- After FTX rocked the industry, exchanges scurried to reassure their users that all was in order with their operations.
- Coinbase’s CEO stated that customers’ deposits are held “dollar-for-dollar”, while Kraken’s boss highlighted some of the red flags that FTX raised.
- The winding-up processes of FTX have begun as the industry reels from the impact of the implosion.
Digital asset exchanges are scurrying to reassure their customers that their funds are safe in their custody as faith in centralized platforms hits an all-time low.
After the news broke, Coinbase CEO Brian Armstrong took to Twitter to clear the air over speculations that the implosion could have a ripple effect on his exchange. He stated that his firm had no “material exposure” to FTX, Alameda, or FTT while stating that his firm remains compliant with U.S. regulations.
“We don’t do anything with our customers’ funds unless directed to by the customers,” said Armstrong. “We hold all assets dollar for dollar, and users can withdraw their money at any time.”
Armstrong blamed the tragedy on regulators focusing the bulk of their attention on firms within the U.S. while bad actors operating from overseas continued to lure in new users. According to Armstrong, these foreign-based firms are “more opaque” and engage in “risky business practices” fuelled by lax regulation in their jurisdictions.
“The temptation from events like these is to call for more heavy-handed regulation,” he said. “This would just make the problem of crypto companies and crypto users going overseas worse.”
Kraken’s founder Jesse Powell took several swipes at FTX and their business method, which took advantage of the “good, trusting nature” of digital asset investors.
“We let clones ride under our banner while they sell us for their own interests,” said Powell. “When they blow themselves up, it’s our house, our reputation, our people which bear the brunt of the damage.”
Powell highlighted some of the red flags raised by Sam Bankman-Fried to include financial recklessness like purchasing the naming rights to sports stadiums, seeking media validation, excessive lobbying of regulators in the capital, and “acting like you know everything after showing up to the battle 8 years late.”
Binance’s founder was in the eye of the storm
Changpeng Zhao, Binance CEO, was in the thick of the action as he notably announced that his exchange would be unloading its holding of FTT tokens, given the reports of the murky state of Alameda’s balance sheets. Zhao added that his firm could purchase FTX, but the deal fell through upon due diligence being conducted.
As the industry assimilated the reports, Zhao cleared the air that his exchange never shorted FTX while adding that Binance will be creating an industry recovery fund to assist firms in a liquidity crisis.
“Crypto is not going away. We are still here. Let’s rebuild,” said Zhao.