Cryptocurrency companies are rushing to reassure users and put as much distance as possible between themselves and crypto exchange firm FTX in the wake of that firm’s multi-billion dollar collapse.
Firms including Binance, Crypto.com, OKX and Derebit have promised to provide evidence that they have enough reserves to match customers’ liabilities.
Coinbase also moved to distinguish itself from FTX, reportedly emailing customers recently to stress how its “business is different and ultimately better protects” client accounts and assets.
That’s according to a Sunday (Nov. 13) report by the Financial Times, which had seen a copy of the email.
Meanwhile, the crypto trading platform Kraken reported that it froze a small number of accounts owned by FTX Group, its sister trading company Alameda Research and executives at those companies after speaking with law enforcement.
“Those accounts have been frozen to protect their creditors,” the company wrote on Twitter on Sunday, adding that other Kraken clients were not impacted.
Kraken has spoken with law enforcement regarding a handful of accounts owned by the bankrupt FTX Group, Alameda Research and their executives. Those accounts have been frozen to protect their creditors.
Other Kraken clients are not affected. Kraken maintains full reserves.
— Kraken Exchange (@krakenfx) November 13, 2022
FTX began to implode last week after announcing a liquidity crunch. The days that followed brought an escalating series of bad news for the firm, including reports of regulatory investigations and allegations that founder and ousted CEO Sam Bankman-Fried had used FTX customer money to prop up Alameda.
FTX has since sought bankruptcy protection for itself and several of its companies.
The fallout from the collapse of FTX has spread to other companies as well. Among them is trading and lending platform BlockFi, which announced on Twitter on Friday (Nov. 11) it was pausing client withdrawals and limiting platform activity.
Writing that “we are shocked and dismayed by the news regarding FTX and Alameda,” the company said a lack of clarity on the FTX meant it was “not able to operate business as usual.”
BlockFi and FTX US announced in July a deal for FTX US to provide BlockFi a $400 million credit facility, with the option for FTX US to purchase the smaller platform.
PYMNTS noted Sunday that the ripple effect from FTX’s fall could extend to venture capital firms as well. Companies like Sequoia have already marked their holdings in FTX down to zero.
Banks, meanwhile, may do better, having just 0.14% of crypto exposure. We’ve written before that banks have been slow to adopt crypto, with our research showing that just 10% of financial institutions provide access to at least one form of cryptocurrency.
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