November 30, 2022

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While regulators scrutinize FTX, rival exchanges try to reassure investors

While regulators scrutinize FTX, rival exchanges try to reassure investors

  • Crypto.com CEO says it will publish proof of reserves
  • Bitcoin settles around $16,700
  • Binance CEO Plans ‘Industry Recovery Fund’
  • Smaller AAX exchange halts withdrawals

SINGAPORE/LONDON (Reuters) – Bitcoin and other cryptocurrencies remained under pressure on Monday after the collapse of cryptocurrency exchange FTX last week as rival exchanges sought to reassure nervous investors of their stability.

Chris Marsalek, CEO of the Singapore-based exchange Crypto.com, refuted suggestions that might be in trouble, saying in a YouTube live headline that the platform will prove all naysayers wrong.

The AMA (Ask Me Anything) session came after investors took to Twitter over the weekend to question the transfer of $400 million worth of ether tokens to the Gate.io exchange on October 21.

Marsalek had tweeted on Sunday that the ether had been recovered and returned to the exchange, but the Wall Street Journal reported that withdrawals at Crypto.com soared over the weekend.

Marsalek said Monday that audited evidence of the stock exchange reserves report will be published within weeks, adding that the exchange has not engaged in any “irresponsible lending products.”

Crypto.com is among the top 10 exchanges by volume globally, but smaller than market leaders FTX and Binance. She made headlines in 2021 by signing a $700 million deal to rename the Staples Center in Los Angeles as the Crypto.com Arena, and getting actor Matt Damon to promote the platform.

FTX filed for bankruptcy on Friday, one of the biggest crypto explosions, after traders pulled $6 billion from the platform in just 72 hours, and rival exchange Binance abandoned a proposed bailout.

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It plunged into further chaos on Saturday after it said it had detected unauthorized access, and analysts said hundreds of millions of dollars in assets had been removed from the platform in “suspicious circumstances”.

FTX’s new CEO, John J. Third Ray, said Saturday that the company is working with law enforcement and regulators to mitigate the problem, and is making “every effort” to secure the assets. Former CEO and founder of FTX, Sam Bankman-Fried, previously told Reuters that some of the transfers from FTX were the result of “confusing internal signs.”

Another cryptocurrency exchange, Kraken, said on Twitter on Sunday that it had frozen the accounts of FTX, Alameda Research’s cryptocurrency exchange, and its executives.

“We have actively monitored recent developments in FTX ownership, are in contact with law enforcement, and have frozen Kraken account access to certain funds that we suspect are associated with FTX-related “fraud, negligence or misconduct,” a Kraken spokesperson said in a statement. .

Bitcoin slipped back below $16,000 early Monday before recovering to trade at $16774, up 2.8% from the day. However, with losses so far in November at 18%, it is still bracing for its biggest monthly drop in percentage terms since June when the fallout from the TerraUSD coin failure wreaked havoc on the markets.

The FTX token was worth just $1.3, down 94% in November, while Crypto.com’s Kronos token halved in the past week to $0.06, according to pricing site Coingecko.

Investors nerves

The collapse of FTX has alarmed investors as unverified rumors spread, even as exchanges released details of their reserves and pledged more disclosures.

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“One of the prevailing theories is that exchanges move cryptocurrencies to shore up their balances and make everything look good even when there is nothing else,” said Zenon Kapron, founder of financial advisory firm Kapronasia.

“It’s as if someone showed someone a bank statement that you had $100 in your account at 2 p.m. this afternoon. At 1 p.m. the rate might be $1 and someone transferred $99 to you, and at 4 p.m. Evening, you’ll resend it… The shot tells us very little about the actual health of the exchange.”

Separately, the smaller, Asian exchange AAX suspended withdrawals over the weekend citing failures at an unnamed third-party partner during a scheduled system update.

AAX said it hopes to resume normal operations for all users in 7-10 days, but within a range Note to customers He notes: “In light of the bankruptcy of one of the biggest players in our industry last week, crypto users are rightly concerned about the operational and financial stability of centralized digital asset exchanges.”

Changpeng Zhao, CEO of Binance, the world’s largest cryptocurrency exchange, tweeted that he would look to set up an industry recovery fund to help projects that were “otherwise strong but in a liquidity crunch,” adding that more details would follow.

Binance last week signed a non-binding letter of intent to buy non-US FTX assets but later abandoned the deal, precipitating its bankruptcy.

Zhao has since warned of a “cascading” crypto crisis.

Meanwhile, regulators continued to rally around FTX, which was itself a White Knight investor for its failed crypto projects over the summer.

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The Royal Bahamas Police Force said Sunday that the Bahamas Securities Regulatory Authority and financial investigators are investigating possible misconduct over the FTX collapse.

Visa company (VN)The world’s largest payment processor said Sunday that it has canceled its global credit card agreements with FTX.

Additional reporting by Xingwe Kwok in Singapore and Elizabeth Hawcroft in London. Editing by Sam Holmes, Kirsten Donovan

Our criteria: Thomson Reuters Trust Principles.