Cryptocurrency Exchange

FTX contagion victim Deepak.eth puts NFT collection up for sale

Deepak.eth, the founder of the blockchain infrastructure Chain, listed their NFT collection for sale on OpenSea starting at 8,000 ETH.

The founder of the Chain blockchain infrastructure company, who goes by the internet pseudonym Deepak.eth, took to Twitter to announce the sale of their nonfungible token (NFT) collection.

Deepak.eth tweeted that the collection will either be sold to the highest bidder or else placed in a “fractional DAO” in which they would sell 80% of the ownership. According to the Chain founder, the collection is going for 8,000 (ETH), which is roughly $10, 258,720 million at the time of writing.

The collection includes high ticket NFTs such as Tiffany Punks which will include the NFTiff and physical pendants, some Bored Ape Yacht Club characters (BAYC) and Mutants, among others. 

On Nov. 10, Deepak.eth began a thread on Twitter, which pointed the finger at the recent FTX turmoil as the reason for dipping into the liquidity via their NFTs.

They said although the company cut ties with Alameda in the summer, it continued to keep holdings in FTX and recently made a major deposit into the exchange. According to Deekpak.eth, those funds are stuck and waiting for withdrawal, which led them to dig into their other digital assets.

Despite recent trading volumes of popular collections such as Bored Ape Yacht Club (BAYC) hitting lows, NFTs in these series have previously seen market values into the millions.

The community on Twitter responded to the listing calling it the “holy grail” of NFT collections:

Others commented on the collection and called it “amazing” and “uncanny.” Many also sent their support to Deepak.eth with words of encouragement such as “stay strong” and “hope you’re ok.”

Related: Nearly $55M worth of Bored Ape, CryptoPunks NFTs risk liquidation amid debt crisis

This is one of many aftershocks from the FTX scandal. It has left the industry scathed, regulators ready to pounce and other exchanges rushing to prove transparency.

Genesis Trading, a market maker and lending subsidiary, came out stating that it has around $175 million worth of funds locked away in an FTX trading account. Along with Galaxy Digital, who claimed to have $48 million locked in FTX withdrawals.

Legislatures in the United States have used the recent events as an example of the need for tighter regulations on the crypto industry, despite FTX US being allegedly unaffected by the incident thus far.

Meanwhile, other crypto platforms in the industry such as Binance and Crypto.com have published their commitment to transparency through future publications of proof of reserves.

California regulators to investigate FTX crypto exchange collapse

The California DFPI announced it will open up an investigation as to the “apparent failure” of FTX and says it takes this oversight very seriously.

The Department of Financial Protection and Innovation (DFPI) in the state of California announced on Nov. 10 that it will open up an investigation as to the “apparent failure” of the cryptocurrency exchange FTX. 

California regulators said in the announcement that the DFPI takes this oversight responsibility “very seriously” and that the department expects all entities offering financial services in the state to comply with local financial laws.

It also encouraged anyone in the state who has been affected by the events of the ongoing FTX saga, to call a dedicated hotline. 

The state of California is one of many governmental actors within the United States to recently speak out on the matter, despite the fact that FTX claims its U.S. branch is not involved in the incidents.

Sam Bankman-Fried, the founder of FTX, tweeted a 22-tweet thread in which he reiterated multiple times that FTX US is a different entity than the international one facing the turmoil.

However, later on Nov. 10, FTX US announced it might halt trading on the platform in the upcoming days. Currently on the U.S. website, it states “withdrawals are and will remain open.”

Related: FTX turmoil increases scrutiny of industry, something institutional investors have been waiting for

incident as a mechanism to call for more regulations on the crypto industry.

On Nov. 10, Maxine Waters, the chair of the United States House of Representatives Financial Services Committee, called for tighter industry regulations and highlighted that FTX tokens are “worthless” and its customers are in the dark.

The same day saw White House press secretary Karine Jean-Pierre make a statement saying the administration will “closely monitor” activity in the crypto space. Moreover, the “recent news” underscores the need for “prudent regulation” of cryptocurrencies.

