FTX, one of the most successful crypto exchanges, has frequently been on the news this winter. While many major crypto firms went underwater, FTX took the opportunity to expand its influence. CEO Sam Bankman-Fried (SBF) had stated in late June that many crypto firms were “secretly insolvent.”
Regarding the purchase of fallen firms, SBF stated,
“You know, we’re willing to do a somewhat bad deal here, if that’s what it takes to sort of stabilize things and protect customers.”
SBF has poured out nearly $1 billion in its buying spree. The CEO also noted that the exchange has over $2 billion that they could use for more such deals.
Is FTX aiming to be the largest crypto empire?
It all began with the acquisition of Liquid, a Japanese crypto exchange. Liquid was the victim of a hack worth $100 million, and what initially started as a loan ended up in an acquisition.
FTX then acquired the Canadian cryptocurrency trading platform Bitvo Inc. and the brokerage services company Embed Financial Technologies Inc. in June.
With a $200 million exposure to Luna, the highly leveraged cryptocurrency trading firm Three Arrows Capital (3AC) announced that it was in danger of going out of business. Loans of a sizeable amount were given to Three Arrows by BlockFi and Voyager Digital. However, after Three Arrows slid into debt, the two digital asset exchanges turned to FTX to help them survive. Credit lines of $750 million were provided to the companies by FTX and SBF’s Alameda quantitative trading unit jointly. Nonetheless, Voyager filed for chapter 11 protection moments after announcing the deal, and SBF said that the goal was to protect customer assets.
“We didn’t have months to do due diligence. We didn’t have weeks. We had two days.”
Additionally, there is talk of FTX acquiring Bithumb, a South Korean crypto exchange. Nonetheless, the exchange did not reveal any details.
Moreover, it has just been revealed that FTX has proposed to buy all Voyager assets, except for 3AC. This will provide early liquidity to customers. According to a press statement, customers of Voyager can create a new account with FTX and have their beginning cash balance reimbursed against their bankruptcy claims.
Is SBF all good? Or is it just a game of loans?
Although many were relieved to have a savior in time of need, some have been skeptical regarding SBF’s moves. Famous crypto whistleblower, FatManTerra, congratulated BlockFi and its CEO Zac Prince on making a “deal with the devil.”
Moreover, the Voyager deal has also been rejected after the firm was not happy with FTX making the offer public.
Chris McCann, the general partner at Race Capital, has known SBF since 2018. Moreover, Race Capital was one of the first firms to invest in FTX. McCann says,
“He’s not doing this out of the goodness of his own heart. His ambition knows no bounds at this point.”
Elliot Chun, the partner at Architect Partners, says,
“It’s dangerous for the whole industry to have connections to FTX […] That typically is not good for a free-market scenario, particularly the free markets that crypto enthusiasts embrace.”
Whatever the case, FTX seems to have, on the one hand, saved falling companies but, on the other, spooked some others. While the expansion is evident, the intention is unclear as of now.