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FTX, which filed for Chapter 11 bankruptcy protection in the U.S. on Friday, is now under investigation in its headquarters of the Bahamas.

“In light of the collapse of FTX globally and the provisional liquidations of FTX Digital Markets Ltd., a team of financial investigators from the Financial Crimes Investigation Branch are working closely with the Bahamas Securities Commission to investigate if any criminal misconduct occurred,” the Royal Bahamas Police Force said in a release posted to Twitter Sunday.

FTX Digital Markets is a subsidiary of FTX Trading and is licensed and regulated in the Bahamas. There has been increased speculation this weekend on the whereabouts of now-former CEO Sam Bankman-Fried, who told Reuters on Saturday he was in the Bahamas. A later report said he and two former FTX associates were “under supervision” by Bahamian authorities.

FTX spent $74 million over the past year buying up residential property around its headquarters, The Block reported Saturday. FTX is known for its communal setup on the island, where teammates work and live.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Congressman Brad Sherman, D-Calif., is the latest politician to call for increased regulation of the cryptocurrency market in the wake of FTX’s multibillion-dollar downfall.

“The sudden collapse this week of one of the largest cryptocurrency firms in the world has been a dramatic demonstration of both the inherent risks of digital assets and the critical weaknesses in the industry that has grown up around them,” Sherman said.

FTX, one of the world’s largest crypto exchanges, filed for Chapter 11 bankruptcy protection Friday. The firm is also facing an investigation by the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) into its mismanagement of customer funds and relationships with FTX.US and Alameda Research.

Sherman, who is chairman of the Subcommittee on Investor Protection and Capital Markets, said he supports “the efforts of U.S. regulators and law enforcement to investigate this situation and make sure those responsible are held accountable.”

Sherman he has advocated for Congress and federal regulators to take an “aggressive approach” in confronting any societal threats posed by cryptocurrencies and plans to examine options for federal legislation in the coming weeks.

“To date, efforts by billionaire crypto bros to deter meaningful legislation by flooding Washington with millions of dollars in campaign contributions and lobbying spending have been effective,” Sherman said.

He pointed out the attention given to now-former FTX CEO Sam Bankman-Fried’s political donations to Democrats, as well as Ryan Salame, the co-CEO of Bahamas-based FTX Digital Markets, who has donated over $23 million to Republican candidates and campaign groups in 2022.

“When you examine FTX efforts to influence Washington, you have to look at both CEOs, not just the eccentric guy wearing the shorts,” Sherman concluded.

Amid questions about his whereabouts following news of the SEC and DOJ investigations, Bankman-Fried told Reuters on Saturday he was in the Bahamas. One report says Bankman-Fried and two former FTX associates are  “under supervision” by Bahamian authorities.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

In the aftermath of FTX’s dramatic demise, crypto lending firm BlockFi stunned users with an announcement that it would pause withdrawals. Now, they’re waiting confused and without many answers.

“Hello, have assets in BlockFi worth 12k$, no updates from them yet,” software developer Vinayak Dhadda told The Block. “Do you think there is any hope to get them back?”

The Nov. 10 announcement came one day after BlockFi said all of its products were functioning normally and employees across the firm were mollifying client concerns about contagion.

“BlockFi will remain fully operational on 11/11 and all crypto transactions, including withdrawals, will continue as normal,” the firm told clients earlier in the week.

Even in the hours leading up to the announcement, BlockFi continued to solicit more customer funds onto the platform, according to messages obtained by The Block.

“BlockFi is an independent business entity so the FTX news does not impact us internally,” an employee told a client in an email on Nov. 8.

In another email sent on the day it paused withdrawals, the firm tried to lure clients with “the highest rates” it ever offered for fixed terms.

And since BlockFi paused withdrawals, it is still asking customers to park funds on the platform to top up collateral.

“The fastest way to cure margin is to post additional collateral to your loan,” BlockFi said in an email sent to one client. “To do this, deposit crypto into your BlockFi Wallet and post collateral to your loan via your BlockFi dashboard.”

