The new CEO of failed crypto exchange FTX has some harsh words for his predecessor, Sam Bankman-Fried.



John J Ray III, who previously oversaw restructuring efforts at historic corporate failures such as Enron, explained in a declaration supporting the FTX bankruptcy proceedings that:



“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”



And while he wasn’t impressed with SBF and his tight-knit team of insiders, he had precious little to celebrate at any level — including failed regulatory systems in his initial assessment of the situation at FTX:



“From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”



Following what appeared to be a hack shortly after the bankruptcy was filed, Ray noted that “the implementation of accounting, audit, cash management, cybersecurity, human resources, risk management, data protection and other systems that did not exist, or did not exist to an appropriate degree, prior to my appointment” was a priority.



The absence of appropriate cybersecurity measures will be galling to those who lost money in the collapse of FTX.



One of the more startling details of the bankruptcy proceedings so far is FTX now declaring the value of its remaining assets at a mere $659.



Former CEO Bankman-Fried had previously valued its assets at $5.5 billion.



Bankman-Fried has issued a series of erratic tweets in the days since his crypto empire fell apart, prompting the official FTX Twitter account to note, tersely, that 



“As previously announced, Mr. Bankman-Fried resigned on November 11 from @FTX_Official, FTX US, Alameda Research Ltd. and their directly and indirectly owned subsidiaries.



Mr. Bankman-Fried has no

Worse Than Enron: SBF’s FTX Has 'Complete Absence of Trustworthy Information'

The Australian Securities Exchange (ASX) has placed a blockchain system (DLT) intended to upgrade its aging settlement layer on indefinite hold after three years of development.



The move marks the end of what was to be one of the most impactful implementations of distributed ledger technology — business-speak for enterprise blockchain — to date.



In a statement on Wednesday, ASX said its DLT, once pegged to replace its 25-year-old Clearing House Electronic Subregister System (CHESS), simply didn’t measure up.



ASX inked a three-party memorandum of understanding in 2019 with enterprise blockchain firm Digital Asset and cloud computing giant VMware to build the software.



Between 245 million and 255 million Australian dollars ($165 million to $171 million) spent on developing the DLT will be scrubbed from ASX’s balance sheet starting next year, a spokesperson told Blockworks. 



The funds were previously listed as a financial asset or liability. ASX doesn't expect the outcome to impact the company’s dividends.



DLTs are private (permissioned) blockchain-powered networks; databases involving multiple vetted parties across multiple trusted nodes, which process actions within a closed system. 



Large companies and other institutions have gravitated towards DLT solutions rather than permissionless blockchains, as they award supreme power and control over the networks they support, with “blockchain, not Bitcoin” the mantra for many over the past five years.



Compare that with public (permissionless) blockchain systems such as Bitcoin and Ethereum. These networks have no central power and allow anyone at all (with the right equipment) to join, validate and otherwise participate in the network.



The ASX spokesperson said that while current activities on the project have been paused, it has not definitively ruled out a DLT implementation in the future. 



“As we revisit solution design we will go back with an open mind,” the spokesperson

'Blockchain, not Bitcoin' is Dead? Australian Bourse Cans DLT Shift

Cryptocurrency-focused asset manager Multicoin Capital lost more than half of its flagship fund’s capital in about two weeks.



The drop of about 55% — one of the worst in Multicoin’s history — was triggered by FTX’s rapid descent into insolvency, according to three sources familiar with the matter.



The figure excludes illiquid, side-pocketed, investments. The staggering downturn reflects the 9.7% of fund assets, including derivatives, that were custodied by FTX.



Multicoin, one of the largest and oldest investment managers in the sector — and often considered one of the more savvy — would like to write down all of its FTX positions to zero for the time being, with the final say going to the fund’s auditors and administrators. 



The move explains in part the precipitous 55% drop in slightly more than half a month. But it doesn’t account for the entire downturn. 



Multicoin, however, has no plans to close up shop, shutter its flagship vehicle or convert to a proprietary trading operation, sources said. It is also in the process of introducing a number of operational and infrastructure improvements, including endeavors to mitigate counterparty risk.



