Gate.io denies liquidity problems after Multichain CEO goes missing

May 31, 2023 Coin Telegraph

Some Twitter users posted transactions showing large inflows of MULTI and FTM to Gate.io, leading them to perceive a connection between the two organizations.

Centralized crypto exchange Gate.io denied rumors of illiquidity on May 31, stating that “there are no issues with our operations or withdrawals as rumored.” The statement comes after numerous Twitter channels had alleged that the exchange was experiencing insolvency due to an alleged connection between it and the cross-chain router protocol Multichain (MULTI).

The Gate.io team said the company's "operations are running healthy" and that it is focused on establishing an affiliated trading platform in Hong Kong called Gate.HK.

Rumors about Gate.io's insolvency erupted after a series of events relating to Multichain. On May 24, blockchain analytics firm Arkham Intelligence posted data showing large inflows of MULTI to Gate.io, which Arkham said was related to rumors of the protocol's team "allegedly being arrested in Shanghai.”

Following rumours of the @MultichainOrg team being allegedly arrested in Shanghai, some large holders of $MULTI have began moving funds.

Team wallets moving ~$3M of $MULTI to https://t.co/5ecSG3rKek have also spooked some investors, with $MULTI price falling 26.5% in 24h. pic.twitter.com/p2sQpu9Ass
— Arkham (@ArkhamIntel) May 24, 2023

On May 25, Binance suspended deposits for several bridged tokens that relied on the Multichain protocol, including bridged versions of Polkastarter (POLS), Alpaca Finance (ALPACA), and Fantom (FTM). Binance said these tokens were experiencing delayed transactions and temporarily paused deposits while seeking clarity from Multichain.

On May 31, Multichain posted a statement that its CEO was missing, adding that some of the protocol's routers no longer work because only the CEO had access to the relevant servers. The same day, some Twitter users began posting images of transactions that were allegedly large deposits of FTM from Multichain team members to Gate.io.

[] JUST IN:

There are rumors that the https://t.co/5YQLO0SsVt team has been arrested. The Multichain team has sent https://t.co/5YQLO0SsVt $10M USD in $FTM. Is this an ongoing larger-scale issue? ‍☠️ https://t.co/s29KYytChM pic.twitter.com/1XXbwGMoPs
— CoinSumption (@CoinSumption) May 31, 2023

Blockchain data confirms that more than $10 million of FTM was transferred from an unknown user to Gate.io on May 25-26. Cointelegraph was not able to determine the identity of the account owner performing the transaction.

After seeing multiple deposits of MULTI and Fantom to Gate.io, some Twitter users suspected that the exchange was exposed to fallout from Multichain.

The team at Gate.io has denied these rumors, stating that the exchange is processing all withdrawals and operating normally.

Fed, central banks enhance ‘swap lines’ to combat banking crisis

March 20, 2023 Coin Telegraph

Bank Funding Program

Currency swap lines have been used during times of crisis in the past, such as the 2008 global financial crisis and the 2020 coronavirus pandemic.

The United States Federal Reserve has announced a coordinated effort with five other central banks aimed at keeping the U.S. dollar flowing amid a series of banking blowups in the U.S. and in Europe.

The March 19 announcement from the Fed comes only a few hours after Swiss-based bank Credit Suisse was bought out by UBS for $3.25 billion as part of an emergency plan led by Swiss authorities to preserve the country’s financial stability.

According to the Federal Reserve Board, a plan to shore up liquidity conditions will be carried out through “swap lines” — an agreement between two central banks to exchange currencies.

Swap lines previously served as an emergency-like action for the Federal Reserve in the 2007-2008 global financial crisis and the 2020 response to the COVID-19 pandemic. Federal Reserve-initiated swap lines are designed to improve liquidity in dollar funding markets during tough economic conditions.

Coordinated central bank action to enhance the provision of U.S. dollar liquidity: https://t.co/Qs4cYY8BFO
— Federal Reserve (@federalreserve) March 19, 2023

“To improve the swap lines’ effectiveness in providing U.S. dollar funding, the central banks currently offering U.S. dollar operations have agreed to increase the frequency of seven-day maturity operations from weekly to daily,” the Fed said in a statement.

