The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A SECOND Bahamas-based crypto currency exchange yesterday pledged to publicly disclose “proof” of its financial soundness and reserves in a bid to reassure jittery investors following the implosion of rival FTX.

Tim Byun, global government relations officer at OKX, told Tribune Business that FTX’s collapse into provisional liquidation in The Bahamas, and Chapter 11 bankruptcy protection in the US, was having a “devastating effect” on the global digital assets sector, operators in the space and their clients/customers.

“Crypto was founded on the principles of decentralisation and transparency, with the goal of restoring financial power to the people. When companies deviate from this, it has devastating effects on the industry and investors, as we’ve seen with FTX,” Mr Byun said.

“While OKX has been committed to the principles of decentralisation and transparency since day one, and maintains a mission of giving our customers the technology to trade and invest responsibly, we understand that it’s now more important than ever to help people understand why they can feel comfortable using OKX.

“OKX will share proof of our reserves in the coming weeks to provide clarity on the funds we hold,” he added. “The OKX reserves will be audited and verified through an advanced cryptographic accounting procedure in order to prove our solvency without compromising data security.

“The crypto industry, overall, is at a point where companies need to prioritise transparency in order to repair customer trust in the industry, and OKX intends to champion this movement.” OKX had barely been licensed and registered under the Digital Assets and Registered Exchanges (DARE) Act, and permitted to operate from The Bahamas by the Securities Commission, before FTX imploded.

The rival crypto currency exchange, which had no connection to events at its competitor, is thus moving swiftly to do its part to bolster shaky investor confidence that has been rocked by its rival’s failure. The collapse of Mr Bankman- Fried’s sprawling crypto empire, which just months ago was valued at around $32bn, in just one week will likely go down in history as one of the most spectacular corporate implosions in history.

The episode is being compared to both Enron’s crash in 2001, amid a series of accounting and corporate governance scandals, and the Lehman Brothers failure in 2008 that triggered the global financial crisis and subsequent recession.

Among the most serious allegations facing FTX and Mr Bankman-Fried is that around $10bn belonging to the crypto exchange’s clients was transferred to Alameda Research, his trading firm, without their permission. These funds were then employed to bail-out other troubled crypto businesses such as Blockfi (a $240m option to buy and $400m credit facility) and Voyager ($1.3-$1.4bn) which had run into trouble during the so-called ‘crypto winter’.

However, the only collateral for this $10bn transfer subsequently turned out to be FTX’s own token, FTT, which was essentially worthless. Besides an $8bn liquidity shortfall at FTX, with liquid assets of $900m compared to $9bn in liabilities, reports at the weekend alleged that between $1bn to $2bn of the sums transferred to Alameda were missing.

This, though, was denied by Mr Bankman-Fried, who told the Reuters news agency that he “disagreed with the characterisation” of the transfer, saying: “We had confusing internal labelling and misread it.” When asked about the missing customer funds, he replied via Twitter: “???” And, to further complicate a confusing picture, there were suggestions that another $515m had disappeared from FTX - either as a result of a hack or “inside job”.

Either way, unlike the Lehman Brothers saga, global attention is now fixated on The Bahamas because FTX’s international headquarters are based here.