Other factors behind the losses, sources said: a longstanding bullish thesis on $SOL, Solana’s native token (once-bullish $SOL backers have sold en masse in light of Sam Bankman-Fried’s role in the early days of the proof-of-stake protocol); Solana-based assets, including Mango, wherein FTX was the only available US counterparty; FTX.US equity stakes; and outstanding derivative contracts. 



It could have been worse.



As of Nov. 6, Multicoin kept approximately 13% of the vehicle's assets on FTX. The firm in short order — with repeated follow ups in ensuing days — issued a series of withdrawal requests to FTX. Not all of the redemptions were met, like many of the asset manager’s peers.  



Fortune and The Block earlier reported Multicoin’s updated 9.7% figure for frozen funds,

Multicoin Lost More Than Half Its Crypto Fund’s Capital This Month: Sources

When it comes to unpacking what exactly happened to now-bankrupt crypto exchange FTX, it’s far too soon to tell what risk management or regulatory errors were made — if any — a CFTC commissioner said Wednesday.



As mounting damage from FTX’s failures percolates, Commissioner Kristin Johnson said if regulators determine there was wrongdoing, it would still be another question entirely of whether they were intentional in nature. 



“We're in the early days and beginning to peel back the layers of what's happened, so I would feel remiss to begin to describe what I think are regulatory missteps or even risk management failures,” Johnson said during an appearance before lawmakers and industry members at the Blockchain Association Policy Summit in Washington. 



It is not yet fair to make the determination that the FTX team knowingly and willingly made mistakes when it comes to risk, according to Johnson.



“It's hard at this point to distinguish, from this distance, risk management failures from something more intentional,” she said. “The outcome will be the same…The result is a liquidity crisis, but there are many ways a liquidity crisis will be triggered.” 



Even so, Johnson added, regulatory guidelines have been proven to work as consumer protection measures. 



One FTX subsidiary, LedgerX, known as FTX US Derivatives, is notably absent from the bankruptcy filing, Johnson pointed out, in part thanks to their due diligence in complying with the futures watchdog’s regulatory requirements. In 2017, LedgerX applied to register with the CFTC as a derivatives clearing organization (DCO). 



“We require, in permitting LedgerX to operate, that LedgerX comply with a number of conditions,” Johnson said. “LedgerX agreed that it would only offer fully collateralized contracts. 



The CFTC has independently confirmed that LedgerX does not belong on the list of FTX bankrupt subsidiaries, Johnson said. 



“Not $1 of customer assets have

CFTC Commissioner: Too Soon To Say if FTX Crisis Was Intentional

Directly after outlandish new comments from FTX founder Sam Bankman-Fried became public, FTX’s new CEO took a moment to distance the company from the exchange’s former leader. 



In an interview with Vox, Bankman-Fried criticized regulators and expressed regrets about filing for bankruptcy, while downplaying the practice of loaning customer assets to sister firm Alameda Research. 



“Mr. Bankman-Fried has no ongoing role at [FTX], FTX US, or Alameda Research Ltd. and does not speak on their behalf,” FTX CEO John Ray tweeted Wednesday. 



Ray’s tweet came after Vox published screenshots of a series of Twitter direct messages from Bankman-Fried. 



Among the messages was, “F— regulators. They make everything worse. They don’t protect consumers at all.”



He also told Vox that he regretted filing for bankruptcy, noting that doing so was “maybe my biggest single f—up.”



“If I hadn’t done that, withdrawals would be opening up in a month with customers fully whole,” he said. “But instead I filed, and the people in charge of it are trying to burn it all to the ground out of shame. I may still get there, but after way more collateral damage. And only 50/50.”



Bankman-Fried’s own lawyers could not be reached for comment, Vox wrote.



Ray, who is also serving as FTX’s chief restructuring officer, years ago oversaw the liquidation of bankrupt energy company Enron. He became CEO on Nov. 11, at which point the exchange filed for Chapter 11 bankruptcy and Bankman-Fried resigned from the CEO post.



Lawyers at Landis Rath & Cobb and Sullivan & Cromwell, representing FTX and affiliates, said in a bankruptcy motion on Monday that as many as one million creditors could be named in the Chapter 11 cases.



Bankman-Fried has also continued to tweet following his resignation. In his latest thread, he mentioned that FTX got “overconfident and careless” as it became “the darling of Silicon Valley.”



