Cryptocurrency exchange FTX Trading Ltd. reportedly stopped processing withdrawals of certain currencies earlier this morning according to a report from The Block amid a massive sale of the exchange’s native FTT tokens by competitor exchange Binance Holdings Ltd.
The Block research analyst Stephen Zheng cited Etherscan data showing that customer withdrawals on the Ethereum blockchain ceased at 6:37 a.m. ET and that it was similarly happening to Tron and Solana.
“It appears that FTX has stopped processing on-chain withdrawals from at least their main identified wallets on Ethereum, Solana and Tron,” said Zheng. “This is weird as there presumably are still people queueing up waiting for their withdrawals.”
This report follows recent insolvency rumors that struck the exchange over the weekend when Binance, a competing cryptocurrency exchange, announced that it was liquidating its holdings of FTX’s native tokens. This led users to rush to the exchange and begin withdrawing their funds from their accounts, slowing down the system.
Although The Block has reported that withdrawals of these cryptocurrencies have been suspended, some users have noted that they have successfully withdrawn them on FTX on social media. Zheng took to Twitter to address the report, noting that FTX.US, the U.S. arm of FTX was still processing withdrawals.
Some users on social media reported that some withdrawals, especially Bitcoin, were going slowly. Meaning that it’s likely that this is probably a liquidity issue caused by a greater-than-average number of users trying to withdraw funds. After the news hit on Monday, FTX took to Twitter to assure users that the team was working to address the backlog.
“This is likely just a liquidity issue, not a solvency problem,” said Frank Muci, a crypto analyst and policy fellow at the LSE School of Public Policy on Twitter, “But it highlights why centralized exchanges should be regulated by a serious oversight body. And why at minimum, exchanges should publish audited financials / proof of reserves.”
The exchange may be facing an illiquidity crisis given user withdrawals according to a report from analyst firm Nansen, which showed that $1.2 billion in total crypto has been withdrawn from FTX in the past 24 hours and only $540 million has been deposited. This accounts for a net flow of -$653 million and the withdrawals continue to increase.
As of yet, there have been no official statements made by FTX suggesting that the exchange is in trouble and Chief Executive Sam Bankman-Fried denied rumors that the exchange was troubled on Monday.
“FTX is fine. Assets are fine,” Bankman-Fried said at the time. “FTX has enough to cover all client holdings… We have been processing all withdrawals, and will continue to be.”
After news of the Binance token selloff hit, FTX’s FTT token plummeted in value by over 35% from $22.8 to $14.7. Following on, the broader cryptocurrency markets also fell with bitcoin dropping 6.3% and Ethereum falling 8.6%.