Good morning, and welcome to Protocol Fintech. This Thursday: the FTX contagion, Twitter’s recycled payments plan, and Upstart’s warning to other fintech lenders.
Off the chain
A lesser man would look at the battered fintech landscape and say, “Party over, oops, out of time.” But not Elon Musk! Musk is going to party like it’s 1999 with his new toy called Twitter. At the start of 1999, Musk was emailing me about his plans to remake banking with a startup called X.com — plans that accelerated when he merged it with another startup that eventually became PayPal. On Wednesday, he talked up strikingly similar ploys in a Twitter Spaces chat. On Protocol, I dug into all the ways his new plan for Twitter to get into financial services and become a super app — possibly also named X! — sounded a lot like the X.com I remembered.
— Owen Thomas ( email | twitter )
The crypto contagion is real
The collapse of crypto exchange FTX has rippled across the crypto industry, but the ultimate effects have yet to be seen as the trading firm’s complex web of relationships continues to unravel. One of the largest global crypto exchanges, FTX holds deposits for a number of large investors in the crypto industry. FTX also has close ties to Alameda Research, one of the largest investors in the industry. Both firms were founded by Sam Bankman-Fried, and Alameda holds large stakes in many crypto projects and tokens, including Solana, which dropped precipitously this week.
The fallout from FTX comes after a series of crypto bankruptcies: Three Arrows Capital, Celsius, Voyager, and others. Those failures also had effects that can be seen across the industry.
- Crypto industry watchers are wondering who else could be affected. As in those past incidents, the counterparties of these entities aren’t always known.
- Alameda is the most closely watched. Of the $14.6 billion in assets it held as of June, $5.82 billion was in FTX’s native FTT token or other “FTT collateral,” according to a CoinDesk report on FTX’s ties to Alameda that helped spark the current crisis.
- Solana was Alameda’s second-largest holding, with $1.16 billion in “unlocked SOL” or “locked SOL.” (Locked tokens are harder to liquidate.) The revelation of Alameda’s potential need to raise capital and sell Solana may have helped drive a steep drop in the price of Solana to $13.46, down more than 43% in the past 24 hours.
There were other knock-on effects. Crypto.com stopped withdrawals of USDC and USDT on the Solana blockchain Wednesday out of an “abundance of caution,” CEO Kris Marszalek wrote on Twitter, citing FTX’s role in trading Solana-based stablecoins and operating a Solana bridge. (Circle, which issues USDC, said that native USDC on Solana was running normally.)
- Solend, one of the larger Solana lending protocols, reported it was having problems liquidating part of a large loan Wednesday morning . It also disabled all borrowing, according to its website. Solend cited congestion issues as the cause of the issue and later said liquidations had resumed .
- Solana Labs CEO Anatoly Yakovenko, whose company helped develop the Solana blockchain and its corresponding token, tweeted that his company didn’t have any assets on FTX and estimated his company had two and a half years of runway. “We launched in 2020 after markets crashed and the world went into lockdown — chewing glass is in our DNA, and we'll get through together,” he wrote .
Alameda itself had exposure to several other crypto lending outfits that had collapsed earlier this year, including Voyager , to which it said it would repay $200 million in September, and BlockFi , which FTX backed with a line of credit earlier this year. On-chain activity showed Alameda had loans on several DeFi lending protocols , analysts said. The effects of FTX’s crisis will take time to become clear: Bankman-Fried said Thursday he was raising money to solve FTX’s liquidity crunch and that Alameda would wind down its trading. But with the size of the entities involved, and the large investors involved either directly or as counterparties, there’s almost certain to be more fallout. The greatest irony, given the blockchain’s supposed virtues of transparency, may be just how little we know.
— Tomio Geron ( email | twitter )
A version of this story first appeared on Protocol.com. Read it here.
A MESSAGE FROM THE FINANCIAL TECHNOLOGY ASSOCIATION
Don’t miss out! Register today to hear some of the biggest players in fintech discuss the industry’s most pressing issues at the Financial Technology Association’s inaugural Fintech Summit: Shaping the Future of Finance. Produced in partnership with Protocol, all sessions of the event will be live-streamed on November 16th.
On the money
On Protocol: Binance said it was no longer buying FTX after a “corporate due diligence” review.
FTX CEO Sam Bankman-Fried apologized for the crisis. He said on Twitter that he was trying to raise $8 billion to repair the company’s balance sheet.
Also on Protocol: The troubles for FTX are also a " step backwards " for crypto in Washington.
The SEC and DOJ are investigating FTX. The investigation is focusing on potential securities-law violations by FTX's U.S. affiliate.
Another iBuyer is shutting down. Redfin i s set to close its home-flipping business and reduce its workforce by 13%, laying off 862 employees.
Lemonade's third-quarter revenue topped Wall Street's expectations. But the insurtech's share price still closed the day down about 4%.
Upstart’s warning
Upstart is warning that the worst may still be on the way, even as rising interest rates and falling loan volumes have already caused the once high-flying fintech lender's stock to sink nearly 90% this year and prompted a round of layoffs last week.
The company reported earnings on Tuesday that missed the mark Wall Street analysts had set. Its share price fell more than 20% in after-market trading, recovering only slightly Wednesday. CEO Dave Girouard cautioned analysts that there may be more pain to come.
"We’ve chosen to take a conservative position with respect to the direction of the economy in the coming quarters," Girouard said on the company's earnings call. "In other words, we assume the worst is in front of us. We’ll be pleasantly surprised if this turns out not to be the case."
Read the full story on Protocol.com.
— Ryan Deffenbaugh ( email | twitter )
Moves and hires
The Office of the Comptroller of the Currency is looking for a chief financial technology officer. An OCC job posting said the role would focus on "matters regarding digital assets, artificial intelligence, machine learning, cloud adoption, fintech partnerships," and other issues for OCC regulated institutions." The bank regulator last month launched a fintech office .
Xero named Sukhinder Singh Cassidy its CEO. The co-founder of Yodlee will replace Steve Vamos as head of the accounting-software firm, and starts on Nov. 28.
FTX has reportedly lost most of its legal and compliance team. Semafor says the departures happened Tuesday after Binance revealed its now-canceled plan to buy FTX.
Paradigm has launched a policy council. Former Speaker of the House Paul Ryan is a senior adviser to the council, which Paradigm hopes will "tell the story of Web3 in Washington."
Damien Vanderwilt is stepping down as Galaxy Digital's co-president and head of global markets. Vanderwilt will stay on at the crypto firm as senior adviser and board director.
Brex made a pair of hires. Samantha Kwok, most recently at Tableau, is VP of engineering for customer journey and Priya Lakshminarayanan, most recently at Meta, is the new VP of product for customer journey.
In other Brex news , co-founder and co-CEO Henrique Dubugras has been elected to Expedia Group's board of directors.
Tej Sidhu is the chief technology officer of Genesis Global. Sidhu joins the low-code development platform for finance from the same role at Umba.
A MESSAGE FROM THE FINANCIAL TECHNOLOGY ASSOCIATION
Don’t miss out! Register today to hear some of the biggest players in fintech discuss the industry’s most pressing issues at the Financial Technology Association’s inaugural Fintech Summit: Shaping the Future of Finance. Produced in partnership with Protocol, all sessions of the event will be live-streamed on November 16th.
Thanks for reading — see you Monday (we’re taking Friday off)!