FTX Collapse Ripples On

FTX Collapse Ripples On

Crypto Bank Silvergate Asked to Disclose FTX Ties

Silvergate Capital Corporation is a crypto bank. Three US Senators contacted the corporation, requesting that all documents regarding funds transfers of FTX empire’s collapsed Sam Bankman-Fried be released. The bank’s shares in La Jolla, California, dropped by up to 8%. Silvergate is currently trading at a fresh 52-week low, with its losses on the year now exceeding 84%.

The letter mentions Silvergate’s banking services to both FTX and Alameda Research. It claims that Silvergate’s depository services were at the heart of the improper transfer of FTX customer money.

The Senators insisted that “Silvergate’s failure to take adequate notice of this scheme suggests that it may have failed to implement or maintain an effective anti-money laundering program, as required under the Bank Secrecy Act.”

Amidst FTX Contagion, yet Another Hedge Fund Defaults

Sam Bankman-Fried’s crypto empire’s messiness is seeping into the decentralized finance world. A hedge fund was found in default on almost $36 million of debt.

The demise of FTX and related trading operations has left Orthogonal Trading significantly harmed, making it unable to pay back a $10 million bitcoin loan, according to a tweet on Tuesday. As a result, the DeFi protocol Maple lending pool operator issued a notice of default for all of the fund’s existing borrowings.

The most recent example of crypto hedge funds getting shaken by Sam Bankman-Fried’s FTX is the default option. Many hedge funds have reported losing money on the site after it went bankrupt. FTX was a favorite trading venue for institutional crypto investors. The brunt of the FTX collapse has so far been avoided by decentralized finance. This allows users to borrow, lend, and trade cryptocurrencies without a central intermediary. Yet, Orthogonal Trading’s default signals how widely the FTX and Bankman-Fried’s trading company Alameda Research demise has spread.

In the event of a default, loans granted on unsecured platforms like Maple aren’t dependent on large pools of collateral to back borrowers’ positions. Instead, they rely on pool managers like M11 to do their research. Because Orthogonal Trading lied about its financial position to the lending pool, M11 Credit, Maple said it had terminated ties with the hedge fund.

Orthogonal Trading has borrowed $31 million in USDC stablecoin and another $4.9 million denominated in a wrapped Ether token. This information is according to Maple data. It has risen from 14% of M11 Credit’s loans at the beginning of September, now accounting for the vast majority.