FTX’s monumental collapse will go down in history as one of the biggest corporate scandals in history. But at least Sam Bankman-Fried, or SBF, is sorry. On November 22, the ill-fated founder of FTX wrote a letter to his former employees in which he described his role in the bankruptcy of the company. “I never wanted this to happen,” he wrote. “I did not realize the full extent of the margin position, nor the magnitude of the risk that a hypercorrelated failure posed.” The best part: Bankman-Friend continues to believe the company can be saved because “there’s a billion dollars of genuine interest from new investors.” Shouldn’t he be worried about trying to avoid going to jail?
Bitcoin (BTC) and the broader cryptocurrency market have been reeling in the aftermath of the scandal. While this has allowed many diamond hunters to accumulate more BTC on the cheap, institutional investors are taking advantage of this opportunity to short BTC. We may finally get that final capitulation to close out the current four-year cycle.
As always, this week’s Crypto Biz newsletter features all the latest high-profile business news from our industry.
Sam Bankman-Fried says he is “deeply sorry” for the collapse of FTX in a letter to the team
SBF’s letter to former FTX employees painted a picture of a deeply regretful founder who managed to wipe out billions of dollars due to excessive margins and poor supervision. He also blamed the “run on the bank” for FTX’s demise. For those closely following the matter, the bank run SBF mentioned was triggered by Binance CEO Changpeng Zhao, who, on November 6, revealed on Twitter – of all places – that he was going to sell $500 million in FTX tokens. That announcement triggered a flurry of FTX withdrawals, as users rushed out. Within 48 hours, FTX was shown to be insolvent.
FTX owes more than $3 billion to its 50 largest creditors
The gap in FTX’s balance sheet is estimated to be around $8 billion, and a large part of that amount is due to just 50 people. New bankruptcy filings in the state of Delaware confirmed this week that FTX’s top 50 creditors are owed a total of $3.1 billion. One individual is owed more than $226 million, while the rest of the top 50 had between $21 and $203 million on the failed derivatives exchange. So when can FTX’s creditors expect to get some of their money back? It could be years or even decades, depending on the insolvency lawyer; Stephen Earl.
FTX discloses its top 50 creditors are owed $3.1 billion.
The largest creditor is owed $226 million.
All names were redacted. pic.twitter.com/JGeddvMB7w
— Tom Dunleavy (@dunleavy89) November 20, 2022
FTX Crisis Causes Record Influx Into Shorting Products
Believers in Bitcoin as a solid monetary alternative to the current monetary regime have taken advantage of the latest market crash to accumulate more BTC. But for some institutional investors, the FTX collapse has triggered a new short-selling opportunity. According to CoinShares, 75% of institutional cryptocurrency investments last week went into short investment products. In other words, they are betting that Bitcoin and other crypto assets will see a further decline in price. BTC has already plunged to around $15,500, marking a new low for the cycle. Although Bitcoin may go much lower, we are nearing the end of the current four-year cycle. Therefore, the bottom could be close.
US Senators Urge Fidelity to Reconsider Its Bitcoin Offerings After FTX Outbreak
Fidelity Investments, an early institutional advocate for digital assets, is being strongly urged by members of Congress to limit its Bitcoin investment offerings. This week, Senators Elizabeth Warren, Tina Smith, and Richard Durbin have again called on Fidelity to reconsider its Bitcoin 401(k) product offering following the FTX disaster. “Since our previous letter [del 26 de julio de 2022]the digital asset industry has only become more volatile, tumultuous and chaotic, all the hallmarks of an asset class that no plan sponsor or individual saving for retirement should approach,” the senators wrote. Skeptics Most of the cryptocurrencies may turn around to victory for now, but Bitcoin will have the last laugh.
The implosion of FTX has made it clear that the digital asset industry has serious problems. I joined @SenWarren & @SenTinaSmith to urge Fidelity to do what is best & reconsider its decision to expose retirement accounts & employer-sponsored plans to these volatile assets. pic.twitter.com/qQn4PF80AP
—Senator Dick Durbin (@SenatorDurbin) November 21, 2022
Before You Go: Could Grayscale Trigger Bitcoin’s Next Price Crash?
Concerns surrounding Grayscale’s Bitcoin Investment Trust (GBTC) began to rise last week after the firm refused to provide on-chain proof. Now, investors are concerned that Grayscale’s parent company, Digital Currency Group (DCG), could be forced to liquidate a portion of its GBTC to cover a massive hold on the Genesis Global Trading balance sheet. What is the relationship between DCG, GBTC and Genesis? In this week’s edition of The Market Report, Marcel Pechman and I discuss this relationship and why it matters to Bitcoin investors. You can watch the full replay below.
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