A fraction of the potentially billions of dollars missing from the company’s coffers, according to the company tasked with seizing the assets of the defunct cryptocurrency exchange FTX, is $740 million in assets, which have so far been recovered and secured, according to the company in charge of doing so.
Crypto Insights
The figures were made public on Wednesday in court filings by FTX, which hired BitGo to act as its cryptocurrency custodian just hours after declaring bankruptcy on November 11.
BitGo CEO Mike Belshe wrote in an email that Bankman-Fried “proved that there is no such thing as a ‘safe’ conflict of interest.”
The figure of $740 million is as of November 16. According to BitGo, since that time, the total value of assets that have been recovered and secured has likely surpassed $1 billion.
The funds BitGo was able to recover are currently kept secure in South Dakota in “cold storage,” which refers to digital currency kept on disconnected hard drives. According to South Dakota law, BitGo offers “qualified custodian” services. In essence, it provides segregated accounts and other security services to lock down digital assets; it is the crypto equivalent of a financial fiduciary.
As the value of bitcoin and other digital currencies has fallen, a number of cryptocurrency businesses have failed this year. Early investigations revealed that FTX employees mixed up assets they were investing in with those they were holding for customers when the company experienced the crypto equivalent of a bank run, which caused FTX to fail.
Belshe asserted that “trading, financing, and custody need to be different.”
The Crypto Saga
In addition to bitcoin and Ethereum, the assets recovered also include a variety of smaller cryptocurrencies with varying levels of use and worth, like the Shiba Inu coin.
California-based, The history of BitGo, includes asset recovery and protection. Following the failure of the cryptocurrency exchange Mt. Gox in 2014, the business was tasked with protecting assets. It also acts as the custodian for the assets that El Salvador’s government holds as part of its trial use of bitcoin as legal tender.
In addition to a $5 million retain, FTX is paying Bitgo $100,000 per month for its services.
Crypto Overview
DeFi proclaimed with reverent fervor that they cherished digital assets because they lacked hierarchies: anyone could trade in bitcoin, for example, without depending on centralized gatekeepers like banks.
“The crypto institutions at the center of much of the system exist in largely unregulated space and are very prone to the risks that regulation in the conventional financial sector is designed to avoid,” British central banker Sir Jon Cunliffe said in a speech this week.
There were some major contradictions, just like in crypto land. One reason was that CDOs were difficult to trade in a “free” (liquid) market because of their complexity. And even though the CDO market was supposed to make finance safe, it actually increased risk. The thinking was magical.
The Silicon Valley area, Despite the recent global financial crisis, the first time I visited in 2010, there were echoes of the CDO sphere. There were those who insisted that increasing global connectivity was beneficial because it would advance equality, democracy, and freedom, like Facebook founder Mark Zuckerberg. Never mind that only a small minority was familiar with the fundamental algorithms used by organizations like Facebook, making the industry appear to be ripe for exploitation. Similar to finance, the creation mythology of technology was rife with contradictions that were largely disregarded.
There are competing creation myths in almost every field, including the media. I’m also not saying that just because self-deception exists, all of these innovations must be flawed. Not at all. Even with its shortcomings, the internet is a fantastic invention. And with supervision, some types of debt repackaging are beneficial. Innovations in digital assets can also be valuable: For instance, decentralized ledgers could enhance real estate record keeping.
