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BlockFi Halt, SEC Probe, Asset Freeze Deepen Crisis

(Bloomberg) — Sam Bankman-Fried is being investigated by the US Securities and Exchange Commission for potential violations of securities rules. Officials in the Bahamas, where his FTX.com is based, froze the assets of FTX Digital Markets while also appointing a liquidator.

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Troubled crypto lender BlockFi said it can no longer operate business as usual, citing “a lack of clarity” in relation to FTX. Earlier, FTX.com founder Bankman-Fried said he’s closing Alameda Research, the trading house at the center of speculation about whether his crypto exchange mishandled customer funds.

US authorities are now investigating FTX’s dealings and Bankman-Fried has warned of bankruptcy if he can’t secure capital to cover a shortfall of as much as $8 billion. Trading may be halted in a few days on FTX US, which is a separate legal entity from FTX.com.

Key stories and developments:

  • FTX’s Sam Bankman-Fried Faces SEC Probe as His Empire Crumbles

  • In Sam Bankman-Fried, Venture Capitalists Saw a Model Founder

  • FTX Retail Investors Fear Wipeout, Shaking Their Faith in Crypto

For crypto market prices: CRYP; for top crypto news: TOP CRYPTO

(All times are US Eastern Standard)

Embattled Crypto Lender BlockFi Pauses Withdrawals (8:45 p.m.)

Troubled crypto lender BlockFi said in a statement on Twitter that the company can no longer operate business as usual, citing “a lack of clarity” on the status of FTX.com, FTX and Alameda Research.

The company said it is limiting platform activity and pausing client withdrawals. BlockFi asked customers not to deposit funds at this time.

FTX US Legal Chief Tells Working to Preserve Platform (8 p.m.)

FTX US general counsel Ryne Miller said in an internal memo he’s working with advisers to preserve “whatever is preservable” of the crypto exchange.

“We should not be optimistic for an outcome that is positive,” Miller wrote. “I’m working with outside advisers to be best prepared to navigate FTX entities to next steps.”

Sponsor of Key US Crypto Bill That Empowers CFTC Is to Review Legislation (7 p.m.)

John Boozman, a lead co-sponsor on legislation that would give the Commodity Futures Trading Commission more power to oversee digital assets, said the bill’s backers are “taking a top-down look to ensure it establishes the necessary safeguards the digital commodities market desperately needs.”

“Chairwoman Stabenow and I remain committed to advancing a final version of the DCCPA that creates a regulatory framework that allows for international cooperation and gives consumers greater confidence that their investments are safe,” he added.

He was referring to Debbie Stabenow, a leader of the Senate Agriculture Committee along with Boozman. DCCPA refers to the bill, the Digital Commodities Consumer Protection Act of 2022.

Broker Genesis’ Derivatives Unit Has About $175 Million on FTX Platform (6:20 p.m.)

Crypto broker Genesis said its derivatives business has about $175 million “in locked funds” in the company’s FTX trading account.

“This does not impact our market-making activities,” the firm said in a Twitter thread, adding “our operating capital and net positions in FTX are not material to our business.”

The fallout from the collapse of the FTX empire has left investors on edge about the risk of contagion.

Bahamas Seeks to Place FTX.com Into Receivership (5:50 p.m.)

The Bahamas Securities Commission has frozen the assets of FTX Digital Markets “and related parties.” An asset freeze was “the prudent course of action” to preserve assets and stabilize the company, the agency said Thursday in a statement.

An attorney has been appointed provisional liquidator as the Bahamas securities regulator seeks to place the beleaguered crypto exchange into receivership.

“The commission is aware of public statements suggesting that clients’ assets were mishandled, mismanaged and/or transferred to Alameda Research. Based on the commission’s information, any such actions would have been contrary to normal governance, without client consent and potentially unlawful,” it said.

Ontario Teachers Says Investment in FTX Entities Was $95 million (3:40 p.m.)

The investments represent less than 0.05% of the assets of the Ontario Teachers’ Pension Plan, according to a statement.

Junior Employees Try to Sell Assets With Bankman-Fried Away (2:20 p.m.)

Employees of the US-based crypto exchange are in talks about selling parts of the business, including some assets that Bankman-Fried amassed on a sweeping acquisition tear across the industry, according to two people with direct knowledge of the matter, who requested anonymity because the talks were private.

FTX Implosion Rattles Retail Investors (2:15 p.m.)

The demise of Bankman-Fried’s FTX.com is the worst-case scenario for retail traders who poured their life savings into crypto.

White House Is Monitoring Crypto Markets (1:52 p.m.)

The Biden administration is aware of recent developments surrounding cryptocurrencies and will “continue to monitor the situation,” White House Press Secretary Karine Jean-Pierre told reporters on Thursday.

Jean-Pierre said the White House believes cryptocurrency markets require “proper oversight,” but declined to comment on specific steps regulators can or should take.

“The most recent news further underscores these concerns and highlights why prudent regulation of cryptocurrencies is indeed needed,” Jean-Pierre said at her daily press briefing.

FTX US Says Trading May Be Halted in a Few Days (1:31 p.m.)

FTX US, the American entity of Bankman-Fried’s crypto exchange, said trading may be halted on it in a few days. FTX.com and FTX US are separate entities with separate management personnel, tech infrastructure, and licensing, but have similar owners and investors, representatives for the firms have said in the past.

FTX Reaches Pact With Tron to Let Users Withdraw Some Tokens (1:10 p.m.)

FTX said it reached an agreement with Justin Sun’s Tron that will allow users to withdraw some tokens from the troubled exchange.

Japan Cracks Down on Local FTX Unit; Freezes Exchange Activity (12:52 p.m.)

Japan’s government has ordered FTX.com’s local subsidiary to suspend some of its operations, saying it has no structure in place to properly offer cryptocurrency exchange services to users.

Crypto Entrepreneur Sun’s Token Jumps After Offer of Help to FTX (12:37 p.m.)

Tron founder Justin Sun said on Twitter early Thursday that his firm is working with FTX at address its liquidity crunch, without providing specific details. The price of the native token used on the Tron blockchain surged on the embattled platform.

FTX Resumes Withdrawals After Two-Day Pause (12:28 p.m.)

FTX.com has resumed withdrawals on the platform, according to blockchain data, after halting such activities on Tuesday. Nansen and Kaiko, another blockchain data firm, both confirmed the resumed activities. FTX processed $8 million worth of withdrawals in an hour on Thursday, Nansen said.

Bankman-Fried Shuts Down Trading Firm (11:40 a.m.)

Bankman-Fried is shutting down Alameda Research, the trading house at the heart of his digital-asset empire, as he seeks last-ditch financing to save his troubled crypto exchange FTX.

–With assistance from Yueqi Yang, Muyao Shen, Jordan Fabian, Takashi Nakamichi, Nao Sano, Philip Lagerkranser and Derek Decloet.

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