U.S. Senators Debbie Stabenow and John Boozman reiterated their commitment to finishing and publishing an upcoming crypto bill in light of the news, also citing the incident.

While all of this was underway, FTX US resigned from the Crypto Council for Innovation.

LayerZero Labs bought back its stake from FTX Ventures and Alameda

The protocol announced an agreement to buy out 100% of FTX Ventures’s and Alameda Research’s equity position.

Interoperability protocol LayerZero Labs announced on Nov.10 an agreement to buy out 100% of FTX Ventures’ and Alameda Research’s equity position, including token warrants and all agreements between the parties. 

In March, the protocol raised $135 million in a funding round co-led by FTX Ventures, bringing the startup’s valuation to $1 billion. Other investors in the round included Andreessen Horowitz, Sequoia, Coinbase Ventures and PayPal Ventures.

In a statement released to investors and published on Twitter, Bryan Pellegrino, LayerZero’s CEO, said:

“We’ve worked around the clock for the past 72 hours to structure an agreement and have bought FTX/FTX Ventures/Alameda out of 100% of their equity position, token warrants, and any agreement between us.”

The agreement also included the purchase of the STG tokens Alameda had acquired from its community auction. According to LayerZero, a proposal will be submitted to transfer the tokens to the Stargate Foundation and “let the community decide what to do with them.” 

FTX Ventures participated in the STG launch and bought all the tokens, as Sam Trabuco, CEO at Alameda, explained in a Twitter thread in March. The tokens were later released as a spot-based product.

LayerZero claimed to possess $107 million in cash, along with the equivalent of $27 million in on-chain funds, with around 90% in stablecoins, coming for a total of $134 million. In addition, the startup had $11.5 million on FTX that was being used for operational purposes but said it now considers it a balance of zero. 

“This puts us in an incredibly strong position going into the next few years. We have no less than 7 years of runway even in our aggressive projections, are equity rich, and have one of the most amazing teams in all crypto,” noted Pellegrino.

Sam Bankman-Fried revealed the FTX crisis on Nov. 8 by announcing Binance’s intention to acquire the crypto exchange amid a “liquidity crunch.” In a Twitter thread published on Nov. 10, he also confirmed that Alameda was “winding down trading” but assured users that the United States-based FTX US “was not financially impacted” by recent events. To learn more, read Cointelegraph’s wrap-up of the whole saga between the exchanges.

FTX US resigns from the Crypto Council for Innovation

“The news this week has been shocking, but we’ve also seen the community come together,” said CCI CEO Sheila Warren.

United States-based exchange FTX US has left its position at the crypto advocacy group Crypto Council for Innovation, or CCI.

In a statement to Cointelegraph on Nov. 10, CCI CEO Sheila Warren said the council had accepted FTX US’ resignation as an associate member of the group. The firm’s departure came amid crypto exchange FTX reporting liquidity issues, leading to volatility across the market and concerns from global regulators and lawmakers.

“We remain committed to working towards building regulation that protects users and safeguards innovation, in order to bring about real change,” said Warren. “The news this week has been shocking, but we’ve also seen the community come together. We have an historic opportunity to get the policies right.”

FTX CEO Sam Bankman-Fried said FTX US had not been “financially impacted” by the liquidity issues the global exchange was facing. However, the U.S. exchange also announced on its website that trading could be halted starting “in a few days” and warned users to close down any positions if they choose.

Related: Crypto Council for Innovation poll sees crypto voters as a force to be reckoned with

Formed in April 2021, the CCI is an alliance including Andreessen Horowitz, Block, Coinbase, Electric Capital, Gemini, Fidelity Digital Assets, Paradigm and Ribbit Capital. The advocacy group has hired U.S. government insiders in its goal to support lawmakers on issues related to crypto and blockchain.

Sam Bankman-Fried apologizes for FTX liquidity crisis: ‘I fucked up twice’

According to the FTX CEO, Alameda Research was also “winding down trading” but United States-based exchange FTX US “was not financially impacted” by recent events.

