Concerns are rising that the “coin edition Lehman incident” could explode if the bankruptcy filing of the cryptocurrency exchange FTX spreads to a series of liquidity crises for other coin companies. Some even predict that individual investors who entrusted money to FTX will not be able to save a penny.
According to foreign media reports such as <Coindisk US> and <Bloomberg> on the 12th, FTX, a cryptocurrency exchange that is in a liquidity crisis, applied for bankruptcy protection under Article 11 of the Bankruptcy Act (Chapter 11) in the state court of Delaware the day before. Chapter 11 of the U.S. Bankruptcy Act is a system that seeks rehabilitation by conducting restructuring procedures under the supervision of the bankruptcy court, similar to the court management in Korea.
More than 130 affiliates, including Alameda Research, which pulled the trigger for the fall of FTX, were included in the bankruptcy protection application. According to the bankruptcy filing, FTX debt amounts to up to $50 billion (about 66 trillion won). Bloomberg reported that this is the largest ever cryptocurrency company and the largest bankruptcy filing this year. There are more than 100,000 creditors. FTX reported to the court that its assets are the same as the size of its debt, but the industry expressed reservations that it would only know if it conducted an accurate due diligence.
Financial transactions with FTX range from coin companies to pension funds, venture capital, and individual investors. First of all, coin companies that have been doing money transactions with FTX were directly hit. Cryptocurrency company Genesis Trading said $175 million (230.7 billion won) was tied to its FTX account. Block Pie, a coin lender that received funding from FTX, stopped withdrawing funds from customers due to a liquidity crisis. Project startups such as Helium, Aptos Labs, and Near Protocol, which received investment from FTX’s affiliated investment company “FTX Venture,” are also expected to suffer financial damage.
As many financial institutions have invested in FTX beyond the coin industry, Wall Street is also diagnosed as reminiscent of Lehman Brothers’ bankruptcy application, which triggered the 2008 financial crisis. Ontario Teachers’ Pension in Canada, Singapore’s sovereign wealth fund Temasek, Japan’s Softbank’s Vision Fund, and hedge fund Tiger Global, which participated in raising FTX investment in January, are tens of billions of won eachThere is a high possibility that hundreds of billions of won will be taken away. Hedge fund Sequoia Capital has already zeroed out the book value of FTX investment worth $214 million (282.1 billion won) and dealt with the full loss.