We told you the deal might not work out.
Now it hasn't.
And it looks like FTX may have to file for bankruptcy.
This could threaten everything.
Okay.
Let's bring you up to date first.
After barely a day of checks, Binance decided late Wednesday to pull its offer to buy FTX.
On Twitter, Binance's official account tweeted "As a result of corporate due diligence, as
well as the latest news reports regarding mishandled customer funds and alleged US agency
investigations, we have decided we will not pursue the potential acquisition of FTX.com."
Now the investigations refer to reports that the Securities and Exchange Commission and
the US Justice Department are looking into the conduct of FTX and specifically that of
FTX boss Sam Bankman-Fried.
It's also been reported that FTX's legal and compliance teams have quit.
More details are emerging, too, about how FTX has been trying to rescue itself this
week by negotiating with other potential buyers or lenders.
That includes OKX.
Here's OKX Director of Financial Markets, Lennix Lai.
FTX asks for help.
That's it.
So they call me or that they might need to chat about the situations on FTX.
Then all of a sudden we're starting to know that this case could be quite serious.
A couple hours later we receive another call from from, from SBF directly and talking about
the situation has gone south to a very critical situation.
And we only got a couple of hours to make a very difficult decisions.
OKX and others were unable to help at the time.
Reports suggest FTX ultimately needs to fill an $8 billion hole now in its balance sheet.
According to Bloomberg, without an injection of capital, FTX will likely have to file for
bankruptcy.
Unless there is a group of potential investors out there willing and able to step in and
rescue FTX's customers.
If there is, OKXx, maybe one of them.
We do want to have the customer in FTX, and we also, during the conversation, a lot of
time involved is, hey, maybe we don't need a lot of information at the moment, but if
there is somebody which is maybe a reputable VC or anyone who understands in depth about
the situation, especially financial situations of the of what happened on and on, on FTX,
we're very happy on interest to take a look and join through.
OKX aren't the only ones to feel that some sort of support is needed.
While we were speaking to Lennix, Justin Sun from Tron tweeted that his team are working
towards a path forward for their token holders on FTX.
Both Sun and OKX have made it clear that they're now worried about the whole of crypto.
It's clear from crypto prices they're not alone.
Total crypto market capitalization has fallen almost a quarter since the start of the week.
That, of course, was when CZ tweeted that Binance was liquidating its FTX token FTT.
As of 2 p.m. Hong Kong time Thursday, Bitcoin was trading at $16,717, down around 9%.
In the previous 24 hours, Etherium had fallen about the same to $1,186.
Solana, meanwhile, continues to be a big worry for many, given the huge backing and ownership
positions held by FTX and by SBF personally.
It was trading at just over $15, down 26% since the day before.
The buzzword now is contagion, and not just in crypto.
There are big companies thought to be directly exposed to FTX, including the likes of Canadian
pension funds BlackRock and Singapore's Temasek.
Sequoia Capital has also reportedly written off its roughly $210 million stake in FTX.
The falls we're seeing in crypto prices could ultimately precipitate pain for even more
players, though.
Stephen Innes from SPI Asset Management said in a note on Thursday, quote, Given how widely
crypto coins are held, it could mean more false liquidation of other assets to cover
margin calls.
As long position investors were massively wrong footed.
Some, though, are still sensing opportunity.
Cathie Wood's ARK Investment, for instance, took a larger position in Coinbase on Wednesday,
but a big issue now is how many people are trading on rumor.
That has got many in crypto worried as well.
KuCoin's Alicia Kao:
The only thing we could do is to make sure we could clarify every rumors and every FUDs,
and to help our users whatever they like.
They want to withdraw and they want to transfer their assets or their they might have some
questions about if their assets are safe on our exchange.
So like quite lots of work, but most of them, I think just like communicating with users.
If market participants can really see relevant data to make informed decisions because of
the lack of transparency, panic effects are a lot more common and there have been numerous
calls over the past few years for strong and clear regulation of crypto markets and additional
requirements in particular around transparency and reporting could certainly help restore
some form of confidence.
Immediate attention rightly remains focused on what happens next.
But the bigger question of how we stop this from happening again is also dominating.
Senator Cynthia Lummis, who proposed the Responsible Financial Innovation Act for crypto earlier
this year, weighed in despite the distraction of the midterm elections.
She said the events are, quote, the clearest example yet of why we need clear rules of
the road for digital asset exchanges.
Exactly what clearer rules look like, though, is, well, unclear.
Lummis' bill is one of three currently proposed in the US, and while different jurisdictions
all over the world have myriad different policies in America alone, there is a huge disparity
in what people in crypto want.
SBF, for instance, had lobbied for his version of regulation, which by the way, seems to
have made him more than a few enemies.
Here's Justin D'Anethan from Amber Group.
He was pushing for a lot of safeguards and regulations which admittedly were serving
his purpose right.
Being based in the US and with preferential, let's say, relationship to Washington DC.
It was kind of seen as him benefiting from those regulations, while DeFfi protocols and
other players outside of the US would kind of be negatively impacted.
And then of course this went full circle and he suffered, you know, from bad risk management.
Others also argue better oversight doesn't always translate to better behavior.
You have a lot of regulation in traditional finance, but it seems like we have the same
problems over and over again.
And actually, these problems that we have in the crypto finance space, they're actually
really a translation of the same skill set right or practices that we have in traditional
finance brought to brought to crypto finance.
So it comes with a cost.
It doesn't necessarily solve the issue.
Many say better transparency actually needs to come from within crypto.
Kraken, for instance, have said they are already committed to regular audits.
KuCoin and OKX, meanwhile, are among those saying that they will soon be providing something
called proof of reserves.
They make sure that the purpose is very simple.
Every single bug that you're seeing it okay got it 100% back by token 100%.
And it's proof by technology.
It's proved by independent trust.
So where does this leave us?
Well, the hope, of course, is that customers are able to be made whole again.
But it's no longer just about those of us that lost out with SBF.
The whole sector is hurting yet again.
And it's not just from another huge fall in crypto prices.
It's because of a collapse in trust.
You can tell people to keep their keys.
You can tell people to keep their coins in hard wallets.
But this technology is supposedly making our lives easier as well.
As we mentioned in our last episode, it was also supposed to be more transparent.
Everyone was supposed to be able to see what was happening on open public protocols.
And we didn't we didn't know what was happening with our money.
How long will it take to rebuild that trust?
More technology, like proof of reserves, may be the answer, but the truth is regulation
is coming in some form or another to every part of crypto and every part of the blockchain
space.
In the meantime, you need to stay reading trusted sources and being able to verify facts.
You also need to stay up to date on.
And we Forkast are trying our hardest to do that for you.
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