BlockFi founder and CEO Zac Prince — who is on paternity leave until the end of the year—declined to comment.

This lack of clarity from leadership adds to the confusion surrounding BlockFi, which once boasted a $3 billion valuation and secured backing from investors including Valar Ventures, Paradigm, SoFi, Galaxy Digital and Akuna Capital. Even former CFTC chairman Christopher Giancarlo sat on its board before quitting after four months. 

During its high-flying growth in 2021, co-founder Flori Marquez touted the company as one of the “fastest-growing fintech” companies in the world. In March of that year, he reported more than 250,000 clients.

BlockFi’s trajectory took a downturn this past summer amid a wider credit crunch that swept crypto’s nascent and immature capital markets. While BlockFi did not then declare bankruptcy or pause withdrawals like rivals Celsius or Voyager, it did ultimately enter into a deal with FTX that gave the now-bankrupt crypto exchange run by Sam Bankman-Fried the option to acquire BlockFi. In turn, BlockFi signed a term sheet to secure $250 million through a revolving credit facility.

With the FTX Group now in the process of seeking Chapter 11 bankruptcy protection, BlockFi’s future is becoming increasingly cloudy.

One former employee told The Block he feels “sick.”

“Evolve Bank notified us that my BlockFi card has been suspended, but crickets from leadership and internal employees have heard nothing,” the employee said.

A user who recently had his first child and requested anonymity said he has $20,000 locked up on BlockFi and that a loss could take a toll.

“Not the best time for $20k in the shitter. Gutted right now,” he said. “Zac OOO message with his ‘exciting news’ made me want to puke.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Solana developers are forking FTX-developed token liquidity hub Serum after it may have been compromised in a hack on FTX. 

On Friday, a hacker made unauthorized withdrawals of more than $400 million from FTX. The situation further exacerbated the exchange’s insolvency crisis, which led it to file for Chapter 11 bankruptcy protection.

Many Solana developers suspect the hack may have also compromised Serum, a well-known protocol that was developed by FTX and used by many apps on the Solana blockchain. 

Solana founder Anatoly Yakovenko noted that developers are rushing to fork Serum’s code today and resume the protocol without the involvement of FTX. Developers need another version of Serum because the original can only be updated via a private key that was controlled by someone at FTX and not the Serum DAO. As a result of the FTX hack, that key may have been compromised. 

“Afaik, the devs that depend on serum are forking the program because the upgrade key to the current one is compromised,” Yakovenko said.

“The serum program update key was not controlled by its own organization, but by a private key connected to FTX. At this moment no one can confirm who controls this key and hence has the power to update the serum program, possibly deploying malicious code,” a pseudonymous developer called Mango Max said, adding that he is leading the Serum fork efforts.

Meanwhile, several Solana apps known to rely on Serum have begun limiting their exposure. Jupiter, the largest DEX aggregator exchange on Solana, notified users that it was halting use of Serum’s liquidity amid security concerns.

“Confirming that we turned off Project Serum as a liquidity source a few hours ago due to security concerns about upgrade authorities, we also encouraged all our integrators to do the same,” Jupiter said.

Other projects, Magic Eden, Mango Markets and Phantom also said they would stop relying on Serum for liquidity and have paused its use, given the security concerns.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The deployer contract of FTX Exchange (FTT) tokens mysteriously printed 192 million new tokens today and sent them to a freshly created wallet, according to on-chain data. The total value of these tokens at current prices is about $380 million.

The release of the new FTT came without any announcement from the exchange and follows a reported FTX hack on Friday.

As new tokens began flooding onto the market, Binance halted FTT deposits. “Binance has stopped FTT deposit, to prevent potential of questionable additional supplies affecting the market. Also encourage other exchanges to do the same,” Binance CEO Changpeng Zhao said.

The number of freshly created tokens eclipsed FTT’s prior circulating supply, which was about 133 million, according to pseudonymous crypto researcher 0xfoobar.

The FTT token played a crucial role in the problems that reportedly led to the insolvency of FTX and trading firm Alameda. 

