Crypto entrepreneur Justin Sun paid half-a-million dollars for a picture of a rock with laser eyes.
Nobody should have been surprised at the crypto frenzy. It was the culmination of a dozen years of mismatched policies between monetary and fiscal authorities globally.
MORE ON THIS TOPIC
Big investors are giving up on crypto markets going mainstream
FTX goes bankrupt: Sam Bankman-Fried fooled the crypto world and maybe even himself

Enter central banks​

Coming out of the 2008 financial crisis, governments largely focused on austerity to reduce heavy debt loads, leaving central banks to nurture the recovery from what was the worst downturn since the Great Depression.
Central banks decided that they had no choice but to resort to drastic measures to keep their economies from slipping back into recession and avoid deflation. So, they lashed interest rates to near zero – or lower in some cases – and began a policy of quantitative easing (QE). Under QE, they injected money directly into the financial system by purchasing assets such as government bonds to keep market interest rates from rising.
Once they started down this route, they could not stop and risk imperiling a sluggish recovery.
Investors, of course, knew this and were emboldened to pay ever higher prices for financial assets because central banks would not – could not! – let markets fail. Central banks knew they were boxed in. They pleaded with governments to shoulder some of the responsibility, to no avail.
European Central Bank (ECB) president Christine Lagarde openly lobbied for looser fiscal policy. Then-Federal Reserve chairman Ben Bernanke was “so aggressive on the monetary policy side’’ because of a lack of fiscal stimulus, Mr Philip Orlando, the chief equity strategist at Federated Investors, told Bloomberg News in 2016.
When the pandemic rolled round, central banks had no option but to step on the QE accelerator. The collective balance sheet assets of the Fed, ECB, Bank of Japan and Bank of England shot up from about 10 per cent of their countries’ combined gross domestic products in 2007 to about 35 per cent at the start of 2020, Bloomberg data shows. They reached 59 per cent at the peak in late 2021.
The pandemic forced governments to finally loosen their belts. The combination led to an undeniable speculative frenzy across markets. Crypto in particular soared. But all such manias must end, as evidenced by last week’s bankruptcy of Mr Sam Bankman-Fried’s crypto empire and the downward spiral of Bitcoin, which has collapsed 75 per cent from its peak a year ago.
MORE ON THIS TOPIC
World's central banks got it wrong, and economies are paying the price
Central banks warm up to digital currency as crypto ecosystem freezes over

Retreat to austerity​

Governments are retreating back to austerity in the face of rising prices. Just ask Ms Liz Truss, whose time as prime minister of the UK was among the shortest in history after the bond market baulked at her stimulus proposals. And central banks are tightening monetary policy and shrinking the money supply to combat inflation rates that have not been this high since the early 1980s.
This is not to say that it was wrong for governments and central banks to act swiftly and strongly to support their economies and the global financial system. Imagine the alternative if they had not. We could have been staring at economic Armageddon.
Rather, the speculative frenzies of the past decade that reached a fever pitch during the pandemic and are causing so much financial pain now probably could have been avoided if central banks were not forced to do all the heavy lifting in the decade after the financial crisis.
Perhaps if the fiscal authorities did their part back then, central bank QE programmes could have been much smaller, helping to contain bubbles. That is the real lesson learnt from all this. BLOOMBERG

• Robert Burgess is the executive editor of Bloomberg Opinion. Previously, he was the global executive editor in charge of financial markets for Bloomberg News.

 

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Temasek to write down $377 million in FTX, says belief in Bankman-Fried appears to be ‘misplaced’​

Temasek said the total cost of its investment in FTX was 0.09 per cent of its net portfolio value of S$403 billion. PHOTO: REUTERS

Claire Huang
Business Correspondent

NOV 18, 2022

SINGAPORE - Temasek will write off its US$275 million (S$377 million) investment in cryptocurrency company FTX, “irrespective of the outcome of FTX’s bankruptcy protection filing”.
In a statement issued early on Thursday, the investment company said the total cost of its investment in FTX was 0.09 per cent of its net portfolio value of $403 billion as at end-March.
It invested US$210 million for a minority stake of about 1 per cent in FTX International, and pumped in another US$65 million for a minority stake of about 1.5 per cent in FTX US, which is the American subsidiary.
These investments were carried out across two funding rounds from October 2021 to January 2022.
The shocking collapse of Mr Sam Bankman-Fried’s FTX empire due to liquidity woes has shaken the crypto world and triggered a contagion that has spread to Genesis, the crypto broker, and Gemini, the crypto exchange. FTX has filed for protection from bankruptcy and Mr Bankman-Fried has stepped down as its chief executive.
“It is apparent from this investment that perhaps our belief in the actions, judgment and leadership of Sam Bankman-Fried, formed from our interactions with him and views expressed in our discussions with others, would appear to have been misplaced,” said Temasek.
It added that there have been misperceptions that the investment in FTX is an investment in crypto. “To clarify, we currently have no direct exposure in cryptocurrencies.”

This comes after another FTX investor, Sequoia Capital, said that it would write down the full value of its US$214 million bet on the exchange. SoftBank was later said to be also anticipating a loss of around US$100 million on its investment.
Temasek said that just as it does with all investments, it “conducted an extensive due diligence process on FTX”, which took about eight months from February to October 2021.
During this period, it reviewed the company’s audited financial statement, which showed it to be profitable.


Due diligence efforts were focused on regulatory risks, particularly licensing and compliance, Temasek said, adding that “advice from external legal and cyber-security specialists in key jurisdictions was sought, with legal and regulatory review done for the investments”.
Interviews with people familiar with FTX, such as staff, industry players and other investors, were also conducted.


If allegations, now under investigation, that customer assets were mishandled and misused are true, then it would amount to serious misconduct or fraud at FTX, Temasek said.
It added: “As we only had about 1 per cent stake in FTX, we did not have a board seat. However, we take corporate governance seriously, engage the boards and management of our investee companies regularly and hold them accountable for the activities of their companies.”
FTX’s board comprised Mr Bankman-Fried, an FTX staff member and a lawyer. There was no investor on its board.
Temasek said it continues to recognise the potential of blockchain applications and decentralised technologies.
“While this write-down of our investment in FTX will not have significant impact on our overall performance, we treat any investment losses seriously and there will be learnings for us from this,” it said.