FTX’s collapse Affected a Wide Cross section of the Crypto Ecosystem

2022-11-17, 09:37

[TL; DR]

- The alleged cause of the collapse of FTX was the financial misappropriation by its founder and CEO.

- Examples of venture Capitals (VC) that lost their funds through the collapse of FTX are SEQUOIA CAPITAL, TEMASEK and PARADIGM.

- Layer-1 blockchains such as Solana, FTM, Sushi, SRM, DODO, FORNT, MAPS, RAMP, FIDA, LINA and PERP also lost their assets.

- Apart from the direct loss of assets/funds, there was a huge fall in prices of major cryptocurrencies such as ETH and BTC.

Introduction

The FTX saga has affected the entire crypto sector in one way or the other. First, it negatively impacted FTX employees and its founder and CEOSam Bankman-Fried. Even though many analysts put the blame for the collapse of the exchange on the shoulders of its founder and CEO, the consequences are beyond his anticipation. Sadly, many stakeholders lost their investments. Further to this, its impact spread across the entire crypto space.

For example, due to the crash many investors lost confidence in cryptocurrencies and other digital assets. This is because the collapse was followed by the fall in prices of major cryptocurrencies such as bitcoin (BTC) and Ether (ETH).

Above that, several venture capitals (VC) and individual investors lost their investments. Then, there are crypto projects that hold large quantities of the FTT token whose value plunged. This article discusses some crypto organizations that were heavily affected by the implosion of FTT and the collapse of FTX.

Already, we have covered related topics concerning FTX such as the De-Trust and Non-Trust emanating from its collapse as well as the Domino from the FTX Saga.

Highlights of the FTX Saga

As background information, several developments took place within the week stretching from 6 to 13 November 2022. After the news of the financial misappropriation filtered through the crypto market, many FTX users withdrew many cryptocurrencies from the exchange.

What prompted that were key issues which include the missing $8 to $10 billion of customer funds and the purported $500 million hack.

Finally,the news that FTX had filed for a bankruptcy made the situation worse. Up to now, millions of dollars remain trapped in the system, leaving many customers devastated and the crypto market in a shock.

FTX venture capitals heavily affected

The first group of institutions that were negatively affected are the venture capitals (VC) that backed FTX. Some of these reputable venture capital firms include Tiger Global Management, Sequoia Capital, Lightspeed Venture Partners, Iconiq Capital and SoftBank.

SEQUOIA CAPITAL
This Silicon Valley VC fund, with a stake of 1.1% in FTX, invested over $200 million. As such, it is one of the largest losses by an outside investor in the history of crypto exchanges. Nevertheless, Sequoia Capital says this investment only represents less than 3% of its total worth and will not negatively affect its operations in any way.

TEMASEK
With a stake of about 1% in FTX, Temasek, a firm owned by the government of Singapore, is one of the largest outside investors in FTX, contributing $205 million. However, as of January 2022 its investment in 7 million shares was worth $302 million.Temasek’s spokesperson told Reuters that the company was still engaging FTX in relation to the invested assets.

PARADIGM
Paradigm, a company that supports web3 startups, also purchased 7 million shares, as it injected $205 million in series B and C rounds. However, in January its investment was worth $315 million. As it stands, it may lose that amount unless there is a rescue solution.

ONTARIO TEACHERS’ PENSION PLAN
The Ontario Teachers' Pension Plan, a venture that manages a retirement fund of teachers in Canada, invested $95 million, representing a 0.4% stake in FTX.

According to the Ontario Teachers Pension Plan, this investment is merely 0.05% of its total worth. Therefore, any loss arising from the collapse of FTX does not affect its operations much.

Firms with exposure to FTX

Apart from the venture capitals we discussed above, there are a host of companies that have exposure to FTX. These include Genesis, Wintermute, Multicoin Capital, Amber Group, Liquid Meta, CoinShares and Pantera Capital.

Wintermute

Wintermute, a market maker, reports that although it reduced its exposure to FTX following the news of its insolvency, it still has assets on the exchange.

Wintermute has little funds in FTX- Wintermute

However, it has admitted that it always keeps reasonable investments in crypto exchanges. Notably, its assets in FTX are within its risk tolerance level.

Genesis

Genesis, a trading firm for institutional investors, confirmed that following the news of the insolvency of FTX, it sold its collateral and incurred a loss of around $7 million. It also maintains that it has no exposure to FTX’s token FTT. However, it says that its derivatives business has over $175 million funds locked in FTX. Significantly, it has pointed out that its loss and the locked funds do not affect its viability and solvency.

Genesis’ Exposure to FTX- Genesis

Multicoin Capital and Amber Group

These two firms are affected in a similar way. They have pending withdrawals from the FTX exchange. Multicoin Capital managed to withdraw 24% of its assets before FTX stopped further withdrawals. Therefore, it has BTC, ETH and USD in its FTX account.

On the other hand, Amber Group says that 10% of its assets in FTX is still stuck there. Nevertheless, its position is that such an amount does not have any negative effect on its operation or liquidity position.

Amber Group’s assets in FTX- Ambergroup

Liquid Meta
According to its press release, Liquid Meta, a decentralized finance infrastructure company, has $4.3 million worth of assets in FTX. Before the collapse, Liquid Meta held $7.5 million worth of assets in FTX, but withdrew $3.2 million after the insolvency saga started. Nevertheless, Liquid Meta does not hold FTX’s native token FTT.

CoinShares
CoinShares, the European digital asset investment and trading group, has assets worth about $31 million in its FTX account. This follows a withdrawal of part of the holdings in the exchange when the saga started.

CoinShares asset exposure in FTX – CoinShares

Other affected firms and crypto projects

The truth is that we cannot cover all the companies and individuals that still have assets in FTX. However, this writeup has shown how the FTX collapse has affected a wide cross section of the crypto ecosystem.

It is important to point out that there are many crypto projects that have direct investment connections with FTX that were affected, most of which are layer1 chains which include Solana, FTM, Sushi, SRM, DODO, FORNT, MAPS, RAMP, FIDA, LINA and PERP.

List of affected layer-1 chains- Huobisearch

Conclusion

The alleged financial misappropriation of funds at FTX led to its insolvency. As a result, it has filed for bankruptcy, something that spells disaster to the crypto sector. Whereas many crypto firms have lost a lot of assets, the impact has spread throughout the market as several cryptocurrencies lost their values.

Author: Mashell C., Gate.io Researcher
This article represents only the views of the researcher and does not constitute any investment suggestions.
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