cryptocurrency bankruptcies : Facts, Statistics And Plight Of Crypto Bankruptcies

 Cryptocurrency Bankruptcies: Facts, Statistics And Plight Of Crypto Bankruptcies (NEWS)

Cryptocurrency Bankruptcies

The virtual currency (virtual currency) market is shaken again:  bankruptcy concerns of major exchanges FTX  FTX's risk business, low transparency and lack of governance). Forex) markets have been impacted, but now there are strong headwinds again. Combined with concerns about the bankruptcy of FTX Trading, a major cryptocurrency exchange, the credibility of the cryptocurrency market is once again shaken. 

At its root is risky business content, poor transparency, and lack of governance.   FTX was founded in 2019 by CEO Sam Bank man fried, who is considered the face of cryptocurrency. He has nearly $2 billion in investments from dozens of Silicon Valley and Wall Street giants. Venture capital (VC) investment firm Sequoia Capital, Sequoia, Ontario Teachers' Pension Fund (OTPP), SoftBank Group, South Korea's Samsung Electronics VC arm, Third Point Hedge Fund led by activist Daniel Loeb, Tiger Global, US Professional Football League (NFL) star player Tom Brady and others.  This should be remembered.

 It is said that from around the summer of 2021, FTX began to receive a big tailwind in terms of fundraising. The company has raised $1.9 billion  from more than 70 investors in just seven months, according to data provider Pitchbook.   These investors only understood FTX as an exchange that earns commission income from buying and selling cryptocurrencies. Venture-backed startups usually seem to  have at least one or two of his investors on the board. 

Risks Taken

Investors who take risks with large investments demand  directorships to oversee management.   But by the summer of 2021, Bankman-Fried said he was the sole director of FTX, according to securities filings and sources familiar with the matter. It can be said that the transaction has been allowed.   Token Exposed Reality of Weak Financial Structure  The trigger for immediate cash flow stagnation for FTX is that around 40% of the assets of Alameda Research, a privately held investment firm founded by Bankman Fried, are under hedging. It was that there was no tokenized FTT.I did this. 

Losing Investors

FTT he is published by FTX and provided to Alameda Research. FTX then used his FTT as collateral to lend to Alameda Research,  with the money Alameda Research invested in and financed crypto-related companies.   Following the exposure of this situation,  major cryptocurrency exchange Binance, which is also a rival of FTX, has announced that it will liquidate FTT. .   Losing Investors and Difficulties in Raising Additional Capital  Sequoia Capital, which invests in FTX,  cut the valuation of its  $150 million stake in FTX to zero on Tuesday, citing default risk. I was.

Estimates Vs Apprehensions

 Investors have been hit hard.   Bankman-Fried reportedly called investors on Wednesday to request emergency cash flow relief of up to $8 billion. He also said he intends to raise $3 billion to $4 billion of the $8 billion funding.   However, given that  we were able to raise about $1 billion  in funds during the most recent period in mid-2021, when the crypto-asset market environment was favorable, we believe that under the current environment, we will be able to raise between $3 billion and $4 billion. 

Another Mistake

Funding possible. Raising is not realistic.   Binance's once-considered FTX withdrawal has made the road to  bankruptcy a much more difficult one for FTX.   Customer Money Lending Also Hits Big For Customers  FTX investors aren't the only ones chasing  big hits. Clients who  used FTX to trade crypto assets have also been hit hardFTX used client funds entrusted to it for trading purposes to fund high-risk transactions conducted by affiliated investment firm Alameda Research. FTX has about $16 billion in total client assets, but FTX appears to be using more than half of that, or about $10 billion, to fund Alameda.   A client who  used FTX to trade crypto assets is now reportedly unable to withdraw crypto assets such as Bitcoin and Ether from his FTX due to lack of funds.  

The Case Of Crypto Lender Celsius Network And Crypto Broker Voyager Digital

 In the case of crypto lender Celsius Network and crypto broker Voyager Digital, which filed for bankruptcy this year, customers were locked out of their accounts for months. Then, after a court hearing, he became a creditor  and had to fight  other creditors for his  share.   Will tighter regulation restore market confidence? Afraid of disappearing, they are looking to cash out their crypto assets. 