FTX first came under pressure following a leaked portion of its sister firm’s balance sheet that showed the large majority of the firm’s assets were denominated in FTT tokens. This triggered a bank run from clients last week, which in a matter of days led to the high-profile implosion of the exchange. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Kraken has frozen accounts owned by FTX Group, Alameda Research and their executives following their filing for Chapter 11 bankruptcy protection.

“Kraken has spoken with law enforcement regarding a handful of accounts owned by the bankrupt FTX Group, Alameda Research and their executives,” the U.S.-based crypto exchange tweeted today, adding: “Those accounts have been frozen to protect their creditors.”

Kraken added that its other clients’ funds are not affected and that it “maintains full reserves.”

Kraken’s update comes after FTX and Alameda-related companies filed for Chapter 11 bankruptcy protection on Friday. FTX had previously approached Kraken — which claimed no exposure to Alameda Research but held almost 9,000 FTT tokens — about a potential rescue deal.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Huobi disclosed balance details of its hot and cold wallets, revealing a total value of about $3.5 billion.

The Seychelles-based crypto exchange said it holds 32,000 bitcoins, 274,000 ether, 820 million tether and 9.7 billion tronix.

Huobie — which was acquired by About Capital last month — said it is planning a Merkle tree audit to prove its reserves within the next 30 days. “It is also our promise and commitment that users’ assets shall be protected intact, not appropriated, and fully redeemable and withdrawable,” it added.

On Friday, crypto exchange Bitfinex also published details of its reserves — which included $3.4 billion in bitcoin and $1.5 billion in ether. Other major crypto exchanges have also shared or promised to share proof of their reserves following the high-profile collapse and subsequent Chapter 11 bankruptcy protection filing from crypto exchange FTX.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto.com mistakenly sent more than 320,000 ether ($400 million) to a rival crypto exchange called Gate on Oct. 21. This was revealed today after a Twitter user posted a screenshot inquiring why a large amount of ether had suddenly moved out of Crypto.com a few weeks ago. 

The firm’s CEO, Kris Marszalek, replied to the tweet, saying that the transfer was a result of human error. Marszalek said someone on his team had erroneously sent about 80% of the ether in their reserves to a “whitelisted exchange.” The funds had been scheduled to move to a new cold storage wallet, he said.

“It was supposed to be a move to a new cold storage address, but was sent to a whitelisted external exchange address. We worked with the Gate team and the funds were subsequently returned to our cold storage,” Marszalek said.

Marszalek added that all of the ether was recovered. Still, this was not the first time Crypto.com has made such an error. Last year, a Crypto.com employee erroneously transferred more than $7.1 million to a customer. Later, the firm sued the person for the return of the funds.

The incident comes at a time when trust for centralized exchanges has declined in the wake of the collapse of FTX and users are increasingly scrutinizing how exchanges manage their funds.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto investment firm Paradigm has told its limited partners that it marked down its investment in now bankrupt exchange group FTX to zero following its liquidity meltdown, according to two persons familiar with the matter. 

The firm, led by former Sequoia investor Matt Huang and Coinbase co-founder Fred Ehrsam, backed FTX and its affiliated firm FTX US.

Paradigm, similar to FTX-backer Sequoia, told investors that it marked down its investment to zero. It invested $290 million in the group of firms tied to former Jane Street trader Sam Bankman-Fried. Despite its investment, Paradigm told investors that it is not a client of FTX and did not have crypto asset exposure to the firm.

Paradigm is one of the most active investors in the crypto market, having announced a $2.5 billion fund launch last year. Known for its academic-based chops in decentralized finance investing, it has backed firms like DeFi wallet Argent, decentralized exchange dYdX, and Gauntlet. It also has backed financial services companies like Ken Griffin’s Citadel Securities, which is one of the largest market-making firms in the world.

On Friday, Bankman-Fried announced the firm would file for bankruptcy protection after a week underpinned by the precipitous decline of its native token FTT and reports that it leveraged client assets to make trades via Bankman-Fried’s trading firm Alameda Research. 

Paradigm declined to comment. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.