How Extensive is the Fallout from FTX’s Collapse?

Potentially over 1 million creditors and investors, including significant institutions, face losses in FTX’s collapse

According to the bankruptcy filings for FTX, the centralized cryptocurrency exchange has an estimated 100,000 to over 1,000,000 creditors, as customers are considered creditors of Sam Bankman-Fried’s now bankrupt company. 

A significant number of investors stored their cryptocurrency holdings on FTX, ranging from retail traders to major cryptocurrency hedge funds. Users in South Korea, Singapore and Japan are the most impacted by FTX's collapse, with a combined 15.7% web traffic share to FTX.com between January to October 2022.

While the value of customer deposits has not yet been accurately ascertained in court filings, as of November 10, FTX held $9 billion in liabilities against $0.9 billion in liquid assets.  

Over 33 well-known institutions and projects were affected by the collapse of FTX

The collapse of FTX has rippled across the industry. In addition to potentially over a million retail investors with funds stuck on FTX, other entities that have been impacted include: Institutional depositors, lenders, investors in FTX, companies that FTX invested in, spin-off projects associated with FTX, and other industry players which have paused business operations or have faced contagion fears in the wake of the bankruptcy filing. 

Among institutional depositors, hedge fund Galois Capital said it had $40 million stuck on FTX (approximately 50% of its assets). Venture capital firm Multicoin Capital, which raised $605 million in the past, confirmed it had 10% of its assets under management (AUM) stuck on FTX.

Meanwhile, FTX’s native utility token FTT wiped out $2.6 billion in market capitalization in the wake of FTX’s Chapter 11 bankruptcy filing. As of December 1, the price of FTT is at $1.34, -98.4% below its all-time high.

Lending firms Genesis and BlockFi, among worst hit

In comparison, lending firms have been badly affected by the downfalls of FTX and its sister company, the trading firm Alameda Research, as both companies borrowed heavily from cryptocurrency lending firms.

On November 11, cryptocurrency broker Genesis Global Trading said it had $175 million in inaccessible deposits on FTX, on top of lending to the company. Genesis’ lending unit suspended redemptions and new loans on November 16, and Genesis has subsequently been seeking $0.5 billion to $1 billion of emergency loans to continue operations. Genesis’ parent company, venture capital firm Digital Currency Group (DCG), also owns Grayscale Investments, Foundry, Luno, as well as CoinDesk, which broke the Alameda leaked balance sheet story that marked the start of FTX’s collapse.

On November 28, lender BlockFi filed for Chapter 11 bankruptcy protection. BlockFi listed a $275 million outstanding loan to FTX US in its bankruptcy filings, and revealed during a November 29 court hearing that it had over $355 million stuck on FTX and a $671 million outstanding loan to Alameda Research. BlockFi, which had received a $400 million line of credit from FTX US in July, is now suing FTX founder Sam Bankman-Fried’s holding company Emergent Fidelity Technologies.

Venture firms write down $1.9B FTX investment to zero

At its peak, the valuation of FTX stood at $32 billion in January, when the cryptocurrency exchange raised $400 million in a Series C round, and the $32 billion valuation continued to be cited as recently as late September. FTX has raised around $1.9 billion from 82 investors since its inception, with its capitalization table headlined by some of the world’s top venture capital, hedge funds, private equity and state-associated funds. 

FTX’s institutional investors include Sequoia Capital, Softbank, Paradigm, Tiger Global, Ontario Teachers’ Pension Plan and Temasek Holdings. Some of the institutional investors have said they will be writing down their FTX investments to $0, such as Temasek Holdings ($275 million investment), Sequoia Capital ($213.5 million), Softbank ($100 million) and Ontario Teachers’ Pension Plan ($95 million). That said, the losses suffered by these institutional investors were a small fraction of their portfolio.

Secondary contagion effects starting to emerge

Companies – which had no known direct business relations with FTX – have been unable to continue normal business operations due to the domino effect from the FTX collapse. Notable companies that have begun to fall include SALT Lending, Genesis Block, AAX, Silvergate Bank, Auros Global, and Gemini’s Earn program.

SALT Lending paused withdrawals and deposits on its platform on November 15, citing “industry events related to FTX”. Centralized cryptocurrency exchange Gemini also paused withdrawals for its Earn program on November 16, after lending partner Genesis suspended redemptions. Trading services firm Genesis Block, which was once among Asia’s top Bitcoin ATM providers, said on November 18 that it would cease its over-the-counter (OTC) trading portal and asked clients to withdraw their funds. 

Methodology

The study examines a non-exhaustive list of institutions and cryptocurrency projects that are publicly reported or otherwise known to be financially affected either directly by the illiquidity and bankruptcy of FTX, or indirectly by contagion fears, as of December 2. Sources referenced include the November 22 FTX hearing exhibit, other court documents, news coverage and Twitter. 

To date, over 60 institutions and cryptocurrency projects are known to have been financially affected by FTX’s collapse, of which 33 of the most well-known have been represented in the contagion graphic above. In addition, FTX has another 130 affiliate companies that have collectively filed for Chapter 11 bankruptcy alongside FTX, FTX US and Alameda Research. Numbers and the list of entities represented in the graphic are by no means exhaustive. The graphic will be periodically updated as the situation develops, as more entities affected by the FTX collapse are reported.

The terms ‘user’ and ‘customer’ were used interchangeably.

All dates mentioned here are in 2022.

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