The arrest of Sam Bankman-Fried, the founder of bankrupt cryptocurrency exchange firm FTX, has done little to appease the plight of ailing investors. Bankman-Fried has been charged with multiple counts of fraud and sued by both the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
Customers have lost billions of dollars that were invested based on “trust” in the world’s largest crypto exchange. Bankman-Fried says the money is “missing” and denies any wrongdoing, while the authorities state that he has “stolen” the customer’s money.
The lawsuits filed by the SEC and CFTC claim that FTX has used the customer’s hard-earned money to make risky bets along with associated firm Alameda Research. They also claim that Bankman-Fried used the funds to make personal luxury purchases and make political donations.
Remarkably, Bankman-Fried has been denied bail and is in custody until February 8, 2023. The “cheated customers” feel that the man will be freed easily and see little chance of recovering any penny of their money.
Binance’s Problems Get Worse
On one hand, FTX’s collapse led to a rival crypto exchange, Binance, taking the number one position. On the other hand, it also aggravated customers’ reluctance and distrust of the broader crypto market.
This week, Binance witnessed huge customer redemptions amounting to nearly $2 billion, as per reports, and had to forcefully suspend redemptions for a while. CEO Changpeng Zhao “CZ” is trying to regain customers’ confidence by stating that the company is 100% capable of paying back 100% of its digital assets.
“People can withdraw 100% of the assets they have on Binance, we will not have an issue on any given day. If 100% of the users withdraw 100% of the assets, we’ll be fine,” CZ said in an interview with CNBC’s Squawk Box on December 15.
The company is even trying to pacify customers by bringing more transparency to their reporting, a move that hasn’t gone very well for the firm. CZ also stated that audit firms are hesitant to audit Binance’s finances due to a lack of proper norms for crypto exchanges.
Commenting on its own customer withdrawals, CZ said, “There was not a liquidity issue there was a conversion issue that was going through the bank… We don’t use customers’ money. We have very solid revenue.”
Meanwhile, the world’s largest traded cryptocurrency, Bitcoin (BTC-USD), has held well above the $17,000 level in the past week. Bitcoin is currently trading at a 74.7% discount from its all-time high of $68,978.64 marked on November 10, 2021.