In one of his first public statements since rumors and concerns about FTX’s insolvency flooded the crypto market, CEO Sam Bankman-Fried, or SBF, has said: “I’m sorry.”

In a Nov. 10 Twitter thread, SBF admitted to investors he “should have done better” in providing transparency on the situation with FTX. The CEO reported that the exchange was experiencing a “liquidity crunch” caused by user withdrawals and requested financial assistance from Binance — a potential deal that later fell apart.

According to SBF, the exchange saw roughly $5 billion in withdrawals on Nov. 6. The total market value of FTX International’s assets was higher than its clients’ deposits, but “the liquidity varies widely, from very to very little.”

“The full story here is one I’m still fleshing out every detail of, but as a very high level, I fucked up twice,” said SBF. “The first time, a poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users’ margin. I thought it was way lower.”

The FTX CEO added:

“I should have said more. I’m sorry — I was slammed with things to do and didn’t give updates to you all.”

While the deal with Binance may be dead, SBF said FTX was discussing similar options with “a number of players” in the crypto space, with “every penny” coming from a potential deal going to the exchange’s affected users. According to the CEO, Alameda Research was also “winding down trading” but United States-based exchange FTX US “was not financially impacted” by recent events.

“At some point I might have more to say about a particular sparring partner, so to speak. But you know, glass houses. So for now, all I’ll say is: well played; you won.”

Related: FTX and Binance’s ongoing saga: Everything that’s happened until now

Some of the events surrounding FTX’s liquidity crisis began in the last seven days, with Binance CEO Changpeng Zhao saying on Nov. 6 the exchange would liquidate its FTX Token (FTT) holdings. Many FTX users attempted to withdraw funds, prompting SBF to tweet on Nov. 7 that the exchange and its assets were “fine,” labeling liquidity concerns as “false rumors.” The FTX CEO put out a seemingly contradictory statement the following day, saying the exchange was facing a “liquidity crunch” and was in talks to sell to Binance.

FTX Ventures and Alameda Research’s websites both went down within 24 hours of SBF’s public statement, Binance said it no longer planned to acquire FTX, and the crypto market experienced extreme volatility with a major exchange potentially going kaput. The FTX website came back online on Nov. 9, but with the main page warning that it “strongly advise[s] against depositing.” 

Binance shares wallet addresses and activity after proof-of-reserve pledge

Days after CZ took to Twitter to announce a new proof-of-reserve system for Binance users, the site went live with public details of its wallet addresses and on-chain activity.

In light of the FTX liquidity crisis and the near-acquisition by Binance, Binance CEO Changpeng “CZ” Zhao assured his community that his network would provide full transparency on asset holdings.

On Nov. 10, Binance published a new page titled “Proof of Assets” on which all details are available of its on-chain activity for its hot and cold wallet addresses. This comes only two days after the initial tweet from CZ on Nov. 8 in which he pledged to create a proof-of-reserve mechanism to ensure “full transparency” to the community.

Binance released an official statement on the new page in which it says it’s the next step in its “commitment to transparency and fostering trust in the ecosystem,” but also that it is only a starting point.

The final goal is to create a Merkle Tree proof of funds, which will be shared with the community in the following weeks, according to the exchange.

“Our objective is to allow users of our platform to be aware and make informed decisions that are aligned with their financial goals.”

The announcement also included a snapshot of hot and cold wallet addresses from Nov. 10, 2022 at approximately 12:00 am UTC.

Additionally, the announcement reiterated that the company’s Secure Asset Fund for Users (SAFU) has been topped at $1 billion. The initial statement came in a tweet from CZ on Nov. 9 and was said to be done “in light of recent price fluctuations.”

Users on social media responded to the publicized numbers, with Reddit users worrying about not seeing Monero (XMR) listed on the new Proof of Assets page but still being available for purchase through the exchange.

Many users across platforms including Twitter and Reddit have said it’s a good start but that reliability tests will be needed.

Related: Bitcoin price hits multi-year low at $15.6K, analysts expect further downside

As the market fumbles in response to the FTX–Binance incident, other crypto platforms have voiced their support of proof-of-reserve mechanisms for their own communities.

