Projects Involved in FTX Incident

https://research.huobi.com/#/ArticleDetails?id=348

Abstract

This week, we focus on the following events: 1) Bitcoin Clings to $16K Ahead of Fed Minutes; 2) Binance Allocates Another $1B for Its Crypto Recovery Fund; 3) US State Regulators Investigating Crypto Trading Firm Genesis Global Capital: Barron’s.

Project Analysis: It took only 3 years for FTX to develop into a global unicorn with a valuation of 32 billion U.S. dollars — a total financing of more than 2 billion U.S. dollars, a luxurious lineup of investment institutions, more than 70, including Sequoia Capital, Paradigm, Singapore’s sovereign wealth fund Temasek, (Canada) Ontario Teachers’ Pension Plan Board, Softbank, Tiger Global and other star institutions.

1. Industry overview

I. Overall market trend

The global cryptocurrency market’s market cap this week changed slightly, currently with a market cap of $840,022,884,963, slightly higher than the lowest point a few weeks ago. Bitcoin is currently trading at US$16,493, continuing weeks of lower than $20,000. Meanwhile, Ethereum, the second largest cryptocurrency, is currently trading at US$1,207, was slowly increasing. Most of the other top 10 tokens, were tokens that have major news happened this week, like the FTT’s fluctuations and World Cup. Among them, most of them are increasing, with CRV up by 35.06%. SONM, which was the token with the biggest increase last week, fell by 59.96% this week.

II.NFT

The NFT market last week saw a decrease of 16.89%, with a market cap of US $2,364,964,109.70 this week. The 7-day sales volume changed by 0.64% to $26,427,933.03 and total sales change by 0.77%, to 32,686. The week, the market showed signs of slow recovery from FTX related damages. This week the top 10 NFT brands on Coinmarketcap are all familiar brands which has entered this list before. Doodles and the Bored Ape Kennel Club has the biggest change, respectively at 0.11% and 0.21%, while all the other top 10 brands have a change less than 0.1%.

III.DeFi

IV.Layer 2

2. Market news (Source: Coindesk)

I. Industry news

Bitcoin Clings to $16K Ahead of Fed Minutes

Bitcoin held its $16,000 ground as traders anticipated the expected release at 2 p.m. ET (19:00 UTC) of minutes from the Federal Reserve’s last monetary-policy meeting.

The minutes might hold clues on the pace of future interest rates, a key factor in prices for risky assets from stocks to cryptocurrencies.

Bitcoin (BTC) was trading as high as $16,634 early Wednesday but had settled back to $16,300 as of press time, up 1.3% in the past 24 hours.

The largest cryptocurrency by market capitalization has recovered somewhat since hitting a two-year low of $15,480 on Monday amid jitters over the future of the crypto financial firm Genesis.

Crypto Exchange Binance Delists Serum Trading Pairs Amid FTX Connection

Cryptocurrency exchange Binance will delist three Serum (SRM) trading pairs as the fallout from FTX’s collapse continues, according to an announcement on Friday.

The exchange will terminate trading of the SRM/BNB, SRM/BTC and SRM/USDT trading pairs on Nov. 28.

Serum is a Solana-based decentralized exchange protocol that was championed by FTX since its inception, with the defunct exchange awarding SRM tokens to traders in the form of a weekly airdrop.

On Nov. 14, the Solana Foundation said that it held 134.54 million SRM on FTX, raising concerns about the future of the project.

The community forked the project the following day to protect itself against a hack that took place on FTX, the token subsequently rallied by over 250%.

FTX Exploiter Transfers $200M in Ether to 12 Crypto Wallets

Blockchain data from Etherscan shows that a crypto account associated with the FTX exploiter moved a total of 180,000 ether (ETH) — worth roughly $200 million at current prices — to 12 crypto wallets Monday, with each wallet receiving 15,000 ETH over a period of minutes.

Failed crypto exchange FTX suffered an exploit on Nov. 11 — the same day it filed for bankruptcy protection in the U.S. — enduring about $600 million of unauthorized withdrawals.

Blockchain experts argued that the looter was likely an insider who had access to the exchange’s cold wallets. The security team of crypto exchange Kraken said that they knew the identity of the exploiter, because they used their personal verified account to pay for transaction fees.

Blockchain intelligence firm Arkham Intelligence said the FTX exploiter is in a panic, and has lost a substantial amount of money in slippage and conversion fees attempting to cash out.

II. Investment and Financing

Binance Allocates Another $1B for Its Crypto Recovery Fund

Crypto exchange Binance has allocated another $1 billion for its industry recovery fund, effectively increasing the size of the fund to over $2 billion.