He relived last week’s

As SBF Disses Regulators, FTX Disowns SBF

What appears to be the first class action lawsuit filed against FTX and a number of its high-profile backers claims the insolvent crypto exchange violated Florida law and is demanding $11 billion in damages on behalf of its customers. 



Adam Moskowitz — the attorney who filed the lawsuit on behalf of Oklahoma resident Edwin Garrison and related counterparties in the Southern District of Florida — said FTX’s founder and former chief executive, Sam Bankman-Fried orchestrated “massive fraud” in improperly trading customer funds. 



Defendants include the following: Tom Brady, Gisele Bundchen, Stephen Curry, the Golden State Warriors, Shaquille O’Neal, Udonis Haslem, David Ortiz, William Trevor Lawrence, Shohei Ohtani, Naomi Osaka, Lawrence Gene David and Kevin O’Leary.



All are allegedly “responsible for the many billions of dollars in damages.”



Using “the largest and most well-known marketers and celebrities was the only way that this massive fraud could have been successful,” Moskowitz said. 



The legal action’s chance of succeeding, however, isn’t yet known. Representatives for the defendants declined to comment, did not immediately return requests for comment or could not be reached.



Added Moskowitz: “Regular people on the street that have smartphones needed to hear from somebody [who] they very much respect in order to make this decision to go ahead and buy something they've never heard of.”



Brady and Curry were brand ambassadors that received equity in FTX and were characterized in the litigation as “parties who either controlled, promoted, assisted in, and actively participated in” the “offer and sale of unregistered” yield-bearing FTX US investment products that were, in fact, unregulated securities.



The suit’s “main focus” is making whole FTX US app users whose funds have been frozen, the attorney said — an endeavor he dubbed “absolutely realistic,” albeit “difficult.” 



The lawsuit

What Do Tom Brady, Steph Curry and Naomi Osaka Have in Common? An FTX Lawsuit.

Borrowing rates of Gemini’s stablecoin GUSD jumped to upwards of 83% on decentralized lending platform Aave on Wednesday morning after the centralized exchange announced that it would be halting the Gemini Earn program.



Gemini is among the many major crypto companies affected by the suspension of customer redemptions at digital currency broker Genesis, one of the latest crypto giants affected by SBF’s reckless behavior.



Speculators assumed that many were shorting the asset, betting on Gemini’s collapse and a GUSD depeg.




$GUSD borrowing rate on Aave is spiking. Probably because people are shorting it on a bet it will fail when Gemini fails.This bet was triggered when Gemini Earn program halted, because Gemini partner Genesis is in trouble over FTX fall-out.Hope Gemini & GUSD will stand.— Sandpath 🆙 🐰🥚 (@sandpath0x) November 16, 2022




Increased interest rates reflect a sudden surge in demand for the stablecoin as the utilization of available GUSD supplied to the protocol approaches 100%. Unlike other assets, such as USDC, DAI and ETH, GUSD cannot be used as collateral, so depositors can only provide GUSD for the purpose of earning the prevailing interest rate.



Risk to MakerDAO and DAI



If GUSD were at risk, DeFi users wondered, what impact would this have on MakerDAO — one of the most prominent DeFi lending protocols and the issuer of stablecoin DAI?



Earlier this year, Gemini co-founder Tyler Winklevoss revealed that the company would be partnering with MakerDAO to offer 1.25% in staking rewards for any GUSD present in Maker’s Peg Stability Module (PSM) — a mechanism that ensures DAI keeps its peg to the dollar. 



So, in the case that GUSD were to depeg — DAI’s collateral base would deteriorate.



But GUSD saw no unusual volatility today, according to data from CoinGecko, nor would it be expected to be at risk from the problems of Gemini Earn’s counterparty Genesis, as Marshall Beard, the chief strategy officer at

GUSD Borrow Rates Spike From Brief Hysteria

The “bare bones” initial bankruptcy filings submitted by FTX could portend a poor outcome for customers with frozen funds, partners at law firm Kleinberg Kaplan told Blockworks. 



FTX has been slower than other bankrupt crypto companies to publicly detail the ailing company’s plans to make creditors whole. More clarity around FTX’s balance sheet and creditors is needed to properly parse the odds of the exchange returning funds, according to the attorneys.



