The collapse of FTX is swiftly draining money from the crypto economy: Information reviewed by TechCrunch indicates that market makers and funds that lost money on the exchange, until recently one of the largest cryptocurrency exchanges in the world, are more numerous than previously anticipated — and some might be in conversations with creditors soon.
Dozens of market makers and fund managers in an invite-only Telegram chat responded to a poll titled “my/my firms [sic] current exposure to FTX.” TechCrunch reviewed the results from the 147-member chat, dubbed “FTX creditors private.” Among the 70 respondents, 66% said they lost $25 million or less, 7% indicated that they lost between $25 million and $50 million, 6% lost $50 to $100 million, and 1% reported FTX-related losses of between $100 million and $500 million. The remaining 20% declined to provide a sketch of their potential losses, according to private documents reviewed by TechCrunch.
Who is in the cohort? “Anyone who was a big player was on FTX,” a source close to the matter said. “You couldn’t have a credible market-making business if you weren’t on that platform.”
There are a few members of the chat who have spoken publicly, but the majority of the firms in the group have not gone public with their losses, the source said. “There’s a lot of funds out there who haven’t reported what they lost. There’s going to be a lot of contagion.”
If the FTX collapse is anything like what happened with crypto exchange Mt. Gox (which was hacked and then filed for bankruptcy), what will result will be a long, drawn-out court case in which depositors try to recoup their losses. But some members of the chat are also exploring opportunities to sell claims of their FTX accounts. Individuals in the chat asked others if they’ve been able to sell their accounts over the counter, according to messages seen by TechCrunch.
Enigma Securities is looking to buy claims of individual or company accounts, according to group members. Enigma is a Financial Conduct Authority-registered crypto asset facilitator for liquidity, banking relations and custody solutions.
“Enigma is looking to buy claims >10m via a Dutch auction as soon as this week. I can make an intro if anyone is interested,” one group member wrote on Tuesday.
A Dutch auction is when the lowest price to sell the total offering becomes the offer price for all the securities being sold. This means Enigma is likely looking to buy those claims for pennies on the dollar, the source said.
Chat members include former FTX head of institutional sales Zane Tackett and Sino Global Capital CEO and managing partner Matthew Graham, whose company tweeted that it had direct exposure to FTX in the “mid-seven figures held in custody.”
Tackett, Graham, and Enigma did not reply to requests for comment from TechCrunch on Wednesday.
Evgeny Gaevoy, the CEO of crypto market maker Wintermute, also participated in the Telegram chat. But spokespeople for both FTX US and Wintermute said last week that Wintermute stopped trading and market-making operations on FTX US before FTX halted withdrawals, CoinDesk reported.
“Can share that Wintermute is currently trading on binance, deribit and bitfinex (last two fairly small amounts) when it comes to perps,” Gaevoy wrote in the Telegram chat. “Pulled out of everywhere else (incl bybit, huobi, okx, kucoin).”
In a direct message with TechCrunch on Wednesday, Gaevoy said “this is not the most up-to-date information (we have returned to some exchanges since that message has been sent.)” When asked if he remains pulled out of Bybit, Huobi, OKX, and KuCoin, he said he “can’t comment on particular exchanges.”
However, “Wintermute significantly reduced exposures to most derivatives exchanges in Asia (with an exception of Binance),” Gaevoy shared with TechCrunch. “We believe that FTX/Alameda contagion can affect these trading venues in the following way: Alameda being offered Letters of Credit on which they would now default, exchanges holding some of their assets on FTX either to access liquidity or as a custody solution, potential for some of these venues to engage in similar practices to what FTX is alleged to have been doing.
“We are working around the clock to update our due diligence on venues in question, checking their financials, proof of reserves etc with a goal to resume trading as soon as we are comfortable,” Gaevoy added.
“There’s going to be a lot of overhang on the market because liquidity has dried up on exchanges because of this,” the source close to the matter said. “Big market-maker companies have basically now had to reduce exposure because they’re also paranoid about other exchanges being illiquid. So they’ve already pulled out liquidity across the board.”
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