Crypto Exchanges Move Away from FTX Drama With Proof of Reserves

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• Crypto exchanges are publishing proof of reserves amidst the FTX meltdown.
• FTX is investigating unauthorized withdrawals worth $477 million.
• Binance has suspended FTT deposits and withdrawals.

Binance and other crypto exchanges, such as Crypto.com, OKX, and Deribit, have all committed to publishing proof that they maintain adequate reserves to match their liabilities to clients over the past week. These actions are in response to the recent collapse of the crypto exchange FTX, which has caused widespread panic in the market.

On Friday, Coinbase (NASDAQ:COIN) issued an email to its clients detailing “how Coinbase’s business is different and ultimately better protects” user accounts and assets. The email clarified that the exchange holds client assets on a one-to-one basis.

Furthermore, after FTX said it was looking into suspicious transactions, several trading platforms began to distance themselves from the company. On Saturday, blockchain firm Elliptic reported that the exchange lost $477 million in crypto with those transfers.Following this, Binance went ahead to pause the deposit of FTT tokens, stating that the firm had “noticed a suspicious movement of a large amount of FTT by the token’s contract deployers.”

Meanwhile, crypto exchange Kraken reportedly spoke with law enforcement on Sunday and immediately suspended a number of accounts belonging to FTX Group, its sister company Alameda Research and its management. The firm said on Twitter that the accounts in question had been locked “to protect their creditors.”

The FTX fiasco began after a news report published a leaked balance sheet revealing that Bankman-Alameda Fried’s Research, a crypto trading business, relied mainly on FTX’s native token, FTT, and the exchange began to experience instability. Prior to this, FTX and its founder had iterated that both firms were entirely unrelated.

Reuters cited unnamed sources saying that Bankman-Fried had moved $10 billion in customer funds to Alameda. Following the article’s publication, Binance CEO Changpeng Zhao announced that, due to “recent revelations,” the company would be selling all of its FTT holdings.

After initially considering rescuing FTX, Binance ultimately opted against doing so. As such, FTX was unable to raise sufficient capital and thus declared bankruptcy.

As of now, a statement from the Royal Bahamas police indicates that the Financial Crimes Investigation Branch is working closely with the Bahamas Securities Commission to investigate “if any criminal misconduct occurred.”

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