Crypto Bigwigs Hint Not All is Well at FTX – Trustnodes

“All crypto exchanges should do merkle-tree proof-of-reserves,” Changpeng Zhao, Binance’s CEO, said in the first statement since announcing intent to acquire FTX.

“Banks run on fractional reserves. Crypto exchanges should not,” he added. “Binance
will start to do proof-of-reserves soon. Full transparency.”

Older crypto exchanges have been put through numerous crypto reserves tests by the market when they were younger and smaller.

FTX however is a newer exchange and has not met such scrutiny until recently, with it unclear whether this statement is in anyway related to the ongoing FTX events.

Changpeng’s statement came soon after Jesse Powell, Kraken’s CEO, highlighted a previous statement where he said: “We don’t play these exotic shell games. I get the benefit (and risks) in DeFi but we’re not operating a hedge fund either.”

“First and foremost, I care about clients being made whole,” Powell said, clearly referring to the FTX events. “Investors knew what they were getting in to. The deal is sure to draw significant scrutiny. There are a lot of allegations flying around and M&A might pressure a govt move, or look like a convenient 2-for-1 opportunity.”

Coinbase’s CEO Brian Armstrong on the other hand seems to be ignoring all this, presumably focusing instead on trying to keep Coinbase running after numerous reports of brief downtimes during the high volatility experienced today.

Where FTX is concerned, little has come out but there’s a completely unconfirmed rumor by Andrew Kang of Mechanism Capital that FTX is “supposedly trying to raise $6B bailout.”

That’s a significant sum. Binance can perhaps cover it, but it would of course be quite unclear just where all that money FTX had, has gone if this $6 billion sum is correct.

The Alameda Research arm, which is kind of a hedge fund, was playing on defi. Just how close the relationship between that and FTX was where assets are concerned, is unclear, but the crypto big wigs are giving hints that not all is well with FTX.

“FTX funds are not custodied at BitGo,” Mike Belshe, BitGo’s CEO, said. “I understand why users would wish they were, however, as this would isolate client funds from exchange funds, provide protection in the event of bankruptcy, and also provide more transparency and checks and balances.”

It is thought FTX US does use BitGo however, but where FTX is concerned, “I hope that consumers come to demand regular Proof of Reserves audits,” Powell said.

There are reports FTX customers are still waiting to withdraw for more than five hours, although FTX’s addresses seem to have been depleted earlier today.

Just how many customers would remain affected if FTX can not continue running, is unclear.