The FTX saga continues to unfold after the crypto exchange files for bankruptcy

Crypto exchange FTX’s filing for bankruptcy on Friday failed to stop the chaos surrounding the once prominent and trusted crypto trading venue.

Since the filing, which included 135 affiliates, millions of dollars in crypto have been stolen from the company, which faces a deficit of between $6 billion and $10 billion. Bahamas officials are also investigating the matter.

“I don’t think predicting that the FTX bankruptcy will be the most complex in U.S. history is an understatement,” Caitlin Long, founder and CEO of Custodia Bank, told Yahoo Finance Live Cube. This was a casino. Good release to them.”

From Friday to Sunday, the global crypto asset market cap fell 3% from $856 billion to $831 billion. Since Nov. 1, it is down 18% from just over $1 trillion, according to Coinmarketcap.

Here’s what unfolded over the weekend.

FTX logo with $100 bill crypto coins displayed for illustration. FTX has filed for bankruptcy in the US and is seeking protection in court as it seeks a way to return funds to users. (Photo illustration by Jonathan Raa/NurPhoto via Getty Images)

Friday FTX Raid

As of Friday night, about $663 million in crypto mysteriously flowed from wallets linked to the now-bankrupt exchange.

John Jay Ray III, the new chief restructuring officer and CEO, who was appointed less than 24 hours earlier, said in a expression Saturday morning: “Unauthorized access to certain assets has occurred.”

According to blockchain analysis firm Elliptic, an estimated $477 million of the total outflow was stolen, while the rest of FTX was sent to cold storage for backup.

“Procedures have been expedited tonight — to mitigate the damage of observing unauthorized transactions,” said Ryne Miller, FTX US general counsel. said on Twitter.

FTX declined to comment further on the matter.

Meanwhile, the thief who was trying to transfer and sell funds through US-based crypto exchange Kraken, owned by the company, has been identified chief security officer said Saturday.

“We are committed to working with law enforcement to ensure they have what they need to adequately investigate this matter,” Kraken said.

How much of those stolen funds are returned matters. The Financial Times reported that FTX held about $900 million in liquid crypto and $5.4 in illiquid venture capital investments versus $9 billion in liabilities the day before filing for bankruptcy.

FTX in the Bahamas

The Bahamas’ security regulator froze assets of FTX Digital Markets on Thursday. On Saturday, the regulator announced that FTX had begun processing pending withdrawals of Bahamian funds.

The Bahamian police also conceded on Sunday expression They state that they are working with the country’s securities regulator to investigate FTX for criminal wrongdoing.

A person familiar with the matter confirmed to Yahoo Finance that Bahamian law enforcement is “forceful [Sam Bankman-Fried] to stay in the Bahamas” starting Saturday night. This was followed by speculation that Bankman-Fried and the company’s other top executives – Chief Technology Officer Gary Wang and Head of Engineering Nishad Singh – were attempting to flee.

Under Chapter 11

FTX will be dealing with the same “big legal issue” as crypto lenders Celsius Network and Voyager, Greg Plotko, a legal partner at Crowell & Moring, told Yahoo Finance. That is, whether crypto in customer accounts belongs to the customers themselves or to the bankruptcy estate.

Unlike Celsius and Voyager, where ownership was less clear, the FTX.com Customer Terms of Service states that “none of the digital assets in your account are owned by, nor shall or shall be loaned to, FTX Trading. “

“There is almost certainly also massive amounts of criminal fraud that led to this scenario and as such we can expect this to be a very messy public process that will result in bad publicity and regulatory backlash for the.” [crypto] Industry,” Haseeb Quershi, a managing partner at venture firm DragonFly Capital, told Yahoo Finance.

Like Quershi’s company Dragonfly, several well-known crypto hedge funds and market makers have trapped assets on FTX, including Galaxy Digital, Multicoin Capital, jump tradingwinter mute and Capital of Galois.

“When you have these situations, there are many institutes that want to give up their positions. They don’t want to be stuck in bankruptcy for two years and wait for payments,” said Plotko. There are already many holes where all the money has gone. Institutions and individuals may want to sell out.”

FTX’s offering of Voyager Digital assets has ended

In September, bankrupt crypto lender Voyager announced that FTX had bid on its assets through its US subsidiary (FTX US). But this “$1.4 billion offer to buy customer accounts from Voyager Digital is now in serious jeopardy,” Jason DiBattista, head of legal analysis at LevFin Insights, told Yahoo Finance.

Voyager Digital has reopened the bidding process for its assets, according to a news release from its unsecured creditors’ committee on Friday.

At the time of FTX’s bankruptcy filing, Voyager held approximately $3 million worth of crypto tokens that it cannot withdraw.

BlockFi?

Crypto lender BlockFi has also officially gone silent since then to announce a freeze on customer withdrawals on Thursday evening. Since then a number of Customers have noticed that their BlockFi credit cards are no longer working.

Although BlockFi is not included in the FTX Chapter 11 filing, the company is expected to be a major creditor after drawing down a $400 million emergency credit line from FTX in late June.

As recently as Monday, BlockFi attempted to relaunch its Yield product. On Tuesday, COO Flori Marquez announced that the company “fully operational.” BlockFi didn’t respond to comments about its status all weekend.

(This story is evolving and will be updated with information)

David Hollerith is a senior reporter at Yahoo Finance covering cryptocurrencies and stock markets. Follow him on Twitter at @DsHollers

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