The swap line network will include the Bank of Canada, Bank of England, Bank of Japan, European Central Bank and the Swiss National Bank. It will start on March 20 and continue at least until April 30.

The move also comes amid a negative outlook for the U.S. banking system, with Silvergate Bank and Silicon Valley Bank collapsing and the New York District of Financial Services taking over Signature Bank.

The Federal Reserve, however, made no direct reference to the recent banking crisis in its statement. Instead, it explained that they implemented the swap line agreement to strengthen the supply of credit to households and businesses:

“The network of swap lines among these central banks is a set of available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses.”

The latest announcement from the Fed has sparked a debate about whether the arrangement constitutes quantitative easing.

U.S. economist Danielle DiMartino Booth argued that the arrangements are unrelated to quantitative easing or inflation and that it does not “loosen” financial conditions:

MISINFORMATION PREVENTION MOMENT

Swap lines do NOT constitute loosening financial conditions.

One more example: You're a doctor. A patient is having cardiac arrest. You can SEE the paddles to revive him/her but you can't REACH the paddles. These swap lines HAND you the paddles. https://t.co/RXOPiBmsif
— Danielle DiMartino Booth (@DiMartinoBooth) March 19, 2023

The Federal Reserve has been working to prevent an escalation of the banking crisis.

Last week, the Federal Reserve set up a $25 billion funding program to ensure banks have sufficient liquidity to cover customer needs amid tough market conditions.

A recent analysis by several economists on the SVB collapse found that up to 186 U.S. banks are at risk of insolvency:

“Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk.”

Cointelegraph reached out to the Federal Reserve for comment but did not receive an immediate response.

Bank Board Member and Dodd-Frank Co-Sponsor Barney Frank Suspects ‘Anti-Crypto’ Message Behind Signature Bank Failure

March 13, 2023 Bitcoin.com

Bank of England Shuts Down Silicon Valley Bank’s UK Branch After US Regulators Close Parent Company

March 11, 2023 Bitcoin.com

NYDFS Releases Guidance on Importance of Segregation and Separate Accounting for Customer Funds in Crypto Industry

January 23, 2023 Bitcoin.com

Despite endless media appearances, SBF unlikely to testify on 13th

December 5, 2022 Coin Telegraph

accounting

One observer suggested Bankman-Fried may be reluctant to discuss FTX due to the legal implication of lying under oath to the U.S. Congress.

Former CEO of FTX, Sam Bankman-Fried, has signaled he's unwilling to testify before the United States Congress until he’s “finished learning and reviewing what happened.”

Bankman-Fried was responding to a Dec. 2 tweet from U.S. Representative Maxine Waters inviting him to testify in a scheduled U.S. House Committee on Financial Services hearing on Dec. 13 to discuss "what happened" at FTX.

In a Dec. 4 response on Twitter, the former FTX CEO said he feels it is his “duty to appear before the committee and explain,” but only once he's “finished learning and reviewing what happened," adding he wasn't “sure” whether it would happen by the 13th.

Rep. Waters, and the House Committee on Financial Services:

Once I have finished learning and reviewing what happened, I would feel like it was my duty to appear before the committee and explain.

I'm not sure that will happen by the 13th. But when it does, I will testify. https://t.co/c0P8yKlyQt
— SBF (@SBF_FTX) December 4, 2022

Some in the community pointed out the response appears out of line with his recent actions, including taking part in several media interviews and posting endless tweets about what led to the fall of FTX in November.

Blockchain Association Head of Policy and U.S. Attorney Jake Chervinsky suggested to his 120,500 Twitter followers that Bankman-Fried was reluctant to take part in the Dec. 13 hearing because '"lying to Congress under oath is less appealing."