In a tweet on Nov. 10, Crypto.com CEO Kris Marszalek said he believes that it should be necessary for crypto platforms to publicly share their proof of reserves. Moreover, Marszalek said the platform will soon be publishing its audited proof of reserves.

Additionally, both OKX and KuCoin released statements on Twitter in which the platforms also committed to publicizing proof of reserves in the coming months.

OKX, Kucoin say proof of reserves will be ready in a month

Similar protocols are used by Kraken, Bitmex, Gate.io and many other exchanges but were not used by FTX.

In the wake of the FTX liquidity crisis, two major crypto exchanges have announced that they will provide Proof of Reserves, also known as Proof of Funds (PoF) within the next month. 

In an official tweet, OKX stated, “We’re hiring Armanino for auditing & will publish an auditable Merkle POF asap.” The company then listed 23 BTC addresses and 13 Ethereum addresses containing some of the exchange’s reserves.

In an earlier tweet, OKX had stated that their PoF would be done “in the coming weeks (within 30 days).” This timeline has now been updated to “asap.”

CEO of KuCoin Johnny Lyu also announced that KuCoin will be providing Proof of Reserves “in about one month.” He said KuCoin will be working with “authoritative auditing institutions” to make sure that the Proof of Funds accurately represents the assets on hand.

Proof of Reserves is a technique used by some crypto exchanges to provide proof that they have enough assets to handle all withdrawals. A reputable third-party auditor records all customer balances and converts them into a cryptographic Merkle Tree. This anonymizes the data to protect privacy, but it also allows users to compare the total balances held by customers with the total assets the exchange has on hand.

Similar protocols are used by Kraken, Bitmex, Gate.io and many other exchanges, but were not used by FTX. CZ of Binance recently argued that all exchanges should provide PoFs to make sure that an exchange is not using “fractional reserves.”

MiCA proponent cites FTX in advocating for regulation: ‘Crypto assets are not play money’

“With a global MiCA, the FTX crash would not have happened,” said European Parliament economics committee member Stefan Berger.

European Parliament economics committee member Stefan Berger has compared the current situation with FTX to the 2008 financial crisis, using “such Lehman Brothers moments” in justifying the need for regulating crypto.

In a Nov. 9 tweet, Berger said proper regulation was needed to avoid issues which “cost enormous trust” in the crypto space, amid FTX reporting financial difficulties. The parliamentary committee member pointed to the Markets in Crypto-Assets, or MiCA, framework currently moving through the European Council as a way to require crypto firms to “ensure internal risk management mechanisms.”

“The FTX case makes it clear what dangers a completely unregulated crypto market and crypto exchanges without licenses entail,” said Berger in a written statement to Cointelegraph. “We still have a large number of crypto asset service providers whose concept is not understandable. MiCA addresses exactly this problem. With a global MiCA, the FTX crash would not have happened.”

He added:

“The crypto space is not a casino. The crash of a $30 billion exchange like FTX has unsettled the entire market […] Regulation is a good tool to restore confidence in the ailing market.”

Berger’s statement on the “shame” of FTX and Alameda Research came prior to crypto exchange Binance announcing on Nov. 9 it did not intend to acquire the firm. Both Binance CEO Changpeng Zhao and FTX CEO Sam Bankman-Fried publicly came out in support of a deal between the two major exchanges on Nov. 8 in an effort to address FTX’s reported “liquidity crunch.” The ongoing situation with FTX has led to volatility across the crypto market and some lawmakers calling for regulatory clarity.

Related: Why is the crypto market down today?

On Oct. 10, the European Parliament economics committee accepted the MiCA legislation, a result of trialogue negotiations between the EU Council, the European Commission and the European Parliament. The bill aims to create a consistent regulatory framework for cryptocurrencies among the 27 European Union member states. EU lawmakers still need to conduct legal and linguistic checks, approve a final version of the bill, and publish MiCA in the EU journal, but the policy could go into effect as early as 2024.

