The issuer of the USD Coin (USDC) stablecoin, Circle Company, owns investments in the equity of FTX Group in the amount of about $10.6 million. The firm said this in a statement to the SEC.
On November 11, FTX's parent company, Alameda Research, and about 130 other affiliated legal entities filed for bankruptcy.
On November 9, amid the escalating liquidity crisis at FTX, Circle CEO Jeremy Allaire published a thread in order to dispel concerns about the impact of the turbulence on the company's business.
According to him, Sam Bankman-Fried's structures have been receiving services for about a year and a half, such as the possibility of issuing/redeeming USDC or API access on the same terms as other clients. He added that Circle has never provided loans to FTX and Alameda, nor has it traded the FTT token.
Allaire called the company a "tiny" FTX shareholder, whose stake in Circle described the same.
A Circle representative explained to Decrypt that the company does not disclose information about investments unless it is about significant amounts.
For this reason, Allaire did not announce the volume of investments in FTX. However, since Circle is in the process of entering the stock exchange through a deal with the SPAC Concord Acquisition Corp, they decided to specify the amount in the appropriate form for the SEC, he stressed.
Circle announced a merger with Concord in July 2021. Then the combined company was valued at $ 4.5 billion, but in February 2022, under the new terms of the deal, the projected value of the firm increased to $ 9 billion.
The parties expected to complete the reverse merger by the end of this year. However, Concord postponed the deadline to "no later than January 31, 2023." To approve the procedure, the company will hold a special meeting of shareholders instead of the annual one.
In the documents for the regulator, Circle admitted that it would not be able to meet the forecast indicators under the previous agreement. As the main reasons , the firm named:
• fall in the value of the main cryptocurrencies in 2022;
• collapse of major industry players like FTX, Voyager Digital and Celsius Network;
• rise in interest rates in the United States, which caused the outflow of funds from the USDC.
The company also pointed to Binance's decision to automatically convert USDC to BUSD on its platform. However, it was difficult to assess the impact of these operations on financial results.
Recall that Jeremy Allaire compared the insolvency of FTX with the collapse of the investment bank Lehman Brothers, which became the catalyst for the global financial crisis of 2008.