Translation: he doesn't mind lying to Andrew Ross Sorkin or George Stephanopoulos, but lying to Congress under oath is less appealing. https://t.co/DZTyzMwn9s
— Jake Chervinsky (@jchervinsky) December 4, 2022

On Nov. 30, Bankman-Fried made his first live public appearance since the collapse of FTX during the New York Times' DealBook Summit where he was questioned over the circumstances behind the crypto exchange's demise. A day later, he appeared in a Good Morning America interview, and also in a Twitter space hosted by IBC Group founder and CEO Mario Nawfal.

Most recently, Bankman-Fried was questioned by Coffeezilla in a Twitter Spaces interview on Dec. 3, which saw him leaving the interview around 20 minutes in.

Meanwhile, Coinbase CEO Brian Armstrong has called out Bankman-Fried's purported narrative in recent days, stating on Dec. 3 that “even the most gullible person” should not believe Bankman-Fried's claim that FTX's transfer of billions of dollars of customer funds to its trading firm Alameda Research came from the result of an unintentional “accounting error.”

I don't care how messy your accounting is (or how rich you are) - you're definitely going to notice if you find an extra $8B to spend.

Even the most gullible person should not believe Sam's claim that this was an accounting error.
— Brian Armstrong (@brian_armstrong) December 3, 2022

As for SBF’s recent media antics, Tesla and Twitter CEO Elon Musk “agreed” with a member of the crypto community SBF doesn’t deserve any more media attention until his court date, with Musk adding he needs an “adult timeout.”

Agreed. Let’s just give him an adult timeout in the big house & move on.
— Elon Musk (@elonmusk) December 3, 2022

Crypto trading firm Auros Global misses DeFi payment due to FTX contagion

December 1, 2022 Coin Telegraph

Auros

Auros is an algorithmic trading and market-making firm that provides liquidity for exchanges and token projects.

Crypto trading firm Auros Global appears to be suffering from FTX contagion after missing a principal repayment on a 2,400 Wrapped Ether (wETH) decentralized finance (DeFi) loan.

Institutional credit underwriter M11 Credit, which manages liquidity pools on Maple Finance, told its followers in a Nov. 30 Twitter thread that the Auros had missed a principal payment on the 2,400 wETH loan, which is worth in total around $3 million.

M11 Credit suggests that it is always in close communication with its borrowers, particularly after events in the last month, and said Auros is experiencing a “short-term liquidity issue as a result of the FTX insolvency.”

We remain committed to providing transparent updates whenever possible, and are working with Auros to provide a joint statement that provides further information to lenders.

If you have any questions, feel free to reach out at m11credit@maven11.com

5/5
— M11 Credit (@M11Credit) November 30, 2022

While Auros, an algorithmic trading and market-making firm, has not yet addressed the statement by M11 Credit, the thread has been retweeted by Maple Finance itself.

M11 Credit has also stressed that the missed payment does not mean the loan is in default. Instead, the missed payment has triggered a “5-day grace period as per the smart contracts.”

This implies that Auros has until Dec. 5 to make the late payment before it will be declared as being in default.

According to an official Maple Finance Youtube video, if a default occurs, it could result in the borrower’s collateral being liquidated and/or staked maple tokens and USDC on the platform being used to cover any shortfalls to lenders. Enforcement action could also be pursued through New York courts.

M11 credit claims that it is “working with Auros to provide a joint statement that provides further information to lenders.”

Cointelegraph has reached out to both M11 Credit and Auros for comment, but did not receive a reply before time of publication.

Crypto exchange FTX announced on Nov. 11 that it would file for Bankruptcy after having suffered a liquidity crisis and being unable to honor withdrawals. The resulting contagion has spread to numerous other firms. BlockFi declared bankruptcy on November 28.

Galois Capital and New Huo Technology have lost millions of dollars from FTX’s collapse, and Nestcoin has had to lay off workers because of its exposure to the failed exchange.

FTX resumes paying staff and contractors after weeks in limbo

November 29, 2022 Coin Telegraph

Benefits

The payments will exclude former FTX CEO Sam Bankman-Fried, and certain former execs including Gary Wang, Nishad Singh, and Alameda's Caroline Ellison.

Bankrupt crypto exchange FTX has announced it will be “resuming ordinary” cash payments, salaries and benefits to its remaining employees around the world.

