image

While cryptocurrency exchange FTX has collapsed in under two weeks, leading to the company’s declaration of Chapter 11 bankruptcy on Nov. 11, the legal ramifications of these events will likely play out over a much longer timeframe. Besides over 1 million individual investors, a large number of crypto firms and companies outside of the industry had exposure to FTX. The list below is likely to continue to grow as additional information comes to light.

Key Takeaways

  • A growing number of crypto-focused companies have revealed some degree of exposure to collapsed cryptocurrency exchange FTX.
  • These companies include Binance, Genesis, Galaxy Digital, Coinshares, Coinbase, and many others.
  • With FTX having filed for Chapter 11 bankruptcy protection, the ability of these companies to recover their funds tied to FTX is unclear.

Binance

FTX rival and leading cryptocurrency exchange Binance revealed that it previously held $580 million of FTT, FTX’s native token. CEO Changpeng “CZ” Zhao said on Nov. 14 that Binance had sold “quite a small portion” of that position, meaning it potentially still has significant exposure to FTX.

Binance played a key role in the collapse of FTX, with CZ stating publicly in early November that his exchange would sell its position in FTT, and then agreeing to and quickly backing out of a deal to bail out the faltering crypto exchange.

BlockFi

Cryptocurrency lender BlockFi is headed toward bankruptcy as a result of its exposure to FTX. FTX bailed out BlockFi in July 2022, providing BlockFi with a $400 million revolving credit facility and the option to buy the lender for up to $240 million. BlockFi paused withdrawals from its platform because of uncertainty about FTX early in the month.

Genesis Trading

Another cryptocurrency company with significant exposure to FTX is Genesis Trading. The crypto broker said on Nov. 10 that it had about $175 million in locked funds on FTX. Still, Genesis had no material exposure to FTT. Genesis delayed certain withdrawals through its platform in response to the FTX crisis. Genesis also announced on Nov. 9 that it had “hedged and sold collateral” leading to a loss of about $7 million across counterparties including Alameda Research, the trading firm of FTX founder Sam Bankman-Fried. After hearing the news, crypto exchange Gemini announced delays in withdrawals from its Earn product, in which Genesis is a lending partner.

Galois Capital

Hedge fund Galois Capital is a non-crypto company with significant exposure to FTX. Co-founder Kevin Zhou announced early in November that the fund had about half of its capital “stuck” on FTX, amounting to about $100 million. Zhou expects it could take “a few years” to recover an unspecified percentage of those assets.

Galaxy Digital

Galaxy Digital is a cryptocurrency financial services company with nearly $77 million in exposure to FTX as of early November. Over $47 million of those funds were in the “withdrawal process,” although it is unclear where they stand as of mid-November.

Multicoin Capital

Major cryptocurrency venture capital firm Multicoin Capital said in a letter to partner’s of the firm’s “Master Fund” that about 10% of that fund’s total assets under management were locked in pending withdrawals on FTX. The letter did not specify the dollar amount of assets locked on FTX.

Voyager Digital

Voyager Digital’s future is heavily impacted by what happens to FTX for multiple reasons. The bankrupt crypto lender had a balance of roughly $3 million on FTX when the latter filed for bankruptcy. FTX successfully bid $1.4 billion for Voyager’s assets in September of this year. With FTX’s collapse, Voyager has been left looking for another bidder. Voyager attorney’s have said that FTX violated its contract to buy Voyager out of bankruptcy.

Crypto.com

Crypto.com, a Singaporean cryptocurrency exchange, had moved roughly $1 billion to FTX over the course of a year prior to FTX’s collapse. However, most of these funds had been recovered by early November, with Crypto.com’s exposure at the time of the FTX liquidity crisis amounting to only $10 million or less.

CoinShares

European digital asset manager CoinShares has over $30 million worth of exposure to FTX, according to a statement dated Nov. 10. This exposure is relatively modest in comparison to CoinShare’s net asset value of over $282 million as of the end of the third quarter. CoinShares said it “significantly reduced” its FTX exposure in recent weeks.

Coinbase

Major cryptocurrency exchange Coinbase Global Inc. (COIN) announced on Nov. 8 that it has relatively small exposure to FTX, with about $15 million in deposits on the exchange. Coinbase added that it had no exposure to FTT and no loans to FTX.

Pantera Capital

Cryptocurrency hedge fund Pantera Capital had under 3% of its total $4.5 billion AUM in FTT tokens prior to Nov. 8. However, the fund said it liquidated as much of its FTT position as possible on that day. It is not clear what the firm’s exposure to FTX is at this point.

Celsius Network

Celsius Network, another cryptocurrency lender that has recently declared bankruptcy, revealed that it has $12 million in outstanding loans to Alameda. Alameda is also undergoing bankruptcy proceedings. Celsius’ exposure to FTX and its related companies is down significantly from three years ago; the crypto lender had $3.6 billion in exposure to FTX Group as of Jan. 2020.

The Bottom Line

A large number of cryptocurrency-focused companies had some degree of exposure to collapsed crypto exchange FTX, either through holdings of the exchange’s FTT token, through assets held on the FTX platform, through loans to a related company, or in other ways. With FTX engaged in bankruptcy proceedings and its future uncertain, the ability of these companies to recoup these funds is in question.

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also