The FTX crash has had a domino effect, causing severe repercussions for firms exposed to the beleaguered exchange. Read on for a quick round-up of the firms impacted by FTX's sudden downfall and the extent of their exposure to the crypto exchange.
The recent FTX meltdown has been one of the most devastating events in crypto history. Once the world's second-largest crypto exchange, FTX is currently battling bankruptcy, with an $8 billion deficit in its financial records.
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The crash has also created a domino effect, causing severe repercussions for firms exposed to the beleaguered exchange. Here's a quick round-up of the firms impacted by FTX's sudden downfall and the extent of their exposure to the embattled crypto exchange.
FTX crash results in several firms halting withdrawals
With FTX pausing withdrawals, firms that invested in the exchange have no way to access their funds and are now facing their own liquidity issues. For instance, BlockFi was one of the first platforms to halt withdrawals after the FTX crash. The lending firm was facing bankruptcy earlier this year after the Terra meltdown.
However, FTX came to the rescue and provided BlockFi with a $400 million revolving credit facility. But with FTX now in the doldrums, BlockFi was forced to pause withdrawals on November 11 and could face bankruptcy again. The firm is also considering job cuts to reduce operating costs.
A few days later, on November 15, FTX-owned crypto exchange Liquid Global also suspended withdrawals on its platform. The company cited "the Chapter 11 filing by FTX Trading International" as the reason for the move.
The next day, the crypto lending platform SALT shuttered withdrawals. "The collapse of FTX has impacted our business," said SALT CEO Shawn Owen in a customer note. "Until we can determine the extent of this impact with specific details that we feel confident are factually accurate, we have paused deposits and withdrawals on the SALT platform effective immediately," he added.
Then, on November 17, another crypto lending firm, Genesis, stalled withdrawals and the issuance of new loans on its platform. The firm announced that it had almost $175 million locked on FTX and stated that an abnormally high amount of withdrawals had caused severe liquidity issues.
However, the firm took to Twitter, reassuring users that its involvement with FTX was limited and did not affect their trading business's operational structure.
A short while after Genesis paused withdrawals, Gemini, an American crypto exchange owned by the Winklevoss brothers, said it was halting withdrawals on its interest-bearing 'Earn' accounts. Genesis is the official lending partner for the Gemini Earn program, which could explain the sudden suspension of withdrawals. The Gemini exchange itself went down for some time before resuming services shortly after.
Firms that have funds stuck on FTX
Several crypto lenders and exchanges have been forced to stop withdrawals after the FTX crash. However, there's an even longer line of firms with funds stuck on the bankrupt exchange. For instance, on November 8, Coinbase, one of the world's leading crypto exchanges, announced that it had about $15 million in deposits on the exchange.
On November 9, the day FTX suspended withdrawals, crypto financial services company Galaxy Holdings released its third-quarter earnings statement. As per the statement, Galaxy had more than $76 million worth of exposure to FTX, of which $47.5 million was "in the withdrawal process" at the time. However, it is not clear how much is still stuck on the exchange and how much it was able to recover.
The next day, European digital asset manager CoinShares, released a statement saying it had more than $30 million worth of exposure to FTX. This amount could have been much larger, but fortunately, CoinShares had "significantly reduced" its FTX exposure in recent weeks. Even then, the firm's current exposure is still only a fraction of its net asset value, which is worth more than $288 million, as per CoinShares' Q3 earnings reports.
On November 11, crypto hedge fund Galois Capital announced that it had about half of its capital "stuck" on FTX, with the Financial Times estimating the amount to be in the range of $100 million. Galois co-founder Kevin Zhou said it could take "a few years" to recover even a percentage of those assets.
Voyager Digital is another firm that has been heavily impacted by the FTX crash. To begin with, the firm had a balance of nearly $3 million on FTX when it declared bankruptcy. Worse still, FTX had come to the rescue of Voyager Digital after the Terra meltdown, bidding $1.3 billion for all of the firm's assets. However, with FTX currently in tatters, Voyager will be left scurrying for another bidder.
A few days later, on November 14, Hbit Technology, a popular subsidiary of New Huobi Technology, also stated that it had $18 million worth of assets locked with FTX. A press release pointed out that almost $13.2 million of these locked assets belonged to the users, while the remaining $4.9 million belonged to the company itself.
On the same day, Crypto.com, the Singapore-based crypto exchange giant, announced that it had moved nearly $1 billion worth of assets to FTX over the last year. Fortunately, the exchange recovered most of the funds, except for nearly $10 million, which remain locked on FTX.
VC firms write off investment in FTX
All exposures pale compared to the losses that VC firms could sustain if FTX cannot be saved. For instance, Sequoia Capital pumped nearly $215 million into FTX's international and US businesses. However, following the crash of the crypto exchange, Sequoia has marked down its investment to $0. Similarly, Singaporean VC firm Temasek Holdings announced that it would write down its $275 million investment in FTX.com, regardless of the exchanges' bankruptcy proceedings.
More recently, Matt Huang, co-founder of the San Francisco-based crypto and Web3-focused venture capital, Paradigm, said that he deeply regretted investing in FTX. Reports suggest that Paradigm's investment in Sam Bankman-Fried's firms exceeds $275 million, which will now be written down to $0. Finally, the Ontario Teachers' Pension Fund invested nearly $95 million in FTX, which will also most likely be written off to $0.
The collapse of FTX has sent shockwaves across the crypto space and has adversely affected hundreds of companies globally that were partners with FTX and their sister-firm Alameda Research. The implications of the FTX crash cannot be fully understood yet as there will be continued repercussions felt for quite some time.
From institutional investors writing off their investments to companies facing legal troubles, the FTX collapse will undoubtedly have a long-lasting impact on the crypto space, affecting crypto regulations and laws.