Last week, California billionaire Sam Bankman-Fried was touted as a key figure in cryptocurrency — even a saviour. Today, amid a series of apologetic tweets, he said “I f–ked up” after his cryptocurrency exchange bled billions of dollars.
His FTX exchange is now scrambling to raise $9.4 billion US from both investors and rivals, as customers rush to withdraw their funds.
A lot of people trusted FTX as a place to buy tokens or cryptocurrencies, like bitcoin.
Now industry watchers say its spectacular fall may be the catalyst that forces governments — including Canada’s — to crack down on cryptocurrency.
The trouble sparked when the rival owner of the world’s largest exchange, Binance, questioned the stability of FTX on Twitter. That touched off a three-day panic costing FTX an estimated $6 billion US.
Binance head Changpeng Zhao then on Wednesday backtracked on a proposed buyout of his second-ranked rival, citing regulatory concerns, according to the New York Times.
That sent FTX into a tailspin.
Bankman-Fried has said he’s in talks with others on another rescue deal, but made no promises.
“I’m sorry. That’s the biggest thing. I f–ked up, and should have done better,” he wrote on Twitter.
What exact mistakes were made, remain unclear.
But crypto experts say investor money that should be “liquid” is not.
FTX was facing mounting legal and regulatory threats before withdrawals were frozen, according to Samson Mow, CEO of Pixelmatic and JAN3, a new bitcoin technology company.
Binance CEO and founder Changpeng Zhao, left, meets with El Salvador’s President Nayib Bukele in San Salvador, El Salvador, on March 24. Zhao was briefly poised to buy out FTX. (Secretaria de Prensa de la Presidencia/Reuters)
Mow says the FTX explosion has a familiar feel, though digital assets like bitcoin and ethereum were not the problem.
He says the exchange created tokens called FTT that were used to hold value. FTT was the backbone of FTX so when its value dipped, users scrambled to get out.
Mow says the U.S. Securities Exchange Commission is investigating and that it seems like client money may have been improperly used to help dig FTX’s affiliate company Alameda Research out of a $10-billion hole.
People who bought bitcoin or other currencies through the exchange now can’t withdraw them.
Mow says bitcoin is reliable but that exchanges which rely on tokens like FTT as collateral are built on a house of financial cards.
He said users know the risk of being “lazy” and leaving assets unclaimed on a currency exchange.
Binance and FTX logos are seen in this illustration. Bankman-Fried blamed himself for FTX’s losses, though it’s not clear what exactly went wrong. (Dado Ruvic/Reuters)
“You gambled on a casino that went bust — and now you’ve lost your money,” said Mow.
He says people who did not withdraw their digital assets and keep them in their own wallet now can’t get access them, because FTX used FTT as collateral and those tokens are now worthless, he says.
“There’s an old saying — not your keys, not your coins. It’s not a new lesson. People are just not learning. They are gambling — and got what they deserved.”
The implosion of FTX, which was valued at $32 billion US not long ago, is just the latest bad news for digital asset investors. Bitcoin prices are less than a third what they were at their height in 2021, before a big crash last fall.
But Bankman-Fried was seen as an influential player, someone who “was working closely with regulators,” to try to regulate the space, said Ashley Stanhope of Ether Capital Corp., a public company focused on ethereum, and a founding member for the Canadian Web3 Council, a group collaborating with governments to build better investor protections.
He had also spent millions helping other companies, claiming he was a proponent of effective altruism, a movement that espouses charitable giving to safeguard humanity’s future.
An advertisement for bitcoin is displayed on a street in Hong Kong, on Feb. 17. (Kin Cheung/The Associated Press)
Her interpretation of his apology is that he made “genuine missteps. It doesn’t sound like he was trying to scam investors or do do them wrong,” she said.
Stanhope says this situation hurts the industry’s credibility and that she fears regulators will now “paint all crypto with the same brush.”
Among FTX’s investors is the Ontario Teachers Pension Plan’s (OTPP) which put more than $126 million into the exchange between October 2021 and January 2022.
In a statement the OTPP said Thursday the “uncertainty” at FTX will have “limited impact” on the pension plan, as the investment was less than 0.05 per cent of its total net assets.
As for FTX’s losses and how they will affect the industry, Stanhope admits it’s a challenge, and that Bankman-Fried’s fall will likely shift the crypto landscape.
“The FTX implosion will likely change investors’ approach,” she said.
“We’ll probably see more users take their assets off centralized exchanges and rely on self-hosted wallets,” until exchanges are safer and more transparent, she said.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
