Global Recession a Bigger Risk to Russia's Oil Revenue than Price Cap

Commodity

Russia-Ukraine Conflict

Summary:

Russia's oil export revenues are at much greater risk from a global economic recession than the price cap being planned by the United States and the European Union.

Recession is a sure-fire way to reduce Russia's earnings from the export of crude, diesel and other refined products.

If there is a global economic slowdown in 2023, Russia's export revenues could fall by between a third and a half, based on experience over the last two decades.

U.S. and EU policymakers will not deliberately plunge their economies into a recession simply to intensify the economic pressure on Russia; privation is not an attractive option in electoral politics.

But if their economies go into recession anyway, which currently appears probable, Russia's export revenues will fall sharply.

The G7 and European Union's planned price cap on Russia's exports of crude from Dec. 5 and products from Feb. 5 represents an attempt to achieve the same reduction in revenues without tipping economies into recession.

Russia's Oil Revenues

Russia's crude export volumes were broadly steady at between 220 million and 260 million tonnes per year between 2004 and 2021, according to trade statistics compiled by the United Nations.

Product exports more than doubled from 81 million tonnes in 2004 to 186 million tonnes in 2016 but have since settled back to around 145 million tonnes per year since 2018.

Revenues were much more variable and correlated closely with the price of Brent. Russia's annual earnings peaked between $263 billion and $283 billion per year in the period of very high prices between 2011 and 2013.

They dropped to $140 billion in the recession of 2009; $130-$165 billion during the volume war and mid-cycle slowdown of 2015-2017; and $118 billion during the first wave of the coronavirus pandemic in 2020.

Like other major oil exporters, Russia's revenues are strongly pro-cyclical, getting a double boost in booms from higher volumes and prices, and taking a double hit in slumps from lower prices and shipments. Global Recession a Bigger Risk to Russia's Oil Revenue than Price Cap_1

Global Recession a Bigger Risk to Russia's Oil Revenue than Price Cap_1

Global Recession a Bigger Risk to Russia's Oil Revenue than Price Cap_2

Global Recession a Bigger Risk to Russia's Oil Revenue than Price Cap_3

Global Recession a Bigger Risk to Russia's Oil Revenue than Price Cap_4

Market Segmentation

If the proposed crude price cap was set at around $70-75 per barrel, with appropriate mark-ups for refined products, it would result in revenues close to the average for the decade between 2012 and 2021.

For U.S. and EU policymakers, it is clearly a superior option, but there are concerns about whether the cap is workable.

The cap depends on segmenting the global market into separate markets for sanctioned and non-sanctioned petroleum, with different prices prevailing in each for what is essentially the same product.

Businesses routinely segment markets to charge different prices to customers based on characteristics such as customer type, age, gender, ability to pay, stickiness, order size and ability to access alternatives.

In this case, U.S. and EU sanctions, including on the provision of maritime, payments and insurance services, are intended to ensure the segments remain separate.

Sanctioned petroleum could only be traded freely below the price cap while unsanctioned petroleum could be traded at any price, including prices well above the cap.

Sanctions regulations will be designed to ensure sanctioned petroleum cannot be transferred across the barrier to become unsanctioned petroleum.

Like any business that tries to maintain segmented markets, however, the barrier will come under greater pressure the wider the price gap between the two markets.

If the crude cap is set at $60-65 per barrel, while unsanctioned crude trades at $120, the incentives for circumvention will be enormous.

If the cap is set at $75-80, while unsanctioned barrels trade at $85-90, the segmentation will be easier to maintain.

Setting The Cap Level

The effectiveness of market segmentation will therefore depend on (a) the level at which the caps are set; (b) prevailing prices for unsanctioned crude and products; and (c) the intensity of sanctions enforcement.

A low crude price cap of $60 per barrel would reduce Russia's revenues aggressively, but could be hard to sustain if prices for unsanctioned oil rise above $100 again, and rely on intensive enforcement.

A high price cap of $80 would have much less impact on Russia's revenues, but be easier to sustain if prices stay around $90-100, and might be largely self-enforcing.

Prevailing prices for crude and refined products are changing all the time, so caps would need to be adjusted regularly to maintain the same level of segmentation with the same level of enforcement.

Policymakers would also have the option of flexing the intensity of enforcement to make the barrier between the two market segments more or less porous.