The New York firm has been fielding calls from affected investors. FTX founder Sam Bankman-Fried stepped down as CEO on the heels of the blowup, as John J. Ray III, who years ago oversaw the liquidation of scandal-ridden energy company Enron, was named the company’s new chief executive.



Kleinberg Kaplan’s affected clients include investors with frozen FTX accounts and equity shareholders, plus crypto-focused firms with indirect exchange exposures eyeing the likelihood of an even deeper market downturn. The firm declined to identify specific clients. 



“The filing was only made on Friday, so there’s still a lot of market education and getting people up to speed as to what this all means,” partner Jared Gianatasio told Blockworks. 



Lawyers at Landis Rath & Cobb and Sullivan & Cromwell, representing FTX and affiliates, said in a bankruptcy motion on Monday that as many as one million creditors could be named in the suit.



The motion also requested relief from filing a list of the top 20 creditors for each of the 134 FTX affiliated entities that filed for Chapter 11 bankruptcy — asking instead to permit one consolidated list detailing the top 50 creditors across all FTX companies by Friday.



Along with Gianatasio, fellow partners at the law firm, Matthew Gold and Dov Kleiner, below say from a regulatory and legal perspective what has already transpired — and what entities stuck in the lurch can expect as FTX’s bankruptcy plays out.



Kleinberg Kaplan partner Jared Gianatasio |

‘Bare-bones’ FTX Bankruptcy Filings Are Likely Bad Investor Omen, Lawyers Say

Genesis’ crypto lending division paused redemptions on more than $2 billion of loans just this morning in New York. And fellow lender B2C2 is already looking to profit from the firm’s plight. 



It’s not yet clear whether Genesis’ liquidity troubles are temporary, but B2C2 has already tossed its hat into the ring to purchase Genesis’ loans at discounted prices.



Max Boonen, founder of the digital asset liquidity provider B2C2, offered to purchase Genesis’ loans shortly after news broke of the firm’s redemptions woes. 



Boonen told Blockworks he expects a potential deal would be finalized within the week, and B2C2 is looking for quality, short term loans in the ballpark of six months. There’s no word from Genesis yet on their preferred term — or if they’d even move forward on a deal — but representatives from the company have already engaged in preliminary talks with Boonen, he said. 



Boonen declined to comment on specific numbers for a potential deal, saying he has yet to see Genesis’ balance sheet.



Alameda Research — the asset manager owned by former FTX CEO Sam Bankman-Fried — was among a small circle of crypto market makers. Apart from Genesis, precious few spot market makers would remain, including Cumberland, Wintermute and B2C2.



FTX struck similar deals following the Terra and Three Arrows Capital collapses with Bankman-Fried calling troubled lender bailouts his responsibility. Boonen doesn’t see a possible Genesis loan deal in the same light.



“We're not doing this out of an altruistic impulse,” Booned said. “We think that there's actually money to be made” by acquiring discounted loans and bolstering B2C2’s reputation.



An asset sale between two of crypto’s largest market makers would grant Genesis quick liquid assets as it looks to avoid insolvency. Binance is also considering buying Genesis’ loans, Blockworks reported.



Genesis "seems to be at all costs trying to avoid [bankruptcy]," according

Genesis Debt Entices Market Maker B2C2

The total value locked (TVL) across major DeFi protocols — as well as related smart contracts — has dipped outside the bounds of typical volatility since the collapse of FTX.



Though the declines so far have not been jarring on an absolute basis, data compiled by DeFiLlama illustrates how FTX’s speedy demise has started to spread from competing centralized exchanges into decentralized markets. 



Over the past seven days, MakerDAO, one of the most prominent DeFi lending protocols, has seen its TVL dip by 3.11%, per the data. Liquid staking protocol Lido, meanwhile, booked a 2% decline over the same period — and open source liquidity protocol AAVE’s TVL was down 4.7% by noon Wednesday in New York. 



TVL represents assets staked on a smart contract, indicating funding available to a protocol to carry out market functions, including spending, borrowing and facilitating transactions.



More broadly, Ethereum had its TVL drop by 14.84% in the last seven days. Despite Polygon’s MATIC token (ERC-20) remaining steady, the blockchain’s TVL dropped 10.8%. Most significantly, however, is the Solana network — the TVL ​​of which plummeted by 54.2%.



