Weekly Recap: FTX Crisis Causes Domino Effect
Meta Cuts 11,000 Jobs Amidst Harsh Economic Conditions
Mark Zuckerberg-led Web3 company Meta has announced plans to cut down its staffing. News of the layoffs first emerged via a Nov 7 report, which the company confirmed two days later. This comes as the tech giant alongside several others fights to stay above water as growth rates decline.
Indeed, Meta saw its share price tumble by more than 70% since the start of the year. The Facebook parent company recorded a 4% decrease in revenue in Q3. This occurred even as costs and expenses rose 19% year over year to sit at over $22 billion. Meta also saw its operating income come to rest at $5.66B after falling 46% from the previous year.
CEO Mark Zuckerberg stated that the company would let go of 13% of the workforce, that is over 11,000 jobs. He further clarified that Meta would hold off on hiring till Q1 of next year.
US Regulators SEC, CFTC, DOJ Launch Probe into FTX
According to a report on Wednesday, the US Securities and Exchange Commission heightened its investigation into crypto exchange FTX. Notably, the Department of Justice alongside the Commodity Futures Trading Commission (CFTC) also began probing into the troubled platform. This came as a result of the platform’s liquidity issues that started Monday, which worsened after a failed acquisition deal involving Binance.
Amid the controversy, the authorities set out to gain a thorough understanding of FTX and American division FTX US' organizational structures. Indeed, the report claimed that any overlap between the two would be concerning for the regulatory authorities. Per the publication, sources close to the situation claimed that the Justice Department would look into violations, including fraud.
Meanwhile, the SEC would enforce civil investor protection policies while investigating how FTX managed its customers' assets alongside the CFTC. The SEC also reportedly collected information on the relationship between FTX and sister Alameda Research.
US Senators Push Crypto Legislation After FTX Crash
US senators Debbie Stabenow and John Boozman have continued to pursue the publication of the final version of the Digital Commodities Consumer Protection Act 2022 (DCCPA). This comes despite the high-profile collapse of the world’s third-biggest exchange FTX Global.
As FTX began to spiral, crypto users tracking the progress of the bill voiced concerns about how the senators would react to the crisis. FTX’s Sam Bankman-Fried had been an avid supporter of the forthcoming DCCPA bill. The policy in question entered congress in early August, and if passed into law it will grant the CFTC regulatory authority over cryptocurrencies.
Members of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry have affirmed their support for the bill in a Nov. 10 release. Indeed, the senators noted that “the events that have transpired this week reinforce the clear need for greater federal oversight of the digital asset industry.”
FTX Files for Chapter 11 Bankruptcy
In an official announcement on Friday, Nov 11, FTX revealed that it had filed for Chapter 11 bankruptcy. The Bahamas-based firm froze withdrawals and commenced bankruptcy proceedings in the US alongside 130 affiliated companies. These include trading desk Alameda Research and US branch FTX.US despite previous assurances that it “was not impacted” by the ongoing crisis.
CEO Sam Bankman-Fried also stepped down from his position with the company. SBF posted a Twitter thread shortly after, apologizing for the situation and expressing his hope that things would improve. John Ray III stepped in as CEO with Bankman-Fried sharing intentions to help with a smooth transition.
Ray stated that the company had opted for Chapter 11 so it could evaluate the situation. The new CEO described the filing as "the beginning of a path forward."
Hacker Drains $600M Worth of Crypto From FTX Wallets
Even as the platform faces one of the biggest liquidity crises in crypto history, exchange firm FTX fell victim to an attack. Late on Friday, malicious actors began carting off funds worth from wallets with ties to the exchange. This occurred shortly after the bankruptcy filing and escalated the situation as the culprit was able to steal millions of dollars in crypto.
FTX announced the breach in a statement on its official telegram page warning users to delete all FTX apps. This came shortly after General Counsel Ryne Miller tweeted that they were investigating the unusual transfers. Users speculated that the hack may have been an inside job with some pointing accusing fingers at Bankman-Fried.
Others pointed out that some of the transactions contained vulgar jokes in the addresses such as “dickcheesemcgee.eth” among others. Notably, however, some addresses featured insults aimed at SBF for instance, “*sambankman-fraud.eth.”
Crypto.com Accidentally Transfers 320,000 ETH to Gate.io
The FTX debacle prompted several crypto exchanges to provide proof of reserves to reassure clients given the volatile state of the market. One platform to join in was Crypto.com, however, the platform’s wallet data turned up a suspicious operation.
Indeed, on Oct 21 Crypto.com transferred 320k Ether to a wallet with ties to swap platform Gate.io. Crypto users began to express their concerns on Twitter considering that the platform claimed to store user assets offline.
CEO of the exchange Kris Marszalek, then stepped in to explain that funds had been transferred to Gate.io by accident. He also confirmed that they had retrieved the funds and assured users that Crypto.com was working to prevent a recurrence.
The exchange made a similar mistake in the past when it transferred AUD 10.5M roughly 7M USD to users in Melbourne. Crypto.com had meant to make an AUD 100 that is, a 67 USD refund when this occurred in May last year.
