Blockchain This Week – FTX’s Epic Overnight Collapse, Google’s Growing Web3 Appetite, UBS Bond on Blockchain

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It Didn’t Even Take 10 Days

On Nov 2, news outlet Coindesk published an article that revealed the dubious business of billionaire Sam Bankman Fried’s crypto empire. It was disclosed that much of the $14.6 billion of assets of Bankman Fried’s trading firm, Alameda Research, is made up of FTT, the native token “printed out of thin air” by its sister company, FTX. Furthermore, Bankman Fried is said to have funneled $10 billion of the customers’ funds from FTX into Alameda. These funds supposedly were used to cover the losses incurred by Bankman Fried’s “altruistic” bailing out the bankrupt crypto firms a few months back. This shocking revelation was followed by CZ Zhao of Binance announcing that it was going to dump the FTT tokens that constitute most of the $2 billion payout it received from Bankman Fried for buying back Binance’s stake in FTX. These combined drove the price of FTT spiraling downwards, and the native token of FTX lost 80% of its value overnight. FTX exchange saw the crypto equivalent of a bank run, with customers rushing to withdraw their deposits. In a desperate attempt to overcome the liquidity crunch, FTX attempted to sell itself to its biggest competitor, Binance. Though CZ initially showed some inclination towards the trade, one look at the questionable balance sheet made him rescind his offer. Meanwhile, Bankman Fried announced that Alameda Research would shut shop while he will be fundraising to save FTX. All of these theatrics culminated on Nov 11, when Bankman Fried departed from FTX, and FTX filed for bankruptcy in a Delaware court.

The Fallout

There were many. Bitcoin fell below the $16K mark, though has marginally recovered since. Prices of cryptocurrencies, especially the ones associated with Bankman Fried, took a plunge. Solana lost more than 55%. Other tokens, such as Raydium and Bonfida, have lost over 40%.

One of FTX’s investors, Sequoia, decided to write off its close to $210 million investment and mark down the value of its stake to zero. Crypto firm Galaxy Digital revealed that it has $76.8 million tied to FTX. The future of firms such as BlockFi and Voyager, which were rescued by Bankman Fried, is undetermined. BlockFi paused withdrawals referring to a “lack of clarity” around FTX.

Sam Bankman Fried is no longer a billionaire, having lost 94% of his net worth, close to $14.6 billion, almost overnight. Stablecoin issuer Tether froze $46 million worth of USDT held by FTX on request from law enforcement.

FTX’s “Effective Altruism” Future Fund team resigned, citing that it was unable to perform its work or process grants while questioning the legitimacy of the business operations. FTX’s head of institutional sales, Zane Tackett, also left his post, stating his team was “completely in the dark” about insolvency.

Investigations to Follow

The US SEC and CFTC have launched investigations into FTX’s alleged mishandling of customer funds and the firm’s relationships with the rest of Sam Bankman Fried’s crypto empire. Furthermore, the US Justice Department is also reportedly investigating FTX. Japan’s Financial Services Agency has ordered the beleaguered crypto exchange’s Japan unit to suspend operations. Meanwhile, the securities regulator of Cyprus has revoked the license issued to FTX EU  a few months ago.

And the Mystery Continues

In yet another turn in this stunning collapse of FTX, the company reported that over $600 million in crypto had mysteriously left FTX wallets on the same day it filed for bankruptcy. FTX said in its official Telegram channel that it had been hacked, telling users to delete all the FTX apps as they claim the apps are infected by malware.

Google Runs Solana Node

Google Cloud is running a validator node for the Solana blockchain and plans to bring Solana into its recently launched Blockchain Node Engine. Alongside this, it will index the data of the Solana platform to enable it to be used in its BigQuery service.

Aptos and Google Team Up

Google Cloud has partnered with crypto startup Aptos and will run validator nodes of Aptos mainnet. Furthermore, Aptos will index its platform using Google’s BigQuery service. Finally, the two firms will jointly launch an accelerator program to attract new talent into the crypto space.

UBS Launches Bond on Blockchain

Switzerland based lender UBS launched a 375 million Swiss francs (CHF) digital bond this week. This bond is the first ever digital bond traded by a banking institution, traded and settled on a regulated blockchain based exchange – SIX Digital Exchange (SDX).

Coinbase Fires 60 Employees

Crypto exchange Coinbase has once again laid off people, this time over 60, in what it calls a move to help the company operate efficiently. This time, employees from the recruiting team and institutional onboarding unit were affected.

Ark Buys More Coinbase Shares

Cathie Woods led ARK Investment Management has bought 237,675 shares in crypto exchange Coinbase following the dip in the share price following the FTX rout. The purchase adds to the 400,000 shares of Coinbase that ARK already owns.

IMF’s CBDC Proposal

The IMF and MIT’s Digital Currency Initiative jointly published a whitepaper where they propose a global, common platform for CBDC called X-C. According to the paper, X-C can use a database or DLT, but both options would rely on Smart Contracts and encryption.

Hash Blockchain Gets HK Regulatory Nod

Hong Kong’s financial regulator has given Hash Blockchain a license to provide crypto asset trading services. As a result, this subsidiary of HashKey Group will be able to operate a digital asset trading platform.

LATAM Bank Teams up With Galaxy

Itaú Asset, the investment arm of Latin America’s largest bank Itaú Unibanco, is partnering with Galaxy Digital to offer physically backed crypto ETF in Brazil. The IT Now Bloomberg Galaxy Bitcoin ETF is listed on Brazil’s B3 stock exchange.

BoK Release CBDC Trial Results

The Bank of Korea released the results of its retail CBDC trial held in June this year. While it is happy with the benefits of using CBDC for offline and cross border payments, the bank also highlighted performance issues with blockchain tech.

Friktion’s Under Collateralized Crypto Loans

Solana based portfolio management firm Friktion launched a crypto lending product for institutional clients. Borrowers get under collateralized loans, while the lenders get higher yields for loaning their funds.

News Shorts

Crypto wallet Metamask has added a bridge aggregator in its portfolio app to enable users to find the best route to make cross chain token transfers.

NFT marketplace OpenSea has reaffirmed its stance to support creators by enforcing royalties on its platform.

David Chaum, the creator of Bitcoin predecessor eCash, is working with Swiss National Bank (SNB) on Project Tourbillon, an initiative to create CBDCs that protect users’ privacy.

The US Department of Justice has seized more than 50,000 bitcoins worth $3.36 billion from James Zhong of Georgia, who unlawfully obtained them from the dark web marketplace Silk Road in 2012.

Web3 Venture Financing

Private equity firm Thoma Bravo led a $70 million Series B extension round of TRM Labs, a company providing risk management and compliance services to crypto companies.

Digital assets exchange Archax has secured $28.5 million in a Series A round led by investment firm Abrdn.

London and Paris based VC firm LeadBlock Partners has raised $150 million for its new crypto fund backed by crypto market makers, family offices, hedge fund managers, and financial institutions.

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