Yahoo Finance’s David Hollerith explains what happened to crypto exchange FTX, the fallout across the crypto industry, and what it means for investors.

Video Transcript

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AKIKO FUJITA: Crypto is seeing a slight boost this morning after plunging to new year-to-date lows on Wednesday. That's after the largest crypto exchange, Binance, walked away from a deal to buy rival firm FTX.

For the latest on what's happening, let's bring in Yahoo! Finance's David Hollerith. David, it's certainly been a wild ride over the last few days. It feels like the story is changing by the hour. But we did hear from CEO Sam Bankman-Fried earlier this morning, putting out a very detailed thread that essentially sums up the fact that he says, look, I just didn't get it right. I should have done better.

DAVID HOLLERITH: Yeah, Akiko, as far as what Bankman-Fried did not get right, we're still trying to figure that out exactly. The crypto exchange FTX is valued at $32 billion in January of this year. And now it's insolvent and it's desperately seeking money. And there is a gap on its balance sheet for what it owes customers in terms of assets that could be anywhere from $6 to $10 billion. So again, we have limited clarity here.

But it started last week with a report from CoinDesk that raised concerns over the trading firm Alameda Research, which is the sister firm to FTX and market maker. On Sunday, Binance's CZ, the rival exchange leader, said that they would sell their holdings for a token that the FTX uses to make trades.

And since then, we've seen a bank run of about $5 billion, just on Sunday, from FTX. So we're still trying to piece together how much of this was a bank run sparked by fears and low to higher interest rates versus how much of this has to do with what FTX got wrong. But it's pretty clear Bankman-Fried has made-- is saying that he did get something wrong. And we're still trying to figure out.

Again, the worst-case scenario would be that Alameda, the sister firm, had taken customer assets from FTX and used it to trade, and lost money in those trades. And we still don't really have clarity as to whether or not this happened.

AKIKO FUJITA: David, you know, it's hard to overstate just how dramatic the fall from grace has been for this company. FTX was valued at $32 billion earlier this year. There's a number of big name investors, including Sequoia, SoftBank, many others, that have led to that valuation. What are we hearing from them in terms of the losses they are likely to incur?

DAVID HOLLERITH: Absolutely, Sequoia has written off their equity investment into FTX down to $0.00 from two $213 million. And other equity firms, other VCs, similar, Multicoin Capital has also done the same. We're sort of waiting to hear from them. And they're, you know sort of waiting-- I guess they're trying to gauge how they're supposed to read the situation to tell clients. But it's fair to assume they might be writing that off to $0.00.