- Twitter spat between high-profile crypto bosses is alarming investors
- The war of words between rival exchanges FTX and Binance points to potential financial shortcomings in FTX
- Fears are growing that another LUNA-style implosion could be about to unravel
Events at Crypto exchange FTX are beginning to look like a ‘run on the bank’, and that’s not only bad news for those holding their coins there but also for the price of some coins. FTT, the native token of the FTX exchange, has seen its price plummet, with aftershocks being felt across the sector.
What’s Going On at FTX?
A verbal sparring match between two of the most prominent players in the crypto sector has added extra colour to a move by the Binance exchange to dump all of its FTT holdings. Binance chief, Changpeng Zhao, has for some time been distancing Binance’s links to FTX, and his recent statement associating the rival platform with LUNA has not gone down well with FTX staff. On 6th November, Zhao Tweeted:
“Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won’t pretend to make love after divorce. We are not against anyone. But we won’t support people who lobby against other industry players behind their backs. Onwards.”
In response, FTX’s owner and crypto guru Sam Bankman-Fried stated that his platform’s books are clean, regulated and audited to GAAP standards.
“A competitor is trying to go after us with false rumors. FTX is fine. Assets are fine. FTX has enough to cover all client holdings. We don’t invest client assets (even in treasuries). We have been processing all withdrawals and will continue to be.”
The concerns highlighted by Binance and others appear to stem from the relationship between two firms owned by Bankman-Fried, FTX and Alameda Research. Both businesses are independent of each other, but Alameda Research is quoted as holding nearly $3.66bn of unlocked FTT tokens, which is a sizeable percentage of the total $14.6bn AUM of that coin.
With analysts digging into the detail of the links between the firms, FTX is maintaining that all the accounting practices are above board. Withdrawals are being processed in line with standard T&Cs, and Bankman-Fried has reiterated that no FTT tokens held by FTX have been converted to other assets, “not even Treasuries”.
It’s definitely a situation to monitor. One irony is that to demonstrate its financial health, FTX is pulling out all the stops to ensure withdrawals are processed as soon as possible, something other exchanges are currently failing to do. But whether new investors will be rushing to place holdings at FTX is, for now, another issue.
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