Other Factors

It is thought that the range of acceleration is wide. As a result, Bitcoin's dollar-denominated price plummeted by about 24% in just a few days from November 6th to 9th.   His current FTX bankruptcy issue could be an opportunity to re-accelerate the debate on tightening regulation of crypto assets. FTX's business model, financial uncertainty, and lack of governance are clearly at the root of this problem. The need for legislation to protect investors was also emphasized. These issues are likely to be at the center of increased regulation. It is unclear whether the new regulation will allow the cryptocurrency market to regain trust.   (reference material)  "Silicon Valley Poured Money Into FTX, With Few Strings Attached", Wall Street Journal, November 11,  "32 billion yen loss of crypto assets" 2022.11.11 Nihon Keizai Shimbun  FTX crisis, personal investment Home Worst-case scenario-bankruptcy crisis. Bloomberg (equivalent to the Rehabilitation Law) application announced CEO Sam Bankman-Fried  resigned.   

Bankman-Fried's private investment firm Alameda Research is also subject to bankruptcy law, FTX saidAlameda Research owes FTX about $10 billion, according to people familiar with the matter.   Regarding FTX, Binance, the world's largest crypto asset (virtual currency) exchange, withdrew its policy to acquire FTX Trading's overseas business unit "FTX.com" on the 9th. FTX is scrambling to secure about $9.4 billion in funding from investors and competitors amid liquidity pressure, people familiar with the matter said on Monday. Goshi said one benefit of companies participating in the Chapter 11 process is that sponsor companies and mutual funds can select only promising sectors from FTX's assets and liabilities to attempt acquisitions. "Select Action" is enabled. 

  Huge Liabilities

  According to the bankruptcy filing of the FTX Group (Alameda Research/FTX, etc.), liabilities range from $10 billion (approximately ¥1.3 trillion) to $50 billion (approximately ¥6.9 trillion), and assets, including illiquid assets.  

FTX Group also invests in over 250 projects (portfolios). In total, FTX has over 130 bankruptcy filings, including exchanges FTX Japan and FTX US, and sister company Alameda Research. If Sam's comments are true, I'm guessing FTX US will be the most attractive business or asset, the "crown jewel" to be used as a bargaining chip in takeover talks.Due to the application of Chapter 11, FTX's ongoing operations were frozen and unauthorized outflow of funds (Bahamian investors, imprisoned TRX 1:1 external exchanges, etc.) while  legitimate debts were collected. is stopped. You can carefully examine the method. 

Binance Trading Mechanism

  Binance buying his FTX-US Debt and using it to pay back client assets has become much more profitable than it used to be.   In fact, FTX itself had such deals before  bankruptcy. FTX and Alameda acquired Voyager Digital's assets for approximately ¥200 billion (US$1.422 billion), transferred customer accounts, and paid back his US$0.72 for every dollar locked in customer deposits I am planning to do so. paddy field.   Wassielawyer also pointed out that “ideally, Binance would do the same type of trading as Voyager.” The money won't come back anytime soon, but "if a deal like Voyager goes through, we'll have a world where customers can withdraw money in the not too distant future," he added. International and FTX US with customer funds. Creditors are left with little.    FTX's new CEO is John J. Ray III, who oversaw the bankruptcy of US energy company Enron.134 companies will be selected immediately. 

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Various Uncertainties

While there are many uncertainties surrounding the company's structure, Wassielawyer said  loans and collateral held by his Alameda, which  operated a market-making business, have been liquidated, making recovery of invested assets more realistic. Stated.   RELATED: FTX's Acquisition of Voyager Assets Approved by Bankruptcy Court I gave my opinion. The issue shared asset composition information from investment firm Alameda Research, which plunged FTX-issued crypto assets. 

Funds Shortage For FTX

FTX is said to have fallen into a funding shortage of about $ 8 billion (about 1.1 trillion yen). Binance, the industry's largest, agreed to buy it for bailout purposes, but withdrew on the 10th, saying, "This issue is beyond our control." Yen and crypto assets based on  parent company policy. After receiving a partial business suspension order and a business improvement order from the Kanto Local Finance Bureau on the 10th, it resumed withdrawing yen on the 11th. (Chihaya Inagaki)   Most attention has been focused on companies structurally separated from FTX, with former FTX CEO Sam Bankman-Fried himself saying, “FTX International and Alameda are completely unaffected by the financial crisis. I have not received it," he said. Body FTX US.Can I file for bankruptcy for debts incurred from trading virtual currency?  

 Bankruptcy Filing Does Not Necessarily Guarantee Relief

 Depending on the content of the transaction, it may not be exempt.  Liability cannot be exempted depending on the content of  virtual currency transactions.   Bankruptcy filing does not necessarily guarantee relief. If the debtor has grounds for refusing the discharge under the bankruptcy law, the court may refuse the discharge.

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