FTX CEO Warns Some Third-Tier Exchanges Have “Secretly” Defaulted
After splurging on struggling digital platforms, FTX CEO Sam Bankman-Fried again warned that some crypto exchanges would soon fail.
FTX CEO’s warning about “secret” defaults of exchanges
The bold moves of the richest billionaire in the crypto industry have completely “reversed the storm”, while many other giants have taken turns announcing payroll reductions. Bankman Fried has emerged as a “hero” of the time. True to his promise of “willing to spend billions of dollars on acquisitions”, the CEO of FTX has splashed a lot of money to acquire US derivatives exchange LedgerX, Japanese crypto exchange Liquid or developer. Good Luck Games developer, 7.6% stake in Robinhood, the platform that is rumored to “return to” FTX, but recently Bankman Fried has denied.
Mr. Sam shared with Forbes: “There are a number of third-tier exchanges that have secretly defaulted.”
FTX, Coinbase, Kraken, and Binance are giants among digital asset exchanges. They have millions of customer accounts, and functionally they operate similarly to an online stockbroker. However, apart from these whales, more than 600 crypto exchanges worldwide exist on a largely unregulated border. Have you heard of AAX, Billance, and Hotbit? They also offer Bitcoin, Ether, Dogecoin… and generous margin loans 20 times the initial capital to customers. Any loophole in terms of regulatory oversight turns customers into easy prey for scams or attacks.
Japanese exchange Coincheck was hacked for $530 million in 2018, Singapore’s KuCoin lost $275 million in 2020, and then in December 2021, Cayman Island-based Bitmart had 200 million stolen USD. In 2016, Bitifinex was hacked with nearly 120,000 Bitcoins worth $2.5 billion.
However, even Bankman-Fried could not be generous or willing to splash the bailout money forever.
“Some companies have gone too far and cannot be saved because of significant holes in their balance sheets, regulatory issues, or no business hope left to turn the situation around. “Mr. Sam tactfully remained anonymous and said
As Forbes reported in its analysis of the world’s 60 best cryptocurrency exchanges, the digital asset trading business often lacks the standards for certifying a new entity before or after they start. Fundraising from customers. The SEC does not yet have the legal status to interfere with crypto exchanges, and the Commodity and Futures Trading Commission only oversees some crypto derivatives markets. In the United States, no member organization like FINRA regulates cryptocurrency exchanges.
The CEO of FTX is worried that there will be more failures because, during the previous euphoria, exchanges constantly offered customers extremely generous deposit yields. BlockFi or Voyager has promised customers up to 12% interest per year. These numbers would only be ideal if the market never went into a downtrend, and now it doesn’t look perfect.
“There are companies that have gone too far and are impractical to be salvageable.”
Despite the widespread downturn, Mr. Sam insists that FTX is profitable and has been operating for the past ten quarters. FTX’s biggest rival Coinbase has lost $432 million in the first quarter of 2022, its stock has fallen nearly 90% from its all-time high, and it has been forced to part ways with 1,100 employees.
FTX CEO also focuses on cryptocurrency miners, many of whom have rapidly scaled up and capitalized on this 21st-century digital gold rush. Shares of publicly-traded cryptocurrency miners, including Marathon Digital Holdings and Riot Blockchain, have also plunged more than 60%.
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