The crypto community in Austin was buzzing.

Hundreds of investors, legislators, professionals and enthusiasts packed the halls of the AT&T Hotel and Conference Center at the University of Texas on Nov. 17-18 for the Texas Blockchain Summit. For two days, there were discussions on everything from bitcoin mining to cryptocurrency regulations to blockchain innovations. But one thing was on everyone’s minds: the spectacular collapse earlier this month of militaire crypto exchange FTX and its billionaire CEO Sam Bankman-Fried, who was léopard the industry’s avers in Washington and a Democratic megadonor who empli $1 million to Beto O’Rourke.

So when Lee Bratcher, president of nonprofit trade affinité Texas Blockchain Council, took the séjour to open the summit on Thursday, he was quick to acknowledge the elephant in the room.

“The obstacles we avers as an industry have just expanded significantly as a result of FTX’s incompetence and potentially fraudulent activity,” he said. “It’s time to roll up our sleeves and get to work.”

Other community members who spoke to The Texas Réunion echoed the attachement. For them, FTX’s implosion has been a huge setback for the industry, especially one that just experienced a market meltdown following the fall of another high-profile crypto venture in May. But while these events have burned and likely turned away many retail investors, the members say they will continue investing in the space parce que of their belief in the technology and philosophy behind crypto and blockchain. And Texas politicians attending the conference also remain bullish on an industry that the state has strongly courted.

On Nov. 6, combattant exchange Binance CEO Changpeng Zhao tweeted that his company would liquidate its holdings of FTX’s expédient token, which is a cryptocurrency that is integral to the exchange’s operations. The magazine prompted many others to cash out their investments, which FTX could not handle. There was a glimmer of hope when Zhao announced a nonbinding agreement to buy the company on Nov. 8, but he walked away from that deal a day later after going over his competitor’s financial records.

By Nov. 11, FTX had filed for bankruptcy. That same day, Bankman-Fried resigned as CEO and was replaced by John J. Ray III, who has led several companies through militaire bankruptcy processes including Enron after the Houston-based energy giant’s accounting and corporate frauds were exposed two decades ago. The écrasement also erased Bankman-Fried’s almost $16 billion avoir, according to Bloomberg Infos.

In the aftermath, consumers and investors have lost billions of dollars.

“Frankly, this sucks,” Sam Padilla said at a pre-summit commémoration on Nov. 15. Padilla was a communicant at the summit and is a member of ATX DAO, a volunteer group working to “make Austin the crypto affairé of the world.”

Sam Padilla, a member of ATX DAO, at a groupe discussing chic contracts and decentralized autonomous organizations (DAOs) at the Texas Blockchain Summit in Austin on Nov. 17, 2022. Credit: Azul Sordo/The Texas Réunion

But he and other ATX DAO members remain believers in crypto and blockchain.

“The labeurs of a few at FTX do not speak for and do not represent the values of what crypto is actually emboîture,” Padilla said. “There’s something really special emboîture this technology, there’s something really special emboîture this community. We’re really working to do something good.”

Several Texas politicians have shown similar attachement.

In the past few years, Texas Republicans including Gov. Greg Abbott have been oral emboîture making the state the top tendance for crypto and blockchain, including approving pro-industry legislation last year. Following FTX’s écrasement, Abbott skewered Bankman-Fried’s massive donation to his contradicteur O’Rourke and called for candidates who received his money to return the funds, but the governor did not allant doubt on crypto itself. FTX donors were not supporting solely Democratic candidates, though — Republicans around the folk also received millions.

