Payments services giant Visa has terminated all deals with bankrupt crypto firm FTX. The crypto exchange founded by Sam Bankman-Fried faced liquidity issues after mishandling over $2 billion in customer funds. Other partners are also pulling back from agreements made with the company prior to its collapse.
VISA Cancels All Contracts With FTX
Digital payments services giant Visa Inc. is severing all ties with bankrupt cryptocurrency exchange FTX. In October, both companies reached an agreement to launch crypto debit cards for FTX customers to pay for goods and services by converting crypto to fiat at the point of sale. The FTX x Visa debit card available to customers in the United States was expected to be rolled out in 40 other countries by the end of 2023.
Now the world’s largest payments processor has announced that it is terminating the agreement made with Sam Bankman-Fried’s (SBF) now-collapsed crypto company.
“The situation with FTX is unfortunate and we are monitoring developments closely. We have terminated our global agreements with FTX and their U.S debit card program is being wound down by their issuer,” a Visa spokesperson told Reuters.
Earlier this month, the once world’s third-largest cryptocurrency exchange by trading volume imploded after facing liquidity issues. The company owned by SBF allegedly mishandled $2 billion worth of customer assets that were moved from the platform to Alameda Research, a crypto trading firm and hedge fund co-founded by the former billionaire. At the time, Alameda Research held $14.6 billion worth of assets in its reserves. However, the company’s balance sheet was dominated by FTT, a native token of FTX. The company also owed $8 billion in liabilities, of which $7.9 billion was in loans. The company’s decision to back its reserves with a native token with little to no utility outside of the platform was inviting trouble.
Earlier last week, Binance CEO “CZ,, who was an early investor in FTX, signed a non-binding letter of intent with SBF to acquire the exchange. However, after reviewing FTX’s finances, the world’s largest cryptocurrency exchange decided not to pursue the deal, accusing the company of financial wrongdoing. Binance then decided to sell over $2 billion worth of FTT that it had in its possession. This resulted in the value of the token plummeting by over 90%. Panicked customers began withdrawing their funds from the exchange. Over $6 billion worth of crypto assets were withdrawn in under 24 hours, which led to FTX suspending all activities on the exchange.
It was later revealed that both FTX and Alameda Research were being investigated by the Securities and Exchange Commission (SEC) and the Department of Justice for their controversial business relationship, and for violating the law by selling products to customers that were not registered as securities. Both companies have now filed for Chapter 11 bankruptcy protection and assigned a liquidator to clear all liabilities. Sam Bankman-Fried also stepped down from his role as CEO.
In January, FTX raised $400 million from venture capital firms SoftBank, Temasek, Multicoin Capital, Sequoia Capital, and Paradigm in a funding round to grow the company. The collapsed crypto giant had also agreed on a deal to acquire $50 million worth of assets from bankrupt crypto lender Voyager Digital in August.
Following Visa’s decision to pull out from all agreements with FTX, other partners have also followed suit. Sequoia Capital, one of FTX’s backers informed shareholders that it has written down $214 million invested into the company. Temasek also wrote down 1% of shares bought in the company which was worth $275 million. Investment giant SkyBridge is working on buying back the 30% stake it had sold to Bankman and FTX back in September. Sam Bankman-Fried and celebrities including Tom Brady, Shaq O’Neil, Stephen Curry and Gisele Bundchen, are facing a class-action lawsuit by investors for promoting a “fraud scheme”.