The news of the mismanagement, and no charges have yet been filed against Bankman-Fried, caused a capital outflow of 6,000 million dollars in three days, which the firm was not able to process, for which reason it declared bankruptcy, and dragged to other cryptocurrency exchanges: BlockFi and Genesis.
In November of last year, almost on par with FTX, BlockFi filed for bankruptcy . In January, it was revealed that the firm had $416 million in assets tied to FTX and $831 million in loans to Alameda, another of Sam Bankman-Fried’s firms.
A week ago, Genesis Global Capital, a cryptocurrency lending firm, also filed for bankruptcy, as it also had assets exposed to FTX.
What cryptocurrency platforms are in the crosshairs?
Beyond the direct effects of the FTX collapse, there is also collateral damage: a confidence crisis that caused an outflow of capital from the crypto world, whose market value fell 40% in 12 months, according to Investing data. This fall affected the finances of some firms, while putting others in the crosshairs of the world’s regulators.
In January 2023, Coinbase announced its third job cut (the first was in June of last year, 1,100, and the second in November: 60). In this third cut, the firm announced that it would reduce its staff by 20% (950 jobs). In addition, it informed that it will suspend its operations in Japan. In the past 12 months, its share price has plummeted 72%.
Other firms that have announced staff cuts of around 20% are Crypto.com and Huobi.
The market crash, crypto firm bankruptcies and general contagion has triggered scrutiny by regulators of firms that handle user funds. Such is the case of Binance, the largest global currency exchange platform, which, according to Reuters, is being investigated by the United States Department of Justice for possible money laundering violations and sanctions.