The announcement came from new FTX CEO John Ray III on Nov. 28, as the insolvency professional looks to help FTX and its approximated 101 affiliated companies (FTX Debtors) navigate their way through the U.S. Bankruptcy Court in Delaware.

"With the Court's approval of our First Day motions and the work being done on global cash management, I am pleased that the FTX group is resuming ordinary course cash payments of salaries and benefits to our remaining employees around the world.”

“FTX also is making cash payments to selected non-U.S. vendors and service providers where necessary to preserve business operations, subject to the limits approved by the Bankruptcy Court,” he added.

The announcement comes around 10 days after FTX debtors filed a motion to pay prepetition compensation and benefits to employees and contractors in the Delaware bankruptcy court on Nov. 19, which excludes payments to former FTX CEO and founder Sam Bankman-Fried, along with Gary Wang, Nishad Singh, and Caroline Ellison.

Sharing our press release just issued: FTX Resumes Ordinary Course Payments of Employees and Certain Foreign Contractors
https://t.co/8CDnlsvu2j
— FTX (@FTX_Official) November 28, 2022

The latest announcement will mean that the remaining employees and contractors of FTX will be receiving nearly three weeks' worth of pay, which was presumably halted after the company filed for bankruptcy on Nov. 11.

Ray acknowledged the financial hardship imposed on FTX employees and foreign contractors with the payment delay and thanked them for their support.

“We recognize the hardship imposed by the temporary interruption in these payments and thank all of our valuable employees and partners for their support."

The relief will include cash payments owed to workers at FTX Trading and 101 other affiliated companies since the Nov. 11 bankruptcy filing, in addition to the many vendors and service providers who still need to be paid out by FTX.

However, the resumption of payments won’t apply to all FTX subsidiaries and related companies.

In The Bahamas, where the crypto exchange is headquartered, only employees and contractors of the FTX Debtors will receive relief, but not those who worked for FTX Digital Markets, which is subject to a separate liquidation proceeding in The Bahamas.

It also won't apply to Australia-based employees and contractors for FTX Australia and its subsidiary FTX Express, which are also subject to separate proceedings in Australia.

On Nov. 22, FTX Trading announced it had been granted interim and final approvals for all of the "First Day" motions for matters related to its bankruptcy filing on Nov. 11.

At the time, Ray said he expected the motions to fast-track FTX Debtor’s efforts to reimburse other stakeholders affected by the trading platform’s collapse, such as FTX users and creditors, with the new CEO suggesting that a potential buyout of FTX’s assets could benefit stakeholders sooner rather than later.

However, some insolvency lawyers warn that the process could take years, or even decades, given the complexity and scope of FTX’s collapse.

Insolvency lawyer Stephen Earel, partner at Co Cordis in Australia recently told Cointelegraph that it’ll take the courts several years, if not decades, to determine who owned what crypto assets before coming up with a plan to redistribute those funds.

FTX Trading alone owes its top 50 creditors $3.1 billion, according to a document submitted as part of its Chapter 11 bankruptcy proceedings.

CoinList addresses ‘FUD’ on withdrawals, cites technical issues for delays

November 25, 2022 Coin Telegraph

Bank Run

CoinList blamed “custodian issues” with one suffering an outage affecting “many tokens” on the platform as the reason for reported withdrawal problems.

Cryptocurrency exchange and Initial Coin Offering (ICO) platform CoinList took to Twitter to address “FUD” after a blogger tweeted that users reported being unable to withdraw funds for over a week, sparking fears the company was having liquidity issues or w insolvent.

“There is a lot of FUD going around that we would like to address head-on,” CoinList said in a Nov. 24 Twitter thread that stated the exchange is “not insolvent, illiquid, or near bankruptcy.” It said however that its deposits and withdrawals are affected by “technical issues.”

2/ We are upgrading our internal ledger systems and are migrating wallet addresses involving multiple custodians.

This is one of many efforts we are undertaking to offer our customers around the world better products and services while maintaining compliance.
— CoinList (@CoinList) November 24, 2022

Crypto-focused blogger Colin Wu had earlier tweeted to his 245,000 followers that “some community members” using CoinList have been unable to withdraw for over a week due to maintenance.