MiCA proponent cites FTX in advocating for regulation: ‘Crypto assets are not play money’

“With a global MiCA, the FTX crash would not have happened,” said European Parliament economics committee member Stefan Berger.

European Parliament economics committee member Stefan Berger has compared the current situation with FTX to the 2008 financial crisis, using “such Lehman Brothers moments” in justifying the need for regulating crypto.

In a Nov. 9 tweet, Berger said proper regulation was needed to avoid issues that “cost enormous trust” in the crypto space amid FTX reporting financial difficulties. The parliamentary committee member pointed to the Markets in Crypto-Assets, or MiCA, framework currently moving through the European Council as a way to require crypto firms to “ensure internal risk management mechanisms.”

“The FTX case makes it clear what dangers a completely unregulated crypto market and crypto exchanges without licenses entail,” said Berger in a written statement to Cointelegraph. “We still have a large number of crypto asset service providers whose concept is not understandable. MiCA addresses exactly this problem. With a global MiCA, the FTX crash would not have happened.”

He added:

“The crypto space is not a casino. The crash of a $30 billion exchange like FTX has unsettled the entire market […] Regulation is a good tool to restore confidence in the ailing market.”

Berger’s statement on the “shame” of FTX and Alameda Research came prior to crypto exchange Binance announcing on Nov. 9 that it did not intend to acquire the firm. Both Binance CEO Changpeng Zhao and FTX CEO Sam Bankman-Fried publicly came out in support of a deal between the two major exchanges on Nov. 8 in an effort to address FTX’s reported “liquidity crunch.” The ongoing situation with FTX has led to volatility across the crypto market and some lawmakers calling for regulatory clarity.

Related: Why is the crypto market down today?

On Oct. 10, the European Parliament economics committee accepted the MiCA legislation, a result of trialogue negotiations between the EU Council, the European Commission and the European Parliament. The bill aims to create a consistent regulatory framework for cryptocurrencies among the 27 European Union member states. EU lawmakers still need to conduct legal and linguistic checks, approve a final version of the bill, and publish MiCA in the EU journal, but the policy could go into effect as early as 2024.

Alameda Research and FTX Ventures websites go dark

Pages for the quantitative trading firm and the venture capital arm have been taken offline and made private.

Websites linked to crypto exchange FTX have been taken down on Nov. 9 following a liquidity crisis and pending acquisition of the company by its rival Binance. Websites for Alameda Research and the company’s venture capital arm, FTX Ventures, were offline and made private, while both FTX’s main site and FTX US’ website remain accessible.

Cointelegraph reached out to Alameda on Nov. 9 but did not hear back as of publication time. The latest developments include unconfirmed reports that most of FTX’s legal and compliance staff quit on Nov. 8.

FTX founder and CEO Sam Bankman-Fried, or SBF, revealed the liquidity crunch on Nov. 8, just hours after he guaranteed that clients’ “assets are fine,” adding that the exchange did not invest clients’ holdings, even in treasuries.

The crisis unfolded after Binance CEO Changpeng Zhao, or CZ, disclosed Binance’s decision to liquidate its position of 23 million FTX Token (FTT) — worth over $520 million at the beginning of this week — for risk management reasons. The news triggered a sell-off of FTT, which was trading at $3.00 as of publication time — a fall of 87.11% in seven days.

As reported by Cointelegraph, some of FTX’s shareholders learned about the agreement via Twitter on Nov. 8. In his letter to the exchange’s investors, SBF apologized for being “hard to contact” in the past days, acknowledged he has no idea what exactly the agreement with Binance means, and lastly, closed the letter saying he will be “quite swamped” in the coming days and will write again “when I have time too.”

The next steps remain unclear. Binance is reportedly performing due diligence and may opt to walk away from the deal after reviewing the company’s structure and books, reported the Wall Street Journal, citing unidentified sources.

FTX was backed by big players in the venture capital scene, including Singapore’s state-owned investment firm Temasek, Sequoia Capital, BlackRock, SoftBank, Ontario Teachers’ Pension Plan, Paradigm, Circle, Ribbit Capital, Alan Howard, Tiger Global and Multicoin Capital.