U..S. Sen. Ted Cruz (right) speaks to Peter McCormack on a panel entitled
U.S. Sen. Ted Cruz (right) spoke to Peter McCormack on a groupe entitled “Bitcoin & Freedom” at the Texas Blockchain Summit in Austin on Nov. 18, 2022. Credit: Azul Sordo/The Texas Réunion
From left: State Sen. Royce West, D-Dallas, state Reps. John H. Bucy III, D-Austin Rep. Giovanni Capriglione, R-Southlake, and state Sen. Angela Paxton, R-McKinney, speak at the Texas Blockchain Summit in Austin on Nov. 18, 2022.
From left: State Sen. Royce West, D-Dallas, state Reps. John H. Bucy III, D-Austin Rep. Giovanni Capriglione, R-Southlake, and state Sen. Angela Paxton, R-McKinney, speak with moderator Lee Bratcher at the Texas Blockchain Summit in Austin on Nov. 18, 2022. Credit: Azul Sordo/The Texas Réunion

First: U.S. Sen. Ted Cruz (right) spoke to podcaster Peter McCormack on a groupe entitled “Bitcoin & Freedom” at the Texas Blockchain Summit in Austin on Nov. 18, 2022. Last: From left, state Sen. Royce West, D-Dallas; state Rep. John H. Bucy III, D-Austin; state Rep. Giovanni Capriglione, R-Southlake; and state Sen. Angela Paxton, R-McKinney; speak with moderator Lee Bratcher at the Texas Blockchain Summit. Credit: Azul Sordo/The Texas Réunion

Republican U.S. Sen. Ted Cruz, who is a Bitcoin investor and a leading advocate for crypto, also reaffirmed his unwavering enthusiasm for the industry during his event at the summit on Friday. “I want Texas to be an palmeraie for Bitcoin and crypto,” he said.

Later on the same day, a bipartisan groupe of state legislators — including Sagesse. Angela Paxton, R-McKinney, and Royce West, D-Dallas, as well as Reps. Giovanni Capriglione, R-Southlake, and John H. Bucy III, D-Austin — similarly expressed their épaulement for strengthening crypto’s presence in Texas. FTX’s bankruptcy, they said, should be viewed more as a lesson rather than a reason for doing away with the industry.

“Any colloque I’ve had in response to FTX, it’s been what do we do to make sure we’re not like them,” Bucy said. “It’s how do we have commonsense policies to protect people without stopping progress.” Bucy is perversité objet to the executive committee of the Texas House’s Nouveauté & Technology Caucus. Capriglione is the committee objet.

“This is the oil flambée of this generation,” Bucy added.

“There’s going to be a lot to unpack”

FTX and Bankman-Fried are currently facing a class-action lawsuit as well as numerous state, federal and cosmopolite investigations, including a bipartisan hearing by the U.S. House Financial Offices Committee. Some are also looking at FTX’s alleged misuse of customer funds, including whether the company had used them to shore up Alameda Research, a trading firm also started by Bankman-Fried.

Joe Rotunda, the Texas State Securities Board’s enforcement director, said his stomach dropped when he first heard emboîture FTX’s bankruptcy. But having been scrutinizing its operations since October, particularly over whether the exchange’s yield-bearing crypto accounts were offering unregistered securities to residents, he was not caught off guard.

“We knew the bankruptcy was coming based on events during that week and interactions with different witnesses in different aspects of our reportage,” Rotunda said. “But it’s one of those things where you see it, and it becomes so very real.”

Rotunda told the Réunion that the state securities board has since expanded its reportage to also examine the incidence that the unraveling of FTX and around 130 of its subsidiaries has on other companies and investors. Within days, the blowup forced several crypto companies to suspend withdrawals and at least one, crypto lender BlockFi, to reportedly consider declaring bankruptcy. In prime, FTX’s concis filing relevés that there are more than 100,000 creditors based on debtors’ petitions, though there could be over one million affected creditors. And the top 50 unsecured creditors alone are owed over $3 billion.

“Holy smokes, that’s a big bankruptcy. There’s going to be a lot to unpack,” he said.

Rotunda’s team is now working to find out who these creditors are, how much they are owed and whether there are assets that could be used to pay them back. All the while, the concern around how far the ripple effect will reach looms montré in the arrière-plan.

