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Crypto exchange FTX files for bankruptcy as wunderkind CEO exits

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LONDON:

Crypto exchange FTX filed for US bankruptcy protection on Friday and its founder Sam Bankman-Fried resigned as chief executive, after the biggest blowup in the crypto industry drew calls for tighter regulation.

The distressed crypto trading platform had struggled to raise billions to stave off collapse as traders rushed to withdraw $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal this week.

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FTX, its affiliated crypto trading firm Alameda Research, and about 130 of its other companies have commenced voluntary Chapter 11 bankruptcy proceedings in Delaware, the company said in a statement on Twitter on Friday.

It was an abrupt fall from grace for a company that was once a darling of the crypto industry. FTX raised $400 million from investors in January, valuing the company at $32 billion. It attracted money from investors such as Singapore state investor Temasek and the Ontario Teachers’ Pension Plan as well as celebrities and sports stars.

Bankman-Fried, 30, known for his trademark shorts and t-shirt attire, has morphed from being the poster child of crypto’s successes to the protagonist of the industry’s highest-profile crash.

“The shock was that this guy was the face of the crypto industry and it turned out that the emperor had no clothes,” said Thomas Hayes, managing member at Great Hill Capital LLC in New York.

The week’s turmoil hit already-struggling cryptocurrency markets, sending bitcoin to two-year lows . Bitcoin dropped after FTX’s announcement and was down 4.3% at $16,803 on Friday afternoon.

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Shares of cryptocurrency and blockchain-related firms also dropped on the news.

FTX’s token FTT plunged 30% on Friday to $2.57, facing an 88% weekly loss.

Bankman-Fried, whose net worth was estimated as high as $26.5 billion by Forbes a year ago, repeatedly apologized.

“I’m really sorry, again, that we ended up here,” he said in a series of tweets.

ankman-Fried did not respond to requests for comment.

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Possible Contagion Effect

In its bankruptcy petition, FTX Trading said it has $10 billion to $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors. John J. Ray III, a restructuring expert, has been appointed to take over as CEO.

Cryptocurrency exchange Coinbase Global Inc will write off the investment its ventures arm made in FTX in 2021, according to a person familiar with the matter.

The company said earlier this week it had $15 million in deposits on FTX that were used to facilitate business operations and client trades, but that its total exposure is minimal.

“The next question is how wide of a contagion effect this is going to have on other exchanges and where the next potential losses can occur,” said John Griffin, founder of Integra FEC, which consults on financial fraud investigations.

US Senator Elizabeth Warren, a Democrat who has previously criticized the crypto industry, tweeted that the implosion of FTX was a wake-up call for Congress and regulators to hold the industry and its executives accountable.

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“Too much of the crypto industry is smoke and mirrors. It’s time for stronger rules and stronger enforcement to protect ordinary people,” she said.

FTX was scrambling to raise about $9.4 billion from investors and rivals, Reuters reported citing sources, as the exchange sought to save itself after customer withdrawals.

“The Chapter 11 filing is a necessary step to allow the company to assess the situation and develop plans to move forward for the benefit of stakeholders,” Ray, the new CEO, said in a Slack memo to FTX staff seen by Reuters.

Ray, 63, oversaw the liquidation of Enron after its bankruptcy filing and served as the senior officer of what became Enron Creditors Recovery Corp. He also led the bankruptcy restructuring at Nortel Networks.

He did not respond to a request for comment.

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As FTX’s troubles mounted, regulators around the world stepped in.

FTX is under investigation by the US Securities and Exchange Commission, the US Justice Department and the Commodity Futures Trading Commission, according to a source familiar with the investigations.

Some investors, including Sequoia and SoftBank, had already marked their investments in FTX to zero. SkyBridge Capital is working to buy back its FTX stake, the alternative investment firm’s founder, Anthony Scaramucci, said in an interview with CNBC on Friday.

The reverberations went beyond financial markets. Mercedes’ Formula One team suspended its partnership with FTX ahead of the season’s penultimate race in Brazil.

“Once Binance walked away from buying FTX after only 24 hours of due diligence the writing was on the wall for FTX,” said Antoni Trenchev, co-founder of crypto lender Nexo.

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“Now we enter the next phase of the fallout, where we witness the second order effects and discover which entities were exposed to FTX and Alameda.”