For example, with crude prices currently at $90-100 per barrel, policymakers could opt for a low cap of $60 but a relatively relaxed approach to enforcement, or $80 with stricter enforcement.

The options look very different but the practical outcome might be the same: a lower cap enables policymakers to appear tougher while relaxed enforcement eases the practical barrier.

Recession and price capping turn out to be complementary approaches rather than substitutes for reducing Russia's oil revenues.

Recession would lower prices for unsanctioned petroleum, making it easier to enforce a lower cap. If recession is averted and prices rise, it will become much harder to maintain a low cap without more enforcement.

Russia As Marginal Producer

Sanctions on oil producers are easiest to introduce and enforce when the market is characterised by excess production and excess production capacity.

In the last three decades, sanctions on Iraq, Libya, Venezuela and Iran were all introduced when the market was in surplus and/or alternative supplies were available.

But the market is currently in deficit and alternative suppliers such as U.S. shale firms and Saudi Arabia have been either unwilling or unable to increase production.

Russia accounted for 13% of global production in 2021, and an even higher share of crude traded by tanker, much higher than Iraq, Libya, Venezuela or Iran at the time they were sanctioned.

At present, the marginal barrel in the global market comes from Russia, and the terms on which it is made available will set prices for all other producers and consumers.

If Russia declined to sell some or all of its exports at the capped price, it would worsen the global shortage, and send prices for unsanctioned oil surging higher.

Even a reduction in Russia's crude exports of 1-2 million barrels per day would likely send prices surging back above $100 and potentially much higher.

Shortages of diesel and other middle distillates are even more severe than for crude and consumers rely heavily on Russia for them.

Recession And Alternatives

In the event of a recession, consumption of crude and diesel would be hit, reducing the call on Russia's crude exporters and refineries.

In the limit, if oil consumption fell by an (improbable) 8 million barrels per day, equivalent to a deep depression or the first round of coronavirus lockdowns, consuming countries would not need Russia's petroleum at all.

Even a more plausible drop of 2 million barrels per day, equivalent to a deep recession, would significantly erode Russia's market power.

Recession remains an extremely unattractive option for U.S. and EU policymakers. The alternative to reduce reliance on Russia's exports is to encourage alternative sources of supply.

The need to make sanctions policy workable at an acceptable cost explains why U.S. and EU policymakers have shown interest in easing sanctions on Venezuela and kept alive the prospect of a nuclear deal with Iran.

It also explains why the Biden administration has pressed stridently if ineffectively for more domestic crude production and diesel output from U.S. refineries.

Source: Reuters

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Kevin Du

Cryptocurrency

At least $1 billion of customer funds have vanished from collapsed crypto exchange FTX, according to two people familiar with the matter.

The exchange's founder Sam Bankman-Fried secretly transferred $10 billion of customer funds from FTX to Bankman-Fried's trading company Alameda Research, the people told Reuters.

A large portion of that total has since disappeared, they said. One source put the missing amount at about $1.7 billion. The other said the gap was between $1 billion and $2 billion.

While it is known that FTX moved customer funds to Alameda, the missing funds are reported here for the first time.

The financial hole was revealed in records that Bankman-Fried shared with other senior executives last Sunday, according to the two sources. The records provided an up-to-date account of the situation at the time, they said. Both sources held senior FTX positions until this week and said they were briefed on the company's finances by top staff.

Bahamas-based FTX filed for bankruptcy on Friday after a rush of customer withdrawals earlier this week. A rescue deal with rival exchange Binance fell through, precipitating crypto’s highest-profile collapse in recent years.

In text messages to Reuters, Bankman-Fried said he "disagreed with the characterization" of the $10 billion transfer.

"We didn't secretly transfer," he said. "We had confusing internal labeling and misread it," he added, without elaborating.

Asked about the missing funds, Bankman-Fried responded: "???"

FTX and Alameda did not respond to requests for comment.

In a tweet on Friday, Bankman-Fried said he was "piecing together" what had happened at FTX. "I was shocked to see things unravel the way they did earlier this week," he wrote. "I will, soon, write up a more complete post on the play by play."

At the heart of FTX's problems were losses at Alameda that most FTX executives did not know about, Reuters has previously reported.

Customer withdrawals had surged last Sunday after Changpeng Zhao, CEO of giant crypto exchange Binance, said Binance would sell its entire stake in FTX's digital token, worth at least $580 million, "due to recent revelations." Four days before, news outlet CoinDesk reported that much of Alameda's $14.6 billion in assets were held in the token.

