After The Collapse Of FTX, Cryptocurrency Exchanges Are Racing To Calm Their Clients' Nerves

After The Collapse Of FTX, Cryptocurrency Exchanges Are Racing To Calm Their Clients' Nerves

As the crisis at Bankman-empire Fried's reverberates, Binance and other trading platforms vow to publish proof of reserves.

Before filing for bankruptcy on Friday, FTX had less than $1 billion in easily sellable assets and $9 billion in liabilities. Leon Neal/Getty Images

As the collapse of Sam Bankman-FTX Fried's crypto exchange reverberates throughout the industry, digital asset exchanges are scrambling to reassure clients that their funds are secure.

Binance, the world's largest crypto trading platform, as well as smaller competitors such as Crypto.com, OKX, and Deribit, have vowed to publish proof that they have sufficient reserves to cover their customer liabilities. Coinbase, a US-listed exchange, has also attempted to distance itself from the crisis engulfing FTX, the digital asset venue founded by Bankman-Fried.

The sudden demise of FTX and Bankman-trading Fried's firm Alameda Research, both once regarded as industry pillars, has severely eroded confidence in the digital asset market. The Financial Times reported on Saturday that FTX had less than $1 billion in easily sellable assets against $9 billion in liabilities when it declared bankruptcy on Friday.

According to data provider CoinMarketCap, Tether's eponymous US dollar stablecoin - the largest in the industry - has seen approximately $3 billion in redemptions in the last four days, highlighting how traders are withdrawing funds from the digital asset market.

Meanwhile, ether, the second-largest cryptocurrency, has dropped 7% in the last two weeks to 22.9 million on major crypto exchanges, including FTX, according to data from blockchain analytics platform Nansen. At current exchange rates, that amounts to a $2 billion drop, indicating that some investors are withdrawing their coins from centralized venues in favor of storing them on their own systems.

Binance's CEO warned last week of the possibility of a "cascading" crisis in the crypto sector in the aftermath of FTX's failure, comparing it to the 2008 global financial crisis. After striking deals with big-name investors, FTX had a $32 billion valuation and was raising its public profile through a series of sports sponsorships, including naming rights to the Miami Heat arena.

The FT obtained an email from Coinbase on Friday that described "how Coinbase's business is different and ultimately better protects" customer accounts and assets. The email mentioned the company's financial position and stated that the exchange, led by CEO Brian Armstrong, holds customer assets one-to-one. Coinbase declined to comment beyond a blog post published last week.

Trading venues have also attempted to distance themselves from what remains of FTX after the company announced that it was investigating unusual transactions. According to Elliptic, a blockchain forensics firm, there are indications that $477 million in crypto assets were taken from FTX late Friday night.

After speaking with law enforcement officers, Kraken, a cryptocurrency trading platform, froze a handful of accounts owned by FTX Group, its sister trading company Alameda Research, and their executives on Sunday. "Those accounts have been frozen to protect their creditors," the company said on Twitter, adding that other Kraken customers had not been affected.

In addition, the Bahamas' market regulator stated

that it is "FTX Digital Markets Ltd has not been directed, authorized, or suggested.

withdrawals for Bahamian clients are prioritized ". FTX, which is headquartered in

Following the suspension of customer withdrawals last week, the island nation stated that it

would permit the redemption of Bahamas funds "according to Bahamian HQ regulations

as well as regulators ".

"In light of the collapse of FTX globally and the provisional liquidation of FTX Digital Markets Ltd, a team of financial investigators from the Financial Crimes Investigation Branch is working closely with the Bahamas Securities Commission to investigate if any criminal misconduct occurred," the Royal Bahamas Police said in a statement on Sunday.

Meanwhile, Binance has halted deposits of FTT, a token issued by FTX, in order to protect users. "We've noticed a suspicious movement of a large amount of $FTT by the token's contract deployers," the exchange said on Sunday, offering advice on how to protect their digital assets.

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