The additional allocation was announced by Binance CEO Changpeng “CZ” Zhao on Friday.

The size increase comes a day after CZ said that Binance is targeting $1 billion for its crypto recovery fund. Aptos Labs and Jump Crypto, along with other prominent crypto companies joined Binance’s initiative and will contribute $50 million to the fund.

The recovery fund would be used to buy distressed crypto assets and support the industry. The crypto market has seen a massive decline since the start of the year, leading to several crypto firms going out of business.

The crypto market continues to be under pressure, with bitcoin (BTC) trading 1.6% lower during the day, hovering at around $16,400 at the time of writing.

Jihan Wu’s Crypto Lender Matrixport Looks to Raise $100M at $1.5B Valuation

Crypto lending firm Matrixport, led by Jihan Wu, is looking to raise $100 million at a $1.5 billion valuation.

The Singapore-based firm already has commitments for $50 million from lead investors at the sky-high valuation, but is still looking for investors for the other half of the round, Bloomberg reported on Friday citing anonymous sources. The lending firm seemed to confirm the news by tweeting out the article.

The crypto industry has been in major turmoil in the past few months as various cryptos have seen sharp declines compared to last year highs. Matrixport competitor in Asia Babel Finance has been restructuring to deal with a liquidity crunch.

The trouble only intensified with the bankruptcy of crypto exchange FTX. Matrixport’s fixed income offering was affected by FTX’s collapse.

Matrixport closed a $100 million Series C round in August 2021 that valued it at $1 billion, led by DST Global, C Ventures and K3 Ventures.

Crypto Exchange Huobi Denies Rumors It Will Merge With Poloniex

Cryptocurrency exchange Huobi has said rumors that it will merge with Poloniex are “categorically untrue.”

It was reported today by Colin Wu that the two exchanges would merge, a rumor to which Justin Sun subsequently added fuel.

Justin Sun, the founder of the Tron network, has an involvement in both exchanges. He was part of an investor group which acquired Poloniex in 2019 and is now an advisor to Huobi.

“We would like to state for the record that rumors stating Huobi will soon merge with Poloniex are categorically untrue,” Huobi said in an emailed statement.

“Huobi and Poloniex are operating independently now.”

Huobi Global, which was founded in China in 2013 and is one of Asia’s largest crypto platforms, is currently planning to move to the Caribbean, with Dominica, Panama and the Bahamas the frontrunners, according to Sun.

III. Supervision

US State Regulators Investigating Crypto Trading Firm Genesis Global Capital: Barron’s

Several U.S. state regulators are looking into whether crypto trading firm Genesis Global Capital may have violated securities laws, according to a report from Barron’s.

The report said that Alabama Securities Commission Director Joseph Borg indicated that his agency and several other states are involved in the investigations, which focus on whether Genesis and other companies persuaded residents of their states to invest in crypto securities without having the proper registrations. Borg did not name the other companies being investigated.

Neither Genesis nor the Alabama Securities Commission responded immediately to requests for comment.

Earlier this week, Genesis confirmed it had hired an investment bank to explore its options, including bankruptcy, as it has struggled to recover from its exposure to collapsed crypto exchange FTX and before that to failed crypto hedge fund Three Arrows Capital.

Turkish Authorities Order Seizure of ‘Suspicious’ FTX Assets

Authorities in Turkey are looking to seize “suspicious assets” associated with collapsed crypto exchange FTX, and are investigating the platform’s founder Sam Bankman-Fried.

A Wednesday notice from the country’s Financial Crimes Investigation Board, known as MASAK, says the agency had sought approval from the Istanbul Chief Public Prosecutor’s Office to initiate “an investigation for various antecedent crimes and laundering the property values ​​arising from the crime” and to “confiscate the suspicious assets” in accordance with local law.

After a CoinDesk article scrutinizing the financial stability of Sam Bankman-Fried’s crypto empire set off a series of events that culminated in a bankruptcy filing in the U.S., regulators in the numerous jurisdictions where the platform had a local presence have sprung to action, most notably in The Bahamas, where FTX was headquartered.

Since Nov. 14, MASAK has also been investigating the exchange’s local unit, FTX Turkey. The ongoing investigations have shown that customers’ trust was “not duly preserved” by the fallen company, and that authorities have “a strong suspicion of crime” being committed, particularly by Bankman-Fried who “directly or indirectly” controls the entities and persons through which FTX operates in Turkey, the notice said.