Solana was heavily promoted by former FTX CEO Sam Bankman-Fried, and its decline accelerated after FTX’s liquidity issues surfaced last week.



The Solana Foundation said that it had roughly $1 million in cash or cash equivalents on FTX — less than 1% of liquid assets on hand. The accounting comprises roughly $3.2 million worth of shares in FTX stocks, $3.4 million of the exchange’s native FTT tokens and $134.5 million in decentralized exchange Serum’s utility token — SRM, an asset that enables holders to receive up to a 50% discount on their trading fees. 



Several DeFi projects on Solana were also affected by the FTX contagion. Most notably, lending protocol Solend saw its TVL drop by 63.21% in the past week, its current TVL at the time of writing sits at $24.87 million.It is important to

Solana’s 54% TVL Plunge Leads DeFi Decline

Gemini users temporarily lost access to the exchange Wednesday following an announcement the company was pausing its Earn product, but the outage was apparently due to an unrelated server issue. 



Gemini Earn paused withdrawals Wednesday after prime broker Genesis, halted customer redemptions and new loan originations within its lending division. 



Gemini released a statement when it paused Gemini Earn, noting that “we are aware that Genesis Global Capital, LLC (Genesis) — the lending partner of the Earn program — has paused withdrawals and will not be able to meet customer redemptions within the service-level agreement (SLA) of 5 business days.”



Source: Gemini


At the time, Gemini noted that other products and services are unaffected, stating that “Gemini is a full-reserve exchange and custodian. All customer funds held on the Gemini exchange are held 1:1 and available for withdrawal at any time.”



On Wednesday, around 11:30 am ET, users looking to access Gemini’s exchange or sign up for an account were redirected to an error message, stating that the platform is “undergoing maintenance.”



Users said they were logged out of their accounts, people familiar with the matter told Blockworks. The exchange’s official status page showed widespread outages as of 11:55 am ET, but services began to come back on line at around 12:40 pm ET.



Source: Gemini


The exchange’s official Twitter account blamed the outage on Amazon Web Services:




We experienced an Amazon Web Services EBS outage with one of our primary databases. We have restored the database and are bringing the exchange back up.— Gemini (@Gemini) November 16, 2022




Both web and mobile applications were down as of 11:55 am, but service was restored by approximately 12:35 pm ET.



A representative from Gemini referred Blockworks to the official Twitter account.



This story was updated on Nov. 16, 2022 at 12:40 am ET.




Get the day’s top crypto news and insights

Gemini Exchange Suffers Temporary Outage, Citing 'Site Maintenance'

It started with CZ. It might end with CZ.



The founder of Binance, the world’s largest cryptocurrency exchange, is reported to be interested in acquiring Genesis’ loan book.



Blockworks spoke with a source familiar with the matter who explained that Changpeng ‘CZ’ Zhao has begun reaching out for more information on the state of Genesis’ balance sheet as he considers a potential bid for Genesis’ loan assets. Genesis includes $2.8 billion in active loans in its Q3 2022 report.



Another source noted that any approach is likely to be rebuffed by Genesis’ parent company, Digital Currency Group (DCG), and that a figure north of $2 billion would need to be floated.



Last week, Zhao’s Twitter proclamations instigated the bank run that toppled FTX, which was sporting a huge target on its back following revelations that its balance sheet was risible — and likely fraudulent.



And, as FTX fell, it became clear that the degree of interconnectedness in the crypto industry that caused shockwaves in May and June persists.



Back then, it was Three Arrows Capital’s collapse, following the depegging of the algorithmic stablecoin project from Terraform Labs, that wiped out the remnants of last year’s bull market.



This time, Zhao may have spread enough contagion within the crypto industry to emerge as its undisputed leader. Binance had not returned a request for comment at the time of publication.



Multiple funds, service providers, lending and yield platforms throughout the crypto business had exposure to FTX, and as investors pulled their money from exchanges and stablecoins, those businesses began to feel the pinch of liquidity issues.



With liquidity evaporating, even the largest prime brokers were affected — among them Genesis Trading’s lending platform. Genesis is a wholly owned subsidiary of Digital Currency Group and did not respond to a request for comment.



Genesis already suffered losses in the hundreds of millions of dollars