That Sunday, Bankman-Fried held a meeting with several executives in the Bahamas capital Nassau to calculate how much outside funding he needed to cover FTX's shortfall, the two people with knowledge of FTX's finances said.

Bankman-Fried confirmed to Reuters that the meeting took place.

Bankman-Fried showed several spreadsheets to the heads of the company's regulatory and legal teams that revealed FTX had moved around $10 billion in client funds from FTX to Alameda, the two people said. The spreadsheets displayed how much money FTX loaned to Alameda and what it was used for, they said.

The documents showed that between $1 billion and $2 billion of these funds were not accounted for among Alameda's assets, the sources said. The spreadsheets did not indicate where this money was moved, and the sources said they don't know what became of it.

In a subsequent examination, FTX legal and finance teams also learned that Bankman-Fried implemented what the two people described as a "backdoor" in FTX's book-keeping system, which was built using bespoke software.

They said the "backdoor" allowed Bankman-Fried to execute commands that could alter the company's financial records without alerting other people, including external auditors. This set-up meant that the movement of the $10 billion in funds to Alameda did not trigger internal compliance or accounting red flags at FTX, they said.

In his text message to Reuters, Bankman-Fried denied implementing a "backdoor".

The U.S. Securities and Exchange Commission is investigating FTX.com's handling of customer funds, as well its crypto-lending activities, a source with knowledge of the inquiry told Reuters on Wednesday. The Department of Justice and the Commodity Futures Trading Commission are also investigating, the source said.

FTX's bankruptcy marked a stunning reversal for Bankman-Fried. The 30-year-old had set up FTX in 2019 and led it to become one of the largest crypto exchanges, accumulating a personal fortune estimated at nearly $17 billion. FTX was valued in January at $32 billion, with investors including SoftBank and BlackRock.

The crisis has sent reverberations through the crypto world, with the price of major coins plummeting. And FTX's collapse is drawing comparisons to earlier major business meltdowns.

On Friday, FTX said it had turned over control of the company to John J. Ray III, the restructuring specialist who handled the liquidation of Enron Corp – one of the largest bankruptcies in history.

Source: Reuters

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Cohen

Energy

When Tasso Azevedo, who runs a project tracking forest loss in Brazil, walked around the halls at the COP26 U.N. climate talks last year in Glasgow, people clapped him on the shoulder, shaking their heads and offering sympathy.

"They said, 'We're so sorry'," as deforestation soared and environmental and indigenous agencies lost power under far-right Brazilian President Jair Bolsonaro's government, he remembered.

But since leftist Luiz Inácio Lula da Silva Lula - widely known as Lula - won Brazil's presidency last month, promising to make forest protection a key focus, the mood has dramatically shifted, climate and nature specialists said.

"Now everybody's smiling. It's 180 degrees different," said Azevedo at Brazil's "Climate Action Hub" at the COP27 climate conference in Egypt, as throngs gathered to talk to new indigenous Congress members beneath the country's green, blue and yellow flag.

President-elect Lula is due to arrive in Sharm el-Sheikh next week and is expected to deliver what Marina Silva, an Amazon-born former Brazilian environment minister, described on Saturday as a big announcement on policy shifts.

Those are expected to include an overhaul of Brazil's environmental policies and the creation of a new national climate authority to oversee efforts by all ministries and agencies to combat global warming.

"Brazil is returning as a protagonist" in global efforts to protect forests and drive climate action, Silva told journalists, adding that reversing soaring forest losses is Lula's "top priority".

Under Lula, who unseated Bolsonaro in the October elections, Brazil plans to reforest 12 million hectares (29 million acres) of land by 2030, as it earlier promised under the Paris Agreement.

It also aims to create a new "bioeconomy" for the Amazon and other natural areas, to displace the current model built on deforestation for cattle ranching and soy farming, mining and other destructive activities, Silva said.

The new approach could involve things like bringing high-speed internet to remote areas of the Amazon and boosting production of renewable solar, wind and biomass energy.

It may also explore how to inject more forest products into the pharmaceutical and cosmetics industries, she said.

The work Brazil's forests do in absorbing carbon could also be monetised in the form of offsets - but huge amounts of work are needed to verify that any credits reflect real climate protection, she said.

Brazil's stocks of carbon have their limits, she added - and companies looking for credits to offset their climate-heating emissions must "do their homework" and cut pollution themselves.

