Crypto businesses brace for FTX aftershock
The knock-on effects of FTX.com's unwinding are starting to show as businesses it embraced as partners and customers start to feel the hurt.
Why it matters: Pain. Up to a million of FTX customers could be affected by the exchange's collapse, according to court filings submitted by FTX.
Catch up fast: Large VCs, crypto shops and pension funds were among the first to provide status updates, saying they were fine in spite of the wealth destruction on display.
- Others—hedge funds, startups and other platforms — were less insulated and have begun to reveal the extent of the damage, both prompted and unprompted by Axios reporters.
Context: Among them are businesses that FTX or its affiliates invested in, or — likely in more cases — companies that bought the hype and entrusted the exchange with custody of their assets.
Details: The pain comes in a variety pack of flavors. Businesses could have money trapped on the exchange, or be forced to suspend operations because of FTX's Chapter 11 proceedings.
- They could hold tokens linked to FTX like the exchange token FTT or SRM or MAPS that have been cut in half or more in the last week.
- They might have been counting on lines of credit or might be owed money.
Axios started with firms closest to FTX, contacting 26 companies in which FTX, FTX Ventures, Alameda, and FTX US invested.
State of play: Now-bankrupt Voyager Digital reopened bidding for its assets since its champion, FTX US, is unable to rescue the lender.
- Emerging markets focused VC Sino Global Capital in a statement Tuesday morning said it had "mid-seven figures" held in custody at FTX.
- Ikigai Asset Management's CIO Travis Kling said the majority of the hedge fund's assets were trapped on FTX, but that it would to operate as best it could. Galois Capital said more than half its assets were stranded. Multicoin reportedly has 10% of its Master Fund's assets on FTX.
- Crypto exchange Liquid Global on Tuesday said that it would halt fiat and crypto withdrawals "in compliance with the requirements of voluntary Chapter 11 proceedings in the United States." The exchange, acquired by FTX earlier this year, did not respond to Axios' queries on social media.
- Crypto lender BlockFi said "rumors that a majority of BlockFi assets are custodied at FTX are false" in a letter to customers on Monday, but due to the large obligations owed to them by FTX and its affiliates, suspended platform functions, including withdrawals would be halted for the foreseeable future.
- Africa-based Nestcoin attributed layoffs to the turmoil.
What they're saying: Ryan Selkis, CEO of the blockchain data company Messari, said, "The coronation of [FTX's] Sam [Bankman-Fried] was a group effort from many newcomers in the space."
- Messari took small investments from Alameda and FTX Ventures, representing less than 1% of ownership, as he detailed in a recent tweet thread. It has no trapped funds or any FTT exposure.
- Selkis called the debacle a "big setback" for the whole industry, but said he has no plans to leave.
The intrigue: Eclipsed by FTX and SBF's downfall, the characters central to the May fiasco are speaking out.
- Three Arrows Capital' Su Zhu broke his silence on Twitter to dredge up past, perceived wrongs.
- Terraform Labs' Do Kwon in a Twitter Spaces on Monday said the way forward was to agree on a "common set of values that the community stands for."
By the numbers: The price of bitcoin is down roughly 17% since Nov. 1 to roughly $16,850 as of Tuesday morning.
What we're watching: If BTC and ETH start to fall due to a general malaise brought on by FTX, eventually that will start to hurt other companies.
Brady Dale and Kia Kokalitcheva contributed additional reporting.