FTX’s $1.4B bid on Voyager Digital assets: A gambit or a way out for users?

In September, cryptocurrency exchange FTX US secured the winning bid for the assets of embattled crypto brokerage steadfast Voyager Digital with a bid of astir $1.4 billion. The bid was made up of the just marketplace worth of Voyager’s crypto holdings “at a to-be-determined day successful the future.”

According to Voyager, astatine existent marketplace prices, the just worth of its holdings was estimated astir $1.3 billion, and the woody included an “additional consideration,” estimated to beryllium worthy astir $111 million.

Since then, caller details connected the lawsuit person emerged, with tribunal filings showing that the currency paid for Voyager Digital itself was lone $51 million. The $1.31 cardinal FTX offered for Voyager crypto holdings are acceptable to beryllium distributed to eligible credits connected a pro-rata basis, according to the filings.

The $111 cardinal included successful the woody are, arsenic a result, divided betwixt the $51 cardinal being paid for Voyager’s assets, intelligence spot and idiosyncratic base, and the $60 cardinal that consists of an accumulated $50 relationship recognition for each idiosyncratic who onboards with FEX and a $20 cardinal earnout.

Voyager’s users hunt for answers

While quality of FTX’s winning bid trickles successful done tribunal documents and different scarce sources, users of the bankrupt steadfast support connected searching for answers, organizing done societal media to accumulate arsenic overmuch accusation arsenic possible.

Initial mathematics done by users taking Voyager’s equilibrium expanse into relationship has suggested that users who determination connected to FTX tin expect to get a haircut of implicit 30% connected the assets they held. To some, seeing immoderate benignant of instrumentality is amended than seeing thing aft the level went under.

Voyager Digital's equilibrium sheet. Source: Reddit, Sedar.

FTX’s CEO Sam Bankman-Fried has said that its bids were “generally determined by just marketplace price,” with the institution buying up assets to springiness them backmost to customers.

— SBF (@SBF_FTX) October 2, 2022

Voyager’s problems emerged aft the steadfast extended a indebtedness of $670 cardinal to crypto hedge money Three Arrows Capital, which defaulted successful precocious June. FTX’s bid excluded the Three Arrows Capital loan.

As it stands, it seems users who volition person their assets backmost volition person to flock to FTX’s trading platforms if the tribunal approves the deal. The Voyager app would, arsenic a result, scope its extremity portion FTX’s idiosyncratic basal would swell significantly.

Recent: Is payments elephantine SWIFT preparing for a blockchain-bound future?

To users who whitethorn soon beryllium moving to FTX, determination are a fewer concerns that they request to beryllium alert of if they take to enactment connected the caller platform.

FTX offers its users an gain programme that allows them to gain involvement connected their cryptocurrency holdings, albeit with yearly percent yields (APYs) that are usually little than those users were getting connected different crypto lending platforms, including Voyager.

FDIC security snafu

Before Voyager Digital went under, regulators directed it to remove “false and misleading statements” that its users’ deposits were insured by the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) arsenic if they were regular savings accounts.

In a associated letter, Seth Rosebrock and Jason Gonzalez, adjunct wide counsel astatine the FDIC, suggested that Voyager’s representations “likely misled and were relied upon” by customers placing funds connected the platform.

While FTX has been seen arsenic a beacon of anticipation attempting to backstop contagion successful the cryptocurrency manufacture aft a tally for liquidity led to the illness of respective firms, the FDIC besides warned it to halt making “misleading” statements regarding the security presumption of users’ deposits.

FTX received a cease-and-desist missive from the FDIC to halt suggesting idiosyncratic funds connected the level were insured. The missive specified that Brett Harrison, the president of FTX US, said successful a tweet that nonstop deposits from employers were stored successful FDIC-insured accounts successful users’ names.

While Harrison responded connected societal media by saying that helium deleted the station and didn’t mean to bespeak that cryptocurrencies stored successful FTX are insured by the FDIC, his statements could person misled users flocking for safety.

Contagion risks

As users determination to FTX either due to the fact that they bask the platform, privation to diversify from Binance oregon Coinbase oregon privation the quality to gain involvement connected their tokens, the institution grows.

It’s unclear whether FTX’s attempts to backstop contagion successful the cryptocurrency abstraction could beryllium leaving the speech itself vulnerable, though experts judge what it’s doing is risky.

Speaking to Cointelegraph, Richard Gardner, CEO astatine fintech steadfast Modulus, said it’s important to admit the “FTX gambits” for what they are, arsenic attempts to “buy up risky assets astatine stone bottommost prices to grow a la Andrew Carnegie.”

Gardner added that Bankman-Fried is “attempting to consolidate the industry” by betting connected high-risk endeavors. He concluded:

“This recession is successful its earliest stages, and the smarter play is to fto the Fed's monetary argumentation shifts play retired and prevention capital. In the comparatively adjacent future, determination volition beryllium companies, implicit with amended fundamentals and greater viability, successful request of a bailout. Those companies volition beryllium the amended investment. FTX is simply playing roulette astatine this point.”

Investors who whitethorn perchance beryllium moved to FTX whitethorn besides privation to see that the institution is progressive successful American authorities arsenic its integer markets co-CEO Ryan Salame has campaigned with his woman Michelle Bond, a New York Republican moving for Congress.

Salame has reportedly spent millions connected governmental donations successful the 2022 predetermination rhythm by donating to cryptocurrency-focused ace governmental enactment committees (PACs). Super PACs tin rise unlimited amounts of wealth to enactment candidates but cannot donate to them directly.

Some of the funds Salame deployed, according to concern reports, look to person been funneled into Bond’s contention aft a bid of wealth transfers. Bond herself holds cryptocurrencies.

Alameda Research and FTX

Alameda Research is simply a crypto quantitative trading steadfast and marketplace shaper founded by FTX’s CEO Sam Bankman-Fried. The steadfast often seems to alert nether the radar, but its trading measurement and unthinkable nett of $1 cardinal successful 2021 person made the task harder arsenic clip goes by.

Alameda Research’s power has been seen by immoderate arsenic a imaginable struggle of interest, taking into relationship its narration with FTX. Cory Klippsten, CEO of crypto startup Swan Bitcoin, has been quoted saying that FTX and Alameda person been “able to payment from a regulatory spread that has allowed them to commercialized and nett from cryptocurrencies” without pursuing the aforesaid rules accepted fiscal institutions do.

For its part, Sam Bankman-Fried has said Alameda is simply a “wholly abstracted entity” that gets nary preferential treatment. As Bloomberg reported successful September 2022, questions persist due to the fact that Bankman-Fried and Alameda’s CEO Caroline Ellison person until precocious shared an flat with 8 different colleagues.

Recent: Man and machine: Nansen’s analytics dilatory labeling worldwide wallets

Ellison has addressed these concerns, saying they’re “arm’s magnitude and don’t get immoderate antithetic attraction from different marketplace makers.” Alameda was initially FTX’s largest trader, arsenic successful its aboriginal days, the speech had constricted entree to liquidity. According to Bankman-Fried, it’s nary longer the platform’s biggest marketplace maker.

While the imaginable struggle of involvement could mean regulators volition soon people FTX erstwhile again, the institution is reportedly actively successful talks with the United States Securities and Exchange Commission (SEC), which reduces regulatory risk.

As users flock to FTX — oregon immoderate different centralized entity — it’s important to ever see the pros and cons of keeping funds connected that platform. As Bitcoin (BTC) advocator Andreas Antonopoulos famously said: not your keys, not your coins.