Lula's return is expected to reopen international funding taps of forest protection money that were closed under Bolsonaro - but Azevedo said cash was needed more to drive a new Amazon economic model than to enforce forest protection.

"It's not, 'Pay me and I'll save the forest' - the forest enforcement we can do by ourselves," he said. "But if there are funds for the new economy, it would be amazing."

Indigenous Rights

Lula, who will take office in January, will have new allies in Congress - including Sonia Guajajara, Sao Paulo's newly elected first indigenous member of Congress, widely backed to head a new Indigenous Peoples Ministry in Brazil.

She and Célia Xakriabá, another new indigenous representative congresswoman, are both at COP27, along with many other indigenous Brazilians.

They have emphasised that they will push for protection for all of Brazil's diverse natural areas - not just the Amazon - as well as efforts to formalise protection of more indigenous areas and to better safeguard indigenous people, particularly women.

"We can't think of Amazon protection and indigenous protection separately," Xakriabá said in an interview.

Dinamam Tuxá, a lawyer and coordinator of the Articulation of the Indigenous Peoples of Brazil (APIB), which represents many of the country's 900,000 native people, said repairing the damage to forests and institutions done during Bolsonaro's administration would take time.

Lula's administration "won't fix all our issues", he said at COP27, but "we have hope".

"The rebuilding will start from now," he added.

Lula will face stiff political obstacles too, including from pro-Bolsonaro Amazon governors and congressmen, in a country where illegally seizing and burning forest for grazing and farming has long been highly profitable.

Deforestation reached a 15-year high last year in Brazil, driving its climate-changing emissions up 12%, with changes in land use, particularly deforestation, now accounting for almost half of Brazil's total emissions, Azevedo said.

About 21% of the Amazon forest has been lost, an area the size of Spain and Italy combined that is now mainly low-quality pastureland, said Brenda Brito, a researcher with IMAZON, a non-profit group working on Amazon conservation.

Deforestation Penalties

But the tools available to stem illegal deforestation are growing. Without Congressional approval, Lula's administration could swiftly overturn about 160 decrees or rules that have weakened accountability for deforestation, Azevedo said.

One, for instance, authorizes only one person per state working for Ibama, Brazil's environment agency, to sign illegal deforestation penalties, an unnecessary bottleneck, he said.

Another requires every penalty issued to go through a "conciliation panel" at the Ministry of Environment, which has meant that only about one in 100 penalties moves forward, he said.

"They created things that made the government not work. We need to liberate people to work," Azevedo said.

His MapBiomas project, which uses detailed satellite images to document forest losses, can produce 1,500 reports of illegal deforestation each week, he said.

Under Brazilian law, a property that is illegally seized and deforested can be "locked", which bars the person claiming it from selling products from it, getting bank loans or seeking legal title to the land, he noted.

Deploying such sanctions could dramatically boost the risk and take the profit out of illegal deforestation, he said.

"It's expensive to deforest. If you can't make money, you stop," he said. "We have to change the perception of impunity."

Source: Reuters

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Alex

Political

Chinese leader Xi Jinping will arrive on the Indonesian island of Bali on Monday for a long-awaited meeting with U.S. President Joe Biden, ahead of a Group of 20 (G20) summit set to be fraught with tension over Russia's invasion of Ukraine.

The two leaders are expected to discuss Taiwan, Ukraine and North Korea's nuclear ambitions, issues that will also loom over the G20 that opens on Tuesday without Russian President Vladimir Putin in attendance.

Foreign Minister Sergei Lavrov will represent the Russian president at the G20 summit - the first since Russia invaded Ukraine in February - after the Kremlin said Putin was too busy to attend.

On the eve of his meeting with Xi, Biden told Asian leaders in Cambodia that U.S. communication lines with China would stay open to prevent conflict, with tough talks almost certain in the days ahead.

The United States would "compete vigorously" with China while "ensuring competition does not veer into conflict", said Biden, stressing the importance of peace in the Taiwan Strait during an address to the East Asia Summit in Cambodia. He arrived in Bali on Sunday night.

Relations between the superpowers have sunk to their lowest in decades, marred by growing tensions in recent years over a host of issues ranging from Hong Kong and Taiwan to the South China Sea, trade practices and U.S. restrictions on Chinese technology.

