FTX Collapse: CoinDesk Explores Sale

view original post

Sam Bankman-Fried’s crypto empire collapsed on November 11, a victim of mass withdrawal demands from clients and investors. 

The cryptocurrency exchange FTX and its sister company Alameda Research, a hedge fund and trading platform, had been unable to meet the demands of fund withdrawals from panicked customers. 

Bankman-Fried, known in the crypto sphere by the initials SBF, was then forced to file for Chapter 11 bankruptcy.

The list of collateral victims of this financial disaster currently includes crypto lender BlockFi, which has also filed for bankruptcy. The platform had been rescued by Bankman-Fried during the crypto credit crunch last summer.

Genesis on the Verge of Bankruptcy

Another big victim may fall soon. This is crypto lender Genesis, which is, according to press reports, preparing its bankruptcy filing with its creditors. Genesis is owned by crypto juggernaut Digital Currency Group (DCG), a firm founded by crypto evangelist Barry Silbert. Genesis had an account with FTX, which was unsurprisingly blocked due to the liquidation process. 

Last November, the brokerage stopped customers from making withdrawals and issuing new loans as a result of the bankruptcy of FTX. The company has also decided to take emergency measures, in particular the elimination of 30% of its workforce.

“We continue working with our advisors, in collaboration with DCG and advisors appointed by various client groups, to evaluate options to preserve client assets and move the business forward,” a spokesperson told TheStreet on Jan. 5.

A Genesis bankruptcy filing would also affect the Gemini cryptocurrency exchange founded by the billionaire twin brothers Tyler and Cameron Winklevoss. Genesis is Gemini’s partner in a reward program, Gemini Earn, offered by the platform to attract customers. 

Genesis owes $900 million to Gemini’s Earn users.

The Genesis-Gemini tussle has somewhat unsettled DCG and Silbert since the Department of Justice and the Securities and Exchange Commission have opened separate investigations into the ties between Genesis and DCG, according to Bloomberg News.

CoinDesk Hires Lazard

It is in this context that CoinDesk, another entity belonging to DCG, has just hired the investment bank Lazard to explore its sale, The Wall Street Journal reports.

CoinDesk is a cryptocurrency news platform. The objective of hiring Lazard is to help CoinDesk “explore various options to attract growth capital to the CoinDesk business, which may include a partial or full sale,” according to the report.

“Over the last few months, we have received numerous inbound indications of interest in CoinDesk,” CEO Kevin Worth told CNBC in an emailed statement. 

CoinDesk didn’t immediately respond to a request for comment.

What is interesting to know is that CoinDesk, which was founded in 2013, is the media site that revealed the accounting issues at Alameda Research. These revelations led to the fall of the Bankman-Fried empire a few days later.

In a Nov. 2 article, Coindesk claimed that most of the balance sheet from Alameda Research was comprised of the FTT token. The leaked balance sheet showed that Alameda listed $3.66 billion in unlocked FTT and $2.16 billion worth of FTT collateral. It also showed a total of $14.6 billion in assets and some $8 billion in liabilities, which includes $7.4 billion worth of loans.

FTT was the token issued by FTX. Investors believed the balance sheet comprised a majority of tangible assets

Changpeng Zhao, the founder and CEO of Binance, Bankman-Fried’s main rival, used the article to announce, on November 6, that he was liquidating Binance’s FTT holdings. 

This decision caused a run on the bank, and the end for Bankman-Fried and FTX.

“Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books,” Zhao wrote.

Besides DCG, Genesis and CoinDesk, Silbert also controls Grayscale Investments, a digital asset management company that runs a Bitcoin Trust. DCG is also the parent company of Foundry Digital, a crypto mining service provider, and Luno, a London-based cryptocurrency exchange.