This could well turn out to be a classic case of an affair gone sour within hours of agreeing to tie the knot. Only it involves not two individuals, per se, but two crypto exchanges – Binance and FTX.
Global crypto exchange Binance did a volte-face within 48 hours of announcing to acquire FTX , on allegations of corporate due diligence, as well as latest incoming news reports regarding mishandled customer funds and alleged US agency investigations into FTX.
“We have decided that we will not pursue the potential acquisition of http://FTX.com,” Binance tweeted.
“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” Binance said in a statement.
On Wednesday, a source with knowledge of the inquiry told Reuters that the US Securities and Exchange Commission (SEC) is investigating crypto exchange FTX.com’s handling of customer funds amid a liquidity crunch, as well its crypto-lending activities.
The platform’s compliance with securities regulations regarding the segregation of customer assets and trading against customers is being investigated by the securities regulator, the source claimed. The investigation began a few months ago.
Sequoia Capital Devalues Its Whole Position In FTX
Venture capital company, Sequoia Capital, wrote down the entire value of its FTX assets as a warning that it does not see a clear way to recover its investment in the troubled cryptocurrency exchange.
Sequoia informed its investors on Wednesday that the VC firm invested around $214 million in FTX’s worldwide and US companies last year. According to a company spokeswoman, the write-down covers interests for both FTX.com and FTX.us.
We are in the business of taking risk. “Some investments will surprise to the upside, and some will surprise to the downside,” Sequoia wrote in a message to investors.
Sequoia is one of many well-known investors which stand to lose a lot on their stakes in Sam Bankman-FTX. Fried’s BlackRock Inc., Tiger Global Management, and SoftBank Group Corp. are some of the others.
Market & Industry Reactions
The cryptocurrenc y market faced heavy losses on November 10, 2022, with Bitcoin (BTC), Ethereum (ETH), Solana (SOL) and other facing heavy losses. BTC fell below $17,000, while Solana fell the hardest at about 40 per cent.
The crypto market cap fell about 9.69 per cent to $813.38 billion. BTC fell 10.54 per cent to $16,260.44, its lowest since November 2020.
Ashish Singhal, CEO of CoinSwitch Kuber, said the crypto market is experiencing turbulence as international exchange, FTX appears to be in trouble.
“Do not use customer assets to borrow or deposit it elsewhere to earn interest without their knowledge and consent. When all goes smoothly, this may look smart and can help you grow fast. But when things hit a rough patch and customers rush to cash out, you’ll be in a tight spot,” he says.
Singhal further noted that if one doesn’t have the ability to get assets he/she has or irresponsibly uses up the assets, or doesn’t have enough cash reserve, then he/she will be in for a downward spiral in a volatile market such as this.
“Keep your books kosher when offering customers lending or borrowing. Maintain healthy reserves for exigencies,” he adds.