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Microsoft admits Sony has has ‘better’ exclusive games

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Microsoft has recently admitted that its rival, Sony, has “better quality” games than Xbox in a filing with UK’s Competition and Markets Authority (CMA). The assertion was made on October 31, but the document was recently made public, Eurogamer noted.

Microsoft elaborated its stance, saying that Sony was “the dominant console provider” and ” a powerful game publisher”. It explained that “Sony is roughly equivalent in size to Activision and nearly double the size of Microsoft’s game publishing business.”

Read: Global regulators to target crypto platforms after FTX crash

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Comparing data, Microsoft wrote in the filing that Sony had five times as many of their 280 exclusive first- and third-party titles, on PlayStation. Besides just owning franchises like God of War and Spider-Man, Sony has signed deals with third-party publishers for exclusive rights to games.

Microsoft also claimed that console exclusives accounted for a higher percentage of global game sales for Sony than their own company. The company detailed review scores for PlayStation and Xbox, saying “the average Metacritic score for Sony’s top 20 exclusive games in 2021 was 87/100, against 80/100 for Xbox”.

CMA is conducting an in-depth investigation into Microsoft’s acquisition of Activision Blizzard, which has raised concerns by Sony, particularly over the franchise Call of Duty, which could be made exclusive to Xbox only, if the deal goes through.

 





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Netflix is working on a ‘brand-new AAA PC game’

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Netflix is currently hiring game directors and engineers to work on a “brand-new AAA PC game” at its new Los Angeles games studio.

The project has yet to be announced by the streaming platform itself. However, as per a job listing spotted by Mobilegamer.biz, Netflix needs a game director who “will be the creative leader of one of Netflix’s first generation of internally developed original games”.

 Apart from multiple job listings, there are not many details available regarding the new project.

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Read Global regulators to target crypto platforms after FTX crash

The digital platform has previously launched some games, but they were specifically suited for mobile phones. While many users are unaware of the games on Netflix, the platform plans to venture into PC gaming and expand its audience.

 

 





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Global regulators to target crypto platforms after FTX crash

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LONDON:

The crash of FTX exchange has injected greater urgency into regulating the crypto sector and targeting such ‘conglomerate’ platforms will be the focus for 2023, the new chair of global securities watchdog IOSCO said in an interview.

Jean-Paul Servais said regulating crypto platforms could draw on principles from other sectors which handle conflicts of interest, such as at credit rating agencies and compilers of market benchmarks, without having to start from scratch.

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Cryptoassets like bitcoin have been around for years but regulators have resisted jumping in to write new rules.

But the implosion at FTX, which left an estimated one million creditors facing losses totalling billions of dollars, will help change that, Servais told Reuters.

“The sense of urgency was not the same even two or three years ago. There are some dissenting opinions about whether crypto is a real issue at the international level because some people think that it’s still not a material issue and risk,” Servais said.

“Things are changing and due to the interconnectivity between different types of businesses, I think it’s now important that we are able to start a discussion and that’s where we are going.”

IOSCO, which coordinates rules for G20 countries and others, has already set out principles for regulating stablecoins, but now the focus is turning to platforms which trade in them.

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In mainstream finance there is functional separation between activities like broking, trading, banking services and issuance, with each having its own set of conduct rules and safeguards.

“Is it the case for the crypto market? I would say most of the time not,” Servais said.

Crypto ‘conglomerates’ like FTX have emerged, performing perform multiple roles such as brokerage services, custody, proprietary trading, issuance of tokens all under a single roof that give rise to conflicts of interest, Servais said.

“For investor protection reasons, there is a need to provide additional clarity to these crypto markets markets through targeted guidance in applying IOSCO’s principles to crypto assets,” Servais said.

“We intend to publish consultations report on these matters in the first half of 2023,” he added.

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Madrid-based IOSCO, or International Organization of Securities Commissions, is an umbrella body for market watchdogs like the Securities and Exchange Commission in the United States, Bafin in Germany, Japan’s Financial Services Agency, and the UK Financial Conduct Authority, who all commit to applying the body’s recommendations.

The European Union’s new markets in cryptoassets or MiCA framework is an “interesting starting point” for developing global guidance as it focuses on supervision of crypto operators, said Servais, who also chairs Belgium’s financial regulator FSMA.

“I think that the world is changing. We know there is some space for developing new standards about supervision of this kind of crypto conglomerates. There is an obvious necessity,” Servais said.





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