Cryptocurrency roundup for November 10: Binance walks out of FTX deal, US regulators initiate probe against FTX, and more

The world's largest crypto exchange Binance announced it will cancel the deal to acquire rival exchange FTX. Following a study of the organization's structure and financial records, Binance withdrew. “Our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” Binance said. We have decided not to pursue the potential acquisition of [FTX] as a consequence of our corporate due diligence and the most recent press reports involving improper handling of customer cash and purported investigations by U.S. agencies, according to Binance. Details here.

US financial regulators are looking into whether troubled cryptocurrency exchange FTX appropriately handled customer cash and its connections to other units of Sam Bankman-crypto Fried's empire, in a move that could derange its acquisition talks with rival Binance. The Securities and Exchange Commission and the Commodity Futures Trading Commission are both looking into the liquidity crisis at the trading platform that prompted a rival exchange, Binance Holdings Ltd., to intend to acquire its non-US operations, Bloomberg reported. The platform's connections to FTX.com's US counterpart FTX US and Bankman-trading Fried's firm Alameda Research are also being investigated by regulators". Read here.

After what appears to be its collapse, the US Department of Justice is investigating the cryptocurrency exchange FTX. State and federal officials were previously looking at FTX, but since it was discovered that the company has a liquidity problem, their interest in the crypto exchange has grown multifold. State officials are already probing FTX to see if either FTX or FTX let US clients trade derivatives products without registering with federal regulators. The U.S. Securities and Exchange Commission and Commodity Futures Trading Commission are also looking into whether FTX handled its clients' money properly. Read here.

The Chinese government is a "crypto whale," having forfeited digital currencies worth $6 billion to the government coffers in 2019, according to Ki Young Ju, the founder, and CEO of blockchain data analytics company Cyptoquant. Young Ju has said that Chinese officials seized 833,000 Ethereum 194,000 Bitcoin and other cryptocurrencies from the PlusToken fraud in 2019. In comparison, publicly listed companies like MicroStrategy, Galaxy Digital Holdings, Tesla, Coinbase Inc, and Block, Inc hold 130000, 40000, 10725, 9000, and 8027 Bitcoin, respectively. Full story here.

Following the debacle of FTT, the native token of cryptocurrency exchange FTX, after Binance CEO Changpeng Zhao declared dumping all the tokens in his company's reserve, U.S. Senator Cynthia Lummis has called for clear regulations for cryptocurrencies.The most recent incidents involving FTX and Binance provide the best illustration yet of the necessity for clear regulations governing digital asset exchanges in the US, according to Senator Lummis. The speaker further said market manipulation, loan activity, and whether customer monies and assets were properly safeguarded are just a few of the numerous topics my colleagues and I need to consider in the coming days.  Full story here.

After a court tentatively dismissed the case, reality TV star Kim Kardashian appears to be winning an investor lawsuit against her and other celebrities over their sponsorship of the cryptocurrency EthereumMax (EMAX). In a January complaint, Kardashian was named along with former boxer Floyd Mayweather Jr. and NBA Hall of Famer Paul Pierce as those who hyped EMAX tokens to get investors to pay more for them. In order to settle accusations connected to her promotion of EMAX, in which she had not disclosed receiving a $250,000 payment, Kardashian paid the SEC $1.26 million last month. Details here.

At least nine cryptocurrency exchanges have come forward to provide proof of fund reserves as the market remains rattled amid insolvency fears after the collapse of FTT, the native token of FTX. Nine exchanges, including Binance, Gate.io, KuCoin, Poloniex, Bitget, Huobi, OKX, Deribit, and Bybit — have independently announced that they will publish their Merkle tree reserve certificates in order to promote transparency over the previous 24 hours. Binance CEO Changpeng Zhao on Tuesday urged exchanges to “do Merkle-tree proof-of-reserves,” as he announced that his crypto exchange will start the process soon to ensure transparency among investors. More here.

Most of the legal and compliance staff of cryptocurrency exchange FTX have resigned from the company, even as the embattled firm led by its CEO Sam Bankman-Fried remains surrounded by a wave of controversies. Their departure would probably make it more difficult to save the cryptocurrency exchange, whose sale to rival Binance was approved in principle yesterday. According to reports, Binance is "extremely unlikely" to move forward with its proposed takeover of faltering rival FTX after less than a day of evaluating the business. Full story here.

In a startling revelation amid the fiasco surrounding FTX, Galaxy Digital Holdings has revealed that it has a $76.8 million exposure to the beleaguered cryptocurrency exchange, out of which, $47.5 million is currently being withdrawn. In the company’s quarterly earnings call, Galaxy Digital reported that its exposure to FTX is made up of cash and digital assets. Galaxy Digital claims to have $1.5 billion in liquidity, including $1.0 billion in cash and an additional $235.8 million in stablecoins, to avert losses despite its exposure to the Sam Bankman-Fried-led company. Details here. 

Two websites associated with the Bahamas-based cryptocurrency exchange FTX have gone silent. Since yesterday, both the websites for FTX Ventures, the venture capital division of FTX, and Alameda Research, the quantitative trading company established by FTX CEO Sam Bankman-Fried, have been taken down or made private. Caroline Ellison, the CEO of Alameda Research, has been silent on the FTX crisis and has declined to comment on reports that revealed that a sizable portion of Alameda's assets were made up of FTX's native FTT coin, the price of which plunged by 80% yesterday. Read more. 

Binance CEO Changpeng Zhao on Wednesday asserted he did not “master plan” the deal with FTX and that the Sam Bankman-Fried-led cryptocurrency exchange going down was in no way a win for the world’s largest digital assets exchange. In an internal note written to Binance employees, Zhao also warned against buying or selling FTT tokens and that after his call with Bankman-Fried, he ordered his team to sell the tokens as a company.

> The fallout from FTX's liquidity issues continued to have a detrimental effect on investor mood, causing crypto markets to crash for a second day.
> As unnamed, unconfirmed reports stated that Binance would withdraw from its deal to buy the troubled exchange after a closer examination of FTX's books, the price of Bitcoin dropped to a new yearly low of $15,682, before settling at $16,200 levels, according to Coinmarketcap.
> Similarly, the price of the world’s second-largest cryptocurrency Ethereum dropped over 15% and made a low of $1084, before rebounding to $1140 levels.
> A wave of successive liquidations in Solana's decentralized finance markets was another element that could have had an impact on the market. Crypto.com, a cryptocurrency exchange, informed its users by email earlier in the day that all USD Coin deposits made in Solana had been halted.
> The native SOL coin of Solana was trading at $14, down 40%, after making a low of $12.51.
> The native FTX Token, which trades for $2.50 levels, was also down about 60% over the last 24 hours.
> In the past day, there have been over $832 million in total liquidations, according to data from Coinglass, and many traders anticipate that number to rise.