Tension rose further after U.S. House Speaker Nancy Pelosi's August trip to Taiwan, the self-governed democratic island that Beijing claims as its territory. The visit enraged China, which subsequently launched military exercises near Taiwan.

But U.S. officials said there have been quiet efforts by both Beijing and Washington over the past two months to repair ties.

"These meetings do not take place in isolation, they are part of a very sustained process," said one Biden administration official. "We have engaged in serious, sustained - dozens and dozens of hours - of quiet diplomacy behind the scenes.

"I think we are satisfied with the seriousness that both sides have brought to that process."

Biden and Xi, who have held five phone or video calls since Biden became president in January 2021, last met in person during the Obama administration when Biden was vice president.

Monday's face-to-face meeting will be at The Mulia, a luxury beachside hotel on Nusa Dua bay in Bali. It is unlikely to produce a joint statement, the White House has said, but it could help stabilise the bilateral relationship.

Both leaders will attend the opening of the G20 summit on Tuesday.

'Some discomfort'

One of the main topics at the G20 will be Russia's war in Ukraine and Biden will be "unapologetic" in his defence of the European nation, U.S. officials said last week.

Xi and Putin have grown increasingly close in recent years, bound by their shared distrust of the West, and reaffirmed their partnership just days before Russia invaded Ukraine. But China has been careful not to provide any direct material support that could trigger Western sanctions against it.

"There have been areas where China and Russia have worked together to deepen and broaden their relationship economically," said the Biden administration official. "But on some of these big issues, I think there is undeniably some discomfort in Beijing about what we've seen in terms of reckless rhetoric and activity on the part of Russia."

Russia's Lavrov said on Sunday the West was "militarising" Southeast Asia in a bid to contain Russian and Chinese interests, setting the stage for more confrontation with Western leaders at the G20.

British Prime Minister Rishi Sunak is expected to meet Lavrov at the summit, a Downing Street spokesperson said in a statement. He is also likely to hold a bilateral meeting with Biden.

The G20 bloc, which includes a broad array of countries ranging from Brazil to India and Germany, accounts for more than 80% of the world's gross domestic product (GDP) and 60% of its population.

Australian Prime Minister Anthony Albanese is due to join Indonesian President Joko Widodo to address a parallel B20 business forum taking place on Monday ahead of the G20 summit. Billionaire Elon Musk is expected to join one of the sessions virtually.

Source: Reuters

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Thomas

Economic

Malaysia's solid economic growth in the third quarter of 2022 is a "nice surprise" and means that the economy is well on track for full recovery, economists said.

They said the performance all boiled down to macroeconomic stability and investors' confidence in the country.

Bank Negara Malaysia today announced that the country's gross domestic product expanded 14.2 per cent in the quarter ended September this year.

This is the strongest quarterly growth in years and fastest posted by any Southeast Asian nation during the period, surpassing Vietnam's 13.7 per cent.

Juwai IQI chuief economist Shan Saeed pointed that Malaysia's average GDP expansion of 9.36 per cent in the January-September 2022 period was ahead of many of its Asean peers.

"It all boils down to macroeconomic stability and investors confidence in the economy. The government has demonstrated total commitment and resolve to deliver economic outcomes for the benefit of masses.

"The 14.2 per cent is very noticeable and fabulous. This clearly reflects that economic strategy of the government has made deep macroeconomic impact in the landscape. It's going to send huge positive signal to the global economy and regional markets," Shan told the New Straits Times.

He said IQI stood bouyant on the Malaysian economic outlook.

"Malaysia continues to remain on global investors radar due to her solid and strong economic performance in 2022," he added.

Putra Business School economic analyst Associate Professor Dr Ahmed Razman Abdul Latiff said he had expected a double-digit growth for Q3, probably around 10 per cent.

"However, a 14.2 per cent growth is indeed a nice surprise and the percentage increase compared to Q2 is even higher than percentage increase in similar quarters in 2019, before the pandemic happens.

"This means that the economy is well on track towards full recovery. And if we look at the GDP value of RM383.8 billion, it is the highest in any quarter ever recorded and this is supported by the double-digit growth of export value that we experienced for the past few months," Ahmed Razman added.

Meanwhile, the Finance Ministry described the 14.2 per cent as "exceptional" and said it implied that Malaysia's GDP was on track to surpass pre-pandemic growth in 2022.

This would be supported by an expansion in domestic demand mainly from household spending in line with the recovery of the labour market and income prospects.