UK Lawmakers Support Easy Seizure of Crypto Linked to Terrorist Activity

Lawmakers in the U.K. voted in favor of new rules that could make it easier for law enforcement agencies to seize crypto linked to terrorist activity.

The rules were proposed as amendments to the Economic Crime and Corporate Transparency bill, which includes reforms that can help authorities combat local crime.

The same lawmakers in the House of Commons, the parliament’s lower house, had already voted in favor of amendments that would give powers to local enforcement to seize, freeze and recover crypto tied to crime. At the second reading of the bill on Oct. 13, they called to mirror these measures in the country’s existing counter-terrorism legislation as well.

“This addresses a gap in current counterterrorism legislation,” Tom Tugendhat, the minister of state responsible for crime and terrorism regulation, said during Tuesday’s line-by-line reading of the bill. Existing counter-terrorism legislation only covers forfeiture of cash, assets and money in bank accounts, a government factsheet said.

3.Projects involved in FTX incident

It took only 3 years for FTX to develop into a global unicorn with a valuation of 32 billion U.S. dollars — a total financing of more than 2 billion U.S. dollars, a luxurious lineup of investment institutions, more than 70, including Sequoia Capital, Paradigm, Singapore’s sovereign wealth fund Temasek, (Canada) Ontario Teachers’ Pension Plan Board, Softbank, Tiger Global and other star institutions.

However, with the bankruptcy of FTX and alameda, all investments instantly returned to zero. A large number of projects have also been implicated.

The following are some of the investment institutions and project parties that disclosed losses.

1. Venture capital firm Sequoia Capital said it will mark down to zero its investment of over $210 million in cryptocurrency exchange FTX, as bankruptcy loom.

2. Paradigm has informed its limited partners that its investment in FTX has been written down to zero after the liquidity collapse. Paradigm said it invested $290 million in FTX affiliates.

3. The Ontario Teachers’ Pension Plan says it is writing down its US$95-million investment in FTX, the cryptocurrency exchange that collapsed this month, to zero.

4. SoftBank is set to mark down its investment in troubled crypto exchange FTX to 0. In its earnings call last week, the Japanese investment giant said it has invested US$100 million in FTX. This represents roughly 0.4% of the cryptocurrency to exchange’s .

5. Temasek, the investment firm owned by Singapore’s government, said it wrote down its full investment in FTX, “irrespective of the outcome of FTX’s bankruptcy protection filing.” Temasek invested $275 million USD in FTX international, giving it a minority stake of about 2.5%.

6. Multicoin, which has always been closely related to FTX, is also hard to escape. In addition to the heavy loss of $25 million in investment funds on FTX.US, 10% of the assets were stranded in FTX. At the moment, the crypto venture giant didn’t state the amount it’s writing off regarding the FTX crisis. But some crypto market experts think the value would be more than $850 million. At the moment, the crypto venture giant didn’t state the amount it’s writing off regarding the FTX crisis. But some crypto market experts think the value would be more than $850 million.

7. GameFi projects built on the Solana blockchain have taken a major hit in the wake of the collapse of FTX, with the values ​​of numerous game-tied tokens in decline. Of the affected titles, Aurory, TapFantasy, Star Atlas , and Mini Royale Nations have been some of the hardest hits.

8. The Solana Foundation officially disclosed information related to FTX, stating that as of November 14, 2022, its assets in the FTX.com account include approximately 3.24 million common shares of FTX Trading LTD, approximately 3.43 million FTT Token, About 134.54 million SRM Tokens.

9. Kevin Zhou, the founder of quantitative hedge fund Galois Capital, informed his investors that nearly half of Galois Capital’s assets, more than $100 million, were stranded in FTX and could not be withdrawn.

10. Galaxy Digital’s partners have roughly $77 million of cash and digital assets with FTX, executives said during the company’s earnings call last Wednesday. They added that the company had zero exposure to FTX, or to Alameda Research.

11. Crypto asset manager CoinShares has $30.3 million worth of exposure to crypto exchange FTX, CoinShares said its exposure to FTX includes $3.1 million worth of bitcoin and $1.2 million worth of ether in pending withdrawal requests which were on TX sent before Fcus. 8. Its exposure also includes $25.9 million worth of dollars and the stablecoin USDC, and $110,000 of unspecified “other assets.”

12. The lending unit of cryptocurrency investment bank Genesis Global Trading suspended redemptions and new loans due to the FTX collapse as it had $175 million locked in an FTX trading account. Following that, it sought help from Binance and Apollo to raise at least $1billion in fresh capital.

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