How Far Does FTX Contagion Go? So Far Affected Companies

The demise of the cryptocurrency exchange FTX will be remembered as one of the darkest periods in cryptocurrency history. In November, the company experienced severe liquidity issues and was unable to honor its customers’ withdrawal requests.

Binance, the world’s largest cryptocurrency exchange, was ready to buy the exchange but backed out after an audit. FTX was unable to find a solution and filed for Chapter 11 bankruptcy protection, while CEO Sam Bankman-Fried resigned.

This sent shockwaves through the cryptocurrency market as a whole. Most digital assets’ prices fell, with bitcoin falling below $16,000.

Fears of contagion continue to afflict the market. Following is a look at some of the companies that were impacted by FTX’s demise.

Withdrawals were halted by Liquid Global, a Japanese crypto platform owned by FTX, shortly after its parent company declared bankruptcy. Last year, the former was hacked and lost more than $90 million in digital currencies. FTX secured a $120 million debt financing at the time to allow Liquid Global to resume operations.

Genesis Global Capital, a crypto lending platform, also paused withdrawals, explaining that a large number of customers began withdrawing their assets from the entity. Customers were concerned that their investment would suffer if it remained in the hands of a centralized organization, as indicated by the “abnormal request.”

Multicoin Capital, a cryptocurrency venture capital firm, was also impacted. Kyle Samani and Tushar Jain, managing partners, admitted to storing “too many assets on FTX,” putting too much trust in their relationship. The company expressed hope that it could reclaim some of its distribution, but realized that this would be a difficult task given that the majority of them are embroiled in bankruptcy proceedings.

Following the latest events, BlockFi, a crypto lending platform dealing with significant issues throughout 2022, was forced to close its doors. FTX previously loaned the company $400 million and offered to buy it for $240 million. Following the recent events, BlockFi was unable to resume its normal course of business and filed for bankruptcy.

Temasek, a Singaporean government-owned holding company, invested $210 million in FTX International and $65 million in FTX US. It stated that the investment had nearly shrunk to zero as a result of the exchange’s decay.

Nonetheless, Singapore’s Deputy Prime Minister, Lawrence Wong, stated that the FTX crisis had a “very minor” impact on the local economy because most large financial institutions had yet to jump on the cryptocurrency bandwagon.

Galois Capital, a hedge fund, revealed that half of its capital was trapped in the troubled exchange. According to sources, this amount could be around $100 million.

The crash “shocked” Paradigm, a crypto and Web3-focused venture capital firm. According to some reports, it had invested more than $270 million in FTX.

This allocation represents “a small portion” of Paradigm’s assets, according to the company’s co-founder Matt Huang, who expressed “deep regret” for having been involved with a Founder and a trading venue that “did not align with crypto’s values and who have done enormous damage to the ecosystem.”

CoinShares, Europe’s largest digital asset investment and trading group, disclosed that over $30 million, or about 11% of its total net asset value, was trapped on FTX. Galaxy Digital, Mike Novogratz’s crypto financial services firm, had more than $76 million in exposure to the distressed entity.

BlackRock, the world’s largest asset manager, is also on the list. CEO Larry Fink revealed that his firm invested $24 million in FTX prior to the latter’s demise. He also refused to comment on the causes of the incident, saying that people should be aware of the facts before making any assumptions:

“I’m sure they did their homework.” Could they have been led astray? Could they have done anything else? Could we have been led astray? Sure… But I’m not going to speculate until we have more facts.”

Tiger Global Management, the hedge fund led by billionaire Chase Coleman, has frequently contributed to FTX’s fundraising efforts. While the exact amount of losses is unknown, one can assume Tiger Global has taken a significant hit as a result of the collapse.

Aurus Global, a cryptocurrency platform, experienced a “short-term liquidity issue” earlier this week. M11 Credit, its institutional credit underwriter, assured customers that both parties had joined forces to reduce risks.