CoinList has a $35 million creditor claim with bankrupt crypto hedge fund Three Arrows Capital which Wu said in his tweet was a “loss,” that likely triggered concerns the company was insolvent or illiquid.

Looking to dampen fears that have seen bank runs on other platforms, CoinList explained that an upgrade to its internal systems and a migration of wallet addresses that involves “multiple custodians” is being undertaken.

The company cited unexplained “custodian issues” as the reason a selection of cryptocurrencies “are taking longer than anticipated to migrate” with one of its unnamed custodian partners suffering from an “outage [...] unrelated to the migration” on Nov. 23 which impacted tokens on the platform.

Its status page shows “degraded performance” for withdrawals, with four cryptocurrencies unavailable for withdrawal since Nov. 15, and one experiencing delayed deposits since Nov. 16.

“Once again, this is purely a technical issue, not a liquidity crunch,” CoinList said. It claimed to hold “all user assets dollar for dollar” and noted it plans to publish its proof of reserves.

Cointelegraph has contacted CoinList for more information but did not immediately receive a response.

CoinList claimed on Nov. 14 that it had no exposure to the now-bankrupt FTX exchange, but users are increasingly nervous about centralized platforms and have rushed to ensure safe custody of their assets as evidenced by the surge in sales reported in mid-November by hardware wallet providers Trezor and Ledger.

Around the same time, outflows of Bitcoin (BTC) and stablecoins from exchanges hit historic highs and a corresponding uptick in activity was seen on decentralized exchanges.

Getting funds out of FTX could take years or even decades: Lawyers

November 21, 2022 Coin Telegraph

Bankruptcy

The complexities that come with digital assets, cross-border insolvency and competing jurisdictions could add years to the timeline.

While investors are eager to know when they will be able to get their funds back from the now-bankrupt crypto exchange FTX, insolvency lawyers warn it could take “decades.”

The crypto exchange, along with 130 affiliates filed for Chapter 11 bankruptcy protection in the United States on Nov. 11.

Insolvency lawyer Stephen Earel, partner at Co Cordis in Australia said it will be an “enormous exercise” in the liquidation process to “realize” the crypto assets then work out how to distribute the funds, with the process potentially taking years, if not “decades.”

This is due to the complexities that come with cross-border insolvency issues and competing jurisdictions, he said.

Earel said unfortunately FTX users are in the queue with everyone else including other creditors, investors and venture capital funders, warning those that have made “crypto to crypto trades” may not see a distribution “for years.”

Simon Dixon, founder of global investment platform BnkToTheFuture who has been an active voice in the Celsius bankruptcy proceedings noted that anyone who holds funds on FTX will become creditors, with a creditors committee to be established to represent their interests.

He stated that the remaining assets will eventually be available to creditors depending on what remains after bankruptcy costs.

These costs could be high given the time required to recover funds, according to Binance Australia CEO, noting that this means more legal and administrative fees that eat into customers' return.

Meanwhile, Digital Assets Lawyer Irina Heaver, Partner at Keystone Law in UAE told Cointelegraph that there are users in the Middle-East also feeling the pain from the FTX collapse, as the region was the third largest user base of FTX.

Heaver explained that as FTX already received a license and regulatory supervision from the newly formed Dubai’s Virtual Assets Authority regulator (VARA), it presents major complications for the regulators as they already have a “huge regulatory failure” on their hands.

Heaver said only “when and if” FTX moves into Chapter 11 bankruptcy procedures, creditors’ rights will be overseen by the legal system, with courts and bankruptcy administrators involved.

Heaver’s advises people with substantial losses due to the FTX collapse to get legal advice and get together with “other injured parties.”

The recent FTX collapse has had significant consequences for investors across the world. It was recently revealed that the bankrupt cryptocurrency exchange may have “more than 1 million creditors.” According to a Reuters article published on Nov. 20 the bankrupt cryptocurrency exchange owes its biggest 50 creditors “nearly $3.1 billion.”

Insolvency

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