Crypto Brokerage FalconX Reveals It Has Funds Locked Up On FTX

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Institutional crypto-trading platform FalconX revealed in a company blog post today that 18% of its “unencumbered cash equivalents” remain locked to FTX.

In a worst-case scenario, where no money can be recovered, FalconX said it has decades of lead, meaning it has enough capital to continue operating.

The company was previously hesitant to say whether it had assets locked on FTX.

Two weeks ago, FalconX CEO Raghu Yarlagadda appeared on Bloomberg TV. When asked if the company had any funds tied up in FTX, he asked for the question to be repeated, then explained that the process of restructuring FTX would be long and complicated. When asked a third time, he said FalconX was performing well within our risk tolerance, which is why the company came out with a small position against our balance sheet.

In Friday’s blog post, FalconX reaffirmed what it had previously said about the lack of exposure to Genesis, the beleaguered trading desk owned by the Digital Currency Group; Alameda Research, the trading desk founded by former FTX CEO Sam Bankman-Fried; and BlockFi, a crypto lender that accepted a bailout from FTX US and has since had to file for bankruptcy following FTX’s filing for Chapter 11 protection.

It’s been over a month since it became clear that FTX was in trouble and later declared bankruptcy, but companies are still coming forward to disclose their exposure. Although it took no formal action in response to FTX’s bankruptcy, the United States Securities and Exchange Commission paid attention.

On Thursday, the SEC issued new guidelines urging companies to provide more details about their cryptocurrency holdings.

The guidelines, which include a sample letter on the regulators’ website, state that companies must disclose third-party crypto market participants, risks to company liquidity, access to funding and the impact potential for any legal proceeding, investigation or regulatory matter.

The guidelines also specifically called for reporting the downstream effect of the failure of third-party companies could impact the companies themselves.

Earlier in the week, crypto insurance protocol Nexus Mutual revealed $3 million in Ethereum exposure to Orthogonal Trading, another ripple effect of FTX’s collapse. On Monday, crypto exchanges Bybit and Swytftx announced they were downsizing as the crypto bear market intensified after FTX fell.

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