As of the first quarter of 2023, almost everyone has heard about, discussed, and debated the FTX fall. The crypto exchange FTX was one of the biggest in the world before its shocking collapse that transpired over just one week. The intimate ties the exchange had to Sam Bankman-Fried’s company Alameda Research and the fact that most of its assets had been seemingly created out of thin air appear to have contributed to its demise. The CEO of the exchange, Bankman-Fried, had assets that peaked at $26.5 billion the previous year.
The ensuing disaster rocked the cryptocurrency market as FTX and Alameda declared bankruptcy, and SBF’s immense wealth vanished almost instantly. We examine FTX’s statistics and data below.
As one of the industry leaders in fintech and cryptocurrency, FTX was expanding swiftly and helping save other businesses while trying to transform how people thought about cryptocurrency. In November 2022, the exchange filed for Chapter 11 bankruptcy, resulting in substantial financial losses for more than a million consumers. This created a void in the cryptocurrency industry that Coinbase is now attempting to fill.
Instead of going to a federal court, Coinbase wants two customer lawsuits it is facing to be settled through private arbitration. The technical subject of whether a party in a lawsuit can be required to continue the case’s defense in a federal district court, even as it requests an appeals court to transfer the disagreement to an arbitrator, will be addressed by the high court in Coinbase’s case.
The Plaintiff, after being conned out of more than $31,000 from his Coinbase account by a third party, Bielski sued the firm. His proposed class action complaint asserts that Coinbase must credit client accounts for cryptocurrency that the Electronic Funds Transfer Act has stolen.
To force arbitration, Coinbase tried. However, a California federal district court judge determined that Bielski’s arbitration agreement with the business was invalid under California law, allowing his lawsuit to continue in district court.
While the crypto company wants to overturn rulings denying it the opportunity to arbitrate the disputes, a federal appeals court has declined to suspend both cases at the district court level.
Neal Katyal, a lawyer for Coinbase before the Supreme Court, stated that the company now has to set aside a lot of time, effort, and money into two burdensome putative class actions in district courts, even though the Ninth Circuit is likely to find that neither case belonged in federal court, to begin with. There is a significant disagreement among the federal appeals courts about the issue that the court will determine, according to Katyal’s petition asking the justices to hear the company’s appeal.
Coinbase Steps Up After FTX Collapse
Coinbase, renowned for its powerful reputation, regulatory compliance, user-friendly software, and financial stability, has the capabilities and standing to manage the market turmoil by FTX’s demise. The network currently has 108 million verified users from more than 100 different countries, $101 billion in assets, and $159 billion in quarterly volume transactions, according to Coinbase.
Coinbase is not immune to the FTX disaster, despite its dominant market share and promising future. A $50 million fine was paid by Coinbase to the New York State Department of Financial Services (NYDFS) on January 4, 2023, in response to claims that the cryptocurrency exchange violated anti-money laundering regulations.
To help prevent future infractions and improve customer safety, Coinbase is also expected to put an additional $50 million into its compliance program as part of the settlement.
Paul Grewal, the Chief Legal Officer of Coinbase, claimed that the platform’s compliance program has advanced more than any other cryptocurrency exchange worldwide and that clients can feel secure using it.
According to Coinbase, being a leader and role model in the cryptocurrency industry requires working with regulators on compliance and other issues. Investors and analysts predict a prosperous future for Coinbase despite the lawsuit.
Although trading volumes may experience a short-term decline, analysts at the company Jefferies predict that Coinbase will ultimately escape unfavorable effects and may even gain market share. The stock soared by more than 15% on Monday, 2 January 2023, due to speculation about potential gains from the shutdown of competitor exchange FTX, increasing demand for cryptocurrencies, and institutional interest in digital assets like Bitcoin and Ethereum.
Why Coinbase Chose This, Despite Legal Disputes
Different from Coinbase, the failure of FTX has raised concerns about the stability and security of the cryptocurrency industry and could make regular traders wary of trading. However, Coinbase has a solid foundation to weather the storm and might even become a market leader thanks to its $5 billion backing in cash, status as a publicly audited firm, and low exposure to FTX and other flailing crypto companies.
Just days after the FTX debacle, the company announced its advocacy to all users via email and through its app to guarantee the safety and security of its users’ assets. Binance and Crypto.com have also taken similar approaches.
Coinbase’s position as a well-established, regulated player in the market may provide it with a significant edge in the face of market disruption, even though the broader consequences of FTX’s failure are not entirely understood. Because of Coinbase’s resilience and stability, the crypto market may continue to develop and mature, positioning it as a significant participant for many years.
Analysts at Bitcoineer offiziell predict that Coinbase will benefit from growing demand for cryptocurrencies and institutional use of digital assets like Bitcoin and Ethereum, in addition to the demise of FTX. When trading digital assets, more institutional investors will probably turn to well-known exchanges like Coinbase as they enter the market.
As a result of the sudden demise of the cryptocurrency exchange FTX, concerns have been raised about the stability and security of the larger cryptocurrency ecosystem. One business that is in an excellent position to withstand the crisis after the incident is Coinbase. Coinbase is dedicated, despite lawsuits, to enhance and improving its marketplaces to ensure that it is safe for all users. While the FTX collapse might have shaken the crypto market, it increased awareness of the need for security in crypto.
Byline: Hannah Parker