“Huge disappointment”: Crypto industry comments on FTX collapse as Binance pulls out from deal

Rick Steves

The FTX – Binance saga took a left turn, with the latter ultimately deciding not to go forward with the $1 acquisition deal announced the day before. 

FTX

The crypto exchange led by chief executive “CZ” cited “mishandled customer funds” and “US agency investigations” as the main reasons to backtrack on the agreement with Sam Bankman-Fried’s FTX.

“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of http://FTX.com”, said Binance via Twitter.

“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help.

“Every time a major player in an industry fails, retail consumers will suffer. We have seen over the last several years that the crypto ecosystem is becoming more resilient and we believe in time that outliers that misuse user funds will be weeded out by the free market.

“As regulatory frameworks are developed and as the industry continues to evolve toward greater decentralization, the ecosystem will grow stronger.”

“Lack of disclosure and transparency on the the part of FTX or worse”

The collapse of FTX is being taken by some as a Lehman Brothers event, which triggered the meltdown of the financial system in 2008. The whole crypto industry is commenting on the matter and taking measures, with Binance announcing a beefed up emergency insurance fund.

Bradley Duke, Founder & co-CEO at ETC Group, commented on Binance’s tweet announcing the pull out: “The fact that Binance explicitly cites “mishandled customer funds” in their tweet explaining the decision to abandon their acquisition of FTX.com suggests, at a minimum, a lack of disclosure and transparency on the the part of FTX or worse, putting customer deposits at risk for business bets FTX was making.”

“We will know the full truth in time but what is clear is that even some of the largest companies in crypto are failing to ring-fence and protect customer assets and give the requisite transparency about deposits in custody.”

“At ETC Group, because of our trad-fi background, have always over engineered the product structuring of our ETPs and operational processes to ensure that the digital assets backing our ETPs are entirely segregated in enterprise custody, have an independent Trustee with a full pledge over the assets in case we were to cease trading, and a 3rd party administrator with a veto on operational movements of these assets and the responsibility of independently verifying the digital assets in custody as always exceeding ETC Group obligations to investors in its products.”

“We did all this because we understand the importance of, first and foremost, protecting investors as there is nothing more important when operating in financial services.”

“Our research team has been vocal about the importance of product structuring and transparency and how digital assets in custody should never be loaned without investors full knowledge – a practice which seems to be at the very heart of FTX’s collapse.”

“Crypto will be less about making a quick buck”

Mikkel Morch, Chairman at ARK36, calls for sour-searching within the digital asset space and points to a path of integrity instead of being a get-rich-quick-scheme.

“With reports that FTX is facing investigations from the SEC, the CFTC, and the Department of Justice, yet another supposedly reputable and trusted industry player goes down as a huge disappointment, to put it mildly.”

“Despite all the talk about the maturation of crypto, it seems like now more than ever the industry is due for some soul-searching.”

“Yes, we all want to create value for our investors but even more so, we want to create a technological foundation for a more efficient and more equitable financial system. But if you leverage yourself up to your ears and take unnecessary and undisclosed risks with your customers’ funds, you’re bound to fail miserably on both counts.”

“It is to be hoped that, moving forward, crypto will be less about making a quick buck and more about decentralisation, transparency, and integrity.”

“There are some positive changes happening already. Binance is pushing for major exchanges to adopt proof of reserves as an industry standard. Some have already started publishing it. Newcomers to the space are discovering the importance of self-custody of their assets. And investors are learning the hard way the advantages of working with properly regulated entities. These are the growing pains of a nascent industry – but crypto will come out of this stronger and more resilient than ever before.”

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