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Crypto exchange FTX under investigation by DOJ, CEO apologizes
Crypto currency exchange FTX took a big hit with its sudden collapse and is now under federal investigation. The founder, who is from the Bay Area, is now taking responsibility.
SAN FRANCISCO - The founder of a cryptocurrency exchange apologized after it became public that the Bay Area native's company was under investigation.
The Department of Justice and the Securities and Exchange Commission are probing whether FTX CEO and founder Sam Bankman-Fried used customers' crypto deposits to fund bets at his Alameda Research hedge fund.
Bankman-Fried said "I sincerely apologize" on social media and promised more transparency going forward.
Bankman-Fried asked investors for more than $8 billion to cover withdrawals as customers tried to exit the FTX cryptocurrency exchange.
FTX had many sponsorships including a $10-million global sponsorship deal with the Warriors announced in December last year. FTX also had deals with Major League Baseball umpires, the Miami Heat basketball team, and UC Berkeley's Memorial Stadium.
"It's already having a very negative impact for sure," said Borys Polushko who works in the cryptocurrency sector. Polushko was part of a "crypto and karaoke" meetup at Dimple's bar in San Francisco Thursday night.
"Today, Bitcoin dropped several thousand dollars already, so it's generally people who didn't have very strong conviction about crypto, they are panicking. And of course, all of the FTX customers got affected. They are panicking because they can't withdraw their funds," said Polushko.
Dean Ludgate who organized the meetup says he learned years ago the risks of cryptocurrency.
"The volatility and the chance to make money real quick, but you don't always consider the fact that you can lose it just as quickly," said Ludgate.
Ludgate and others at the meetup remain optimistic, however, that the entire cryptocurrency sector will turn out to be viable in the long run.
"Similarly, to the dot-com bubble, there are going to be projects that don't have fundamental use, and they're going to get weeded out," said Ludgate.
Nicholas Weaver, a researcher with the UC Berkeley-affiliated International Computer Science Institute, says the collapse of FTX shows underlying problems with cryptocurrency and the need for greater regulation.
"You do see the power of proper regulation already. FTX has a separate subsidiary FTX US that at least for now, doesn't appear to be insolvent because it is actually regulating cryptocurrencies," said Weaver.