The abrupt implosion of the FTX cryptocurrency exchange, valued at $32 billion in February, resonated like an earthquake in the crypto industry and business circles.
Overnight, many retail and institutional investors lost their money. It will probably take many months to assess the damage caused and draw up the list of victims.
BlockFI crypto lender is about to drop for Chapter 11 bankruptcy. The company had been bailed out by FTX and its founder and former CEO Bankman-Fried during the liquidity crisis that hit the sector last summer, after the collapse of sister cryptocurrencies Luna and UST, or TerraUSD.
“We have significant exposure to FTX and related legal entities that includes obligations owed to us by Alameda, assets held on FTX.com, and undrawn amounts from our line of credit with FTX.US,” BlockFi said. November 14.
“We lost money in general”
Venture capital firm Sequoia Capital said it lost $210 million to FTX, while Japanese firm Softbank quantified its losses at $100 million.
Another big name in the business community has in turn revealed to be affected by this debacle, with FTX filing for bankruptcy on November 11 for lack of a savior.
“You lost money?” Anthony Scaramucci, the founder of alternative investment firm SkyBridge Capital, was interviewed during the Bloomberg Forum on the New Economy in Singapore on November 15.
“I actually didn’t lose any money because Sam [Bankman-Fried] gave me the money,” Scaramucci, whose nickname is The Mooch, said. “But yeah, we’ve lost money in general because the overall portfolio is shrinking as a result of this debacle, so yeah, I guess so.”
Last September, FTX had acquired 30% of SkyBridge Capital. Financial terms of the transaction were not disclosed.
At the time, SkyBridge, which started as a hedge fund before turning to cryptocurrencies with investments in bitcoin (BTC) and other coins, saw his bets on digital assets turn sour.
SkyBridge had bet that BTC would hit $100,000 per unit. But the fall in the price of cryptocurrency undermined that bet, and more specifically, it made smaller funds, like Legion Strategies, vulnerable.
Besides this bailout, Bankman-Fried and FTX were also the main sponsor of the annual SALT conference, organized by SkyBridge, which brings together hedge funds. They signed a 3 year contract. The Mooch also revealed that he was in the Middle East – Saudi Arabia, Abu Dhabi – recently with Bankman-Fried who wanted to raise new funds.
“I think it’s very difficult to protect against these kinds of misrepresentations,” Sc said of the revelations that Bankman-Fried may have changed his company’s position. balance sheet. “If you are shown a balance sheet which may or may not be accurate; if you are shown income statements which may or may not be accurate, which have been validated by third parties, it is quite approximate, it is very difficult to see through.”
He continued: “If you do a background check on someone like Sam you won’t find anything, he was spotless if you do it before this incident.”
“He was giving me the money I was looking for and I was doing a lot of due diligence on him, but clearly not enough, so it’s important to explain that to people, to share that with people.”
The Mooch reported on Nov. 11, in an interview with CNBC, that it planned to buy back its stake in SkyBridge from FTX. But he did not provide additional details. Does SkyBridge have enough cash for the deal, considering the company was bailed out just two months ago?
The other point is also that the assets of FTX were seized or transferred as part of the bankruptcy. And it is not certain that during the liquidation, SkyBridge has a say.
FTX faces a shortfall of $1.7 billion, a source told Reuters, while another source said between $1 billion and $2 billion was missing. Bankman-Fried, who stepped down as CEO Nov. 12, has already been hailed as the sector’s savior during last summer’s liquidity crunch.
Financial data from FTX also showed there was a “backdoor” on the books, created with “bespoke software”, according to the outlet. It was described as a way for Bankman-Fried to alter the company’s financial records without raising an alert.
But Bankman-Fried denied the existence of a “back door”.