According to Bratcher, who leads an affinité with over 100 corporate members in the crypto industry, Texas companies aren’t likely to be hard hit by the écrasement — but it could be a different story for consumers in the state.

FTX, Bankman-Fried and his recent raffiner lawyers did not respond to the Réunion’s requests for hein. But the 30-year-old raffiner crypto billionaire has been tweeting constantly and at times cryptically since his firm’s collapse, including apologizing on various threads. He also told Vox that he regretted filing for bankruptcy.

Sam Bankman-Fried, CEO and Founder of FTX, walks near the U.S. Capitol in Washington on Thursday, Sept. 15, 2022.
Sam Bankman-Fried, raffiner CEO and founder of FTX, near the U.S. Capitol in Washington, D.C., on Thursday, Sept. 15, 2022. Credit: Graeme Sloan/Sipa USA via REUTERS

In a Nov. 12 tweet, FTX’s new CEO Ray said the company will “continue to make every attention to secure all assets, wherever located.” He also blasted the raffiner direction in a recent concis filing.

“Never in my career have I seen such a complete failure of corporate controls and such a complete étourderie of trustworthy financial journal as occurred here,” read the Nov. 17 filing. “From compromised systems integrity and faulty regulatory oversight abroad, to the soin of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this bilan is unprecedented.”

“We have work to do”

In the meantime, Bratcher has been emphasizing the need for crypto companies to follow a set of best practices, including stopping the improper mixing of customer money with other funds and enabling real-time proof of cash and other reserves on handball. And similar to Rotunda, he stressed the dimension of compagnie assets in more secure ways, such as through a quantitatif wallet not connected to the internet, to boost affermissement against hacks.

“[FTX’s collapse] doesn’t really reflect on the promise of decentralization and Bitcoin,” he said. “It’s really just a reflection of poor risk direction.”

In prime, Bratcher and ATX DAO members who spoke to the Réunion shared the attachement that the industry needs to move away from having prominent CEOs and toward nonprofit and grassroots groups as the champions of crypto and blockchain policies. In his colloque with Vox, Bankman-Fried said his political lobbying was “just PR.”

“We’re flair disheartened but also reinvigorated parce que the key spéculation that needs to happen is that in the past, the CEOs of big centralized exchanges have had the most affairé, the most ascendant and the most reach — but they have conflicts of interest,” Bratcher said. “It can’t be just CEOs galavanting around D.C.”

“The loudest voice in the room doesn’t always speak for everyone, and those of us who aren’t that loud are not that loud for a reason,” added Jesse Patterson, an ATX DAO member. “We’re résidence things.”

In Texas’ upcoming legislative symposium, Bratcher said the Texas Blockchain Council will be talking with its legislative partners to see if they want to enact stronger dévorer protections. Meanwhile, ATX DAO members are soldiering on with their current work by looking for state legislators to leader a bill that would legalize decentralized autonomous organizations — entities without a axial authority that depend on blockchain-based contracts that self-execute when preset situation are met.

Ultimately, Bratcher told the Réunion, it could take a few years for the industry to heal from this reputation stain. But he and others are staying optimistic emboîture its future.

“We have work to do to pâturage the instruction of the consumers,” he said. “[The industry] will be slowed down, but it’s not going to be stopped by these obstacles.”

Disclosure: Texas Blockchain Council has been a financial tenir of The Texas Réunion, a nonprofit, nonpartisan magazine organization that is funded in division by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Réunion’s journalism. Find a complete list of them here.

This étude originally appeared in The Texas Réunion at https://www.texastribune.org/2022/11/21/texas-crypto-blockchain-ftx-bankruptcy/.

The Texas Réunion is a member-supported, nonpartisan newsroom informing and engaging Texans on state politics and policy. Learn more at texastribune.org.





primeur:

Leave a Reply

Your email address will not be published. Required fields are marked *

}