NOVEMBER 21, 2022
Sam Bankman-Fried’s Web of Influence | SBF’s companies have had relationships with who-is-who of crypto and beyond
House and Senate panels are planning hearings in December about bankrupt crypto exchange FTX and its former chief executive officer, Sam Bankman-Fried, amid renewed calls for Congress to strengthen regulation and oversight for the industry.
Global exchange-traded products focusing on cryptocurrencies and related themes posted a net inflow of $44.4 million in the week to Nov. 18, according to Bloomberg calculations. Solana-focused products saw the biggest outflows at $3.3 million, followed by Ripple ETPs with $1.4 million.
Exchange-issued crypto tokens such as bankrupt FTX Group’s FTT can pose “extreme” risks when accepted by their issuers as collateral, Bank of England Deputy Governor Jon Cunliffe said in a speech on Monday.
FTX and related companies now in bankruptcy collectively had a carryover federal net operating loss of at least $3.7 billion as of Dec. 31 last year based on tax returns, according to court filings.
Key stories and developments:
Crypto Exchange Tokens Pose Extreme Risks, BOE’s Cunliffe SaysFTX Fiasco Adds Wrinkle to Plan for Crypto Accounting RulesCrypto Arb Trades Roar Back as FTX-Battered Quants Flee MarketWant to Know Where Crypto Is Headed? Remember 2008: Bill DudleyWhat Does the Fall of FTX Mean for the Future of Crypto?
(Time references are New York unless otherwise stated.)
Crypto ETPs See Net Inflows $44.4 Million Led By Proshares’ BITO (9:25 a.m.)
Global exchange-traded products focusing on cryptocurrencies and related themes posted a net inflow of $44.4 million in the week to Nov. 18, according to Bloomberg calculations.
ProShares Bitcoin Strategy ETF had net inflows of $15.7 million, followed by ProShares Short Bitcoin Strategy ETF with $12.3 million. Bitcoin-themed ETPs led the inflows at $33.1 million, followed by Ether with $14 million. Solana-focused products saw the biggest outflows at $3.3 million, followed by Ripple ETPs with $1.4 million.
Congress Plans Hearings to Probe FTX Collapse: Crypto in DC (9:08 a.m.)
House and Senate panels are planning hearings in December about bankrupt crypto exchange FTX and its former chief executive officer, Sam Bankman-Fried, amid renewed calls for Congress to strengthen regulation and oversight for the industry.
The House Financial Services Committee is seeking testimony from Bankman-Fried, his trading house Alameda Research, rival exchange Binance, as well as other FTX employees. US and Bahamian authorities are also discussing bringing Bankman-Fried to the US for questioning.
Crypto Exchange Tokens Pose Extreme Risks, BOE’s Cunliffe Says (8:11 a.m.)
Exchange-issued crypto tokens such as bankrupt FTX Group’s FTT can pose “extreme” risks when accepted by their issuers as collateral, Cunliffe said.
“A firm accepting its own unbacked cryptoasset as collateral for loans and margin payments, as there are indications may have happened with FTX, creates extreme ‘wrong-way’ risk — i.e. when the exposure to a counterparty increases together with the risk of the counterparty’s default,” he said in a speech on Monday.
Crypto Arb Trades Roar Back as FTX-Battered Quants Flee Market (7:32 a.m.)
The wild-west days of crypto markets are back again as the large trading houses that once thrived on arbitraging price gaps pull back in the wake of FTX’s collapse. That’s opening up profitable opportunities for anyone that still dares to trade.
Prices for essentially identical assets on various platforms are diverging in a clear sign the dominoes are still falling across the crypto trading world. The gap between the funding rates of identical Bitcoin futures on Binance and OKEx, for instance, has been as wide as an annualized 101 percentage points and remained at least 10, compared to mostly single-digit gaps last month.
FTX Fiasco Adds Wrinkle to Plan for Crypto Accounting Rules (5:00 a.m.)
US accounting rulemakers were already considering tackling the thorny issue of accounting for freshly minted crypto tokens in their prolonged effort to write guidance for digital assets. Then came the collapse of crypto exchange FTX, and a new headache for accounting rulemakers.
While questions about the worth of FTX’s self-generated tokens are just a part of the company’s puzzle, there’s an area where the Financial Accounting Standards Board could bring clarity to the market: ensuring that businesses creating a crypto token don’t just assign it a value and report it on their balance sheets as an asset.
FTX’s Federal Net Operating Loss Carryover Stood at $3.7 Billion (2:32 a.m.)
Crypto exchange FTX and related companies now in bankruptcy collectively had a carryover federal net operating loss of at least $3.7 billion as of Dec. 31 last year based on tax returns, according to court filings.
The document from Alvarez & Marsal North America LLC, released as part of the Chapter 11 process, also showed that the minimum state net operating loss carryforward stood at $715 million. Earlier filings signaled the losses could help offset tax liabilities.
Ballet’s Lee Says Need to Get Past ‘Amateurs’ in Digital-Asset Sector (11:45 a.m. HK)
Bobby Lee, CEO and founder of crypto storage provider Ballet Global, said in an interview that “bad actors” that are poorly run need to be “flushed out” in order to restore faith in crypto. He added that “we’ve got to get past this early stage of amateurs in crypto.”
Lee said the latest troubles in virtual coins will set back the industry by a year or two. He predicted that Bitcoin could fall as low as $10,000 if crypto markets are hit by more major blowups.
Bill Ackman Says He’s Invested in Crypto (6:25 a.m. HK)
The Pershing Square CEO said in tweets laying out his thoughts on the crypto industry that he has small investments in a number of crypto projects, including VC funds and firms that help with compliance or reducing fraud in the industry. The crypto investments represent less than 2% of his assets, he added.
Ackman said that he remained positive on crypto overall despite the recent troubles, comparing its future potential impact on the economy and society to that of the telephone and internet.
Courtesy/Source: Bloomberg Businessweek
