Crypto contagion: Will FTX users get their money back? – The Average Joe

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    Crypto contagion: Will FTX users get their money back?

    victorlei

    November 9, 2022

    Are we experiencing the modern-day Lehman Brothers collapse in real-time? Crypto lost nearly $200B in market value this week, and it’s not even Friday yet.

    • Monday: Signs of trouble emerge with the second-largest crypto exchange, FTX.
    • Tuesday: The collapse begins. The largest crypto exchange, Binance, said it was looking into buying FTX — pending due diligence.

    FTX.US (US company) is still operational, and users can still withdraw money. But users are locked from withdrawing funds from the separate international entity, FTX.com.

    And the story continues…

    Yesterday, CoinDesk reported that after an initial review of FTX’s internal data, Binance strongly leaned against the deal. Rumors pegged the buyout price at $1 (not a typo) — down a smidge from its $32B valuation earlier this year.

    The bad news began to compound for FTX:

    • The majority of FTX’s legal team quit, per Semafor.
    • US regulators are looking into FTX to see whether they mishandled customer funds.

    Then this happened yesterday…

    Now that the acquisition isn’t going through, bankruptcy odds are even higher, and customers could face more severe losses.

    How does this impact the rest of crypto?

    One of the industry giants going down is definitely a major setback for the entire industry. It’s also going to leave a bad taste with regulators. Per Blockworks, FTX’s founder and CEO, Sam Bankman-Fried was the “biggest and most-connected cheerleader in Washington.”

    Here’s what Binance’s CEO has to say:

    • “FTX going down is not good for anyone in the industry. Do not view it as a ‘win for us.’ User confidence is severely shaken.
    • “Regulators will scrutinize exchanges even more. Licenses around the globe will be harder to get. And people now think we are the biggest and will attack us more.”

    The events sent Bitcoin ($BTC) and Ethereum ($ETH) down 16% and 22% in the past week, respectively. Another major crypto, Solana ($SOL), which had major support from FTX, has lost over half its value in the past week. It’s going to be a long and cold winter.

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