MIDF Research said the robust growth indicated that growth momentum had picked up further as Covid-19 restrictions had generally been uplifted, international borders reopening, growing domestic spending and continued expansion in external sector.

The firm upgraded its 2022 GDP growth forecast to 8.0 per cent from 6.6 per cent previously.

"Even with zero growth quarter-on-quarter in the next quarter, the 2022 GDP growth would be at least 7.7 per cent," MIDF Research said.

Source: NST

To stay updated on all economic events of today, please check out our Economic calendar

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Saif

Forex

Traders' Opinions

Fundamental analysis

We have a lot of significant news coming this week for the British pound On the other hand we have medium-impact news on the CHF

U.K. Unemployment Rate

Previous 3.5%

Expectation 3.5%

A higher-than-expected figure should be seen as negative (bearish) for the GBP while a lower-than-expected figure should be seen as positive (bullish) for the GBP.

GBPCHF Going Down to the Previous Demand Zone_1

U.K. CPI YoY

Previous 10.1%

Expectation 10.6%

A higher-than-expected figure should be seen as positive (bullish) for the GBP while a lower-than-expected figure should be seen as negative (bearish) for the GBP.

GBPCHF Going Down to the Previous Demand Zone_2

Switzerland's Balance of Trade

Previous 2.78B

Expectation 2.9B

A higher-than-expected figure should be seen as positive (bullish) for the CHF while a lower-than-expected figure should be seen as negative (bearish) for the CHF.

GBPCHF Going Down to the Previous Demand Zone_3

Switzerland Industrial Production YoY

Previous 5.1%

Expectation 2.5%

GBPCHF Going Down to the Previous Demand Zone_4

Technical analysis

We can see in the 4-hour chart that a downtrend has been established We can see that very clearly in the chart the high and lower high and the other lower high We expect the market to pull up at 1.12428 And then we'll continue the downtrend until the next demand zone at 1.09004 With 20 moving average pointing down as a dynamic supply zone as clear in the diagram chart.

GBPCHF Going Down to the Previous Demand Zone_5

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Kevin Du

Cryptocurrency

The imploding cryptocurrency trading firm FTX is now short billions of dollars after experiencing the crypto equivalent of a bank run.

The exchange, formerly one of the world's largest, sought bankruptcy protection last week, and its CEO and founder resigned. Hours later, the trading firm said there had been "unauthorised access" and that funds had disappeared. Analysts say hundreds of millions of dollars may have vanished.

The unraveling of the once-giant exchange is sending shockwaves through the industry. Here's a look at the company's collapse so far:

Why did FTX go bankrupt?

Customers fled the exchange over fears about whether FTX had sufficient capital, and it agreed to sell itself to rival crypto exchange Binance. But the deal fell through pending Binance's due diligence on FTX's balance sheet.

FTX had valued its assets between US$10 billion to US$50 billion, and listed more than 130 affiliated companies around the world, according to its bankruptcy filing.

FTX and dozens of affiliated companies - including CEO Sam Bankman-Fried's hedge fund, Alameda Research - filed the bankruptcy petition in Delaware on Friday (Nov 11).

This week's developments marked a shocking turn of events for Bankman-Fried, who was hailed as somewhat of a savior earlier this year when he helped shore up a number of cryptocurrency companies that ran into financial trouble. He was recently estimated to be worth US$23 billion and has been a prominent political donor to Democrats.

Was it hacked too?

FTX confirmed Saturday there had been unauthorised access to its accounts, hours after the company filed for Chapter 11 bankruptcy protection.

A debate formed on social media about whether the exchange was hacked or a company insider had stolen funds - a possibility that cryptocurrency analysts couldn’t rule out.

Exactly how much money is involved is unclear, but analytics firm Elliptic estimated Saturday that US$477 million was missing from the exchange. FTX's new CEO John Ray III said it was switching off the ability to trade or withdraw funds and taking steps to secure customers' assets.

Is my bitcoin safe?

People who own bitcoin should be OK if they keep them off exchanges such as FTX that effectively work as a "crypto-casino gambling website," said Cory Klippsten, the CEO of financial services firm Swan Bitcoin.

"Any exchange is a security risk," said Klippsten. Some are more reputable than others, but he said a better option is to take control of your digital assets. "With bitcoin, you have the option to take self-custody and take your coins off the exchange," he said.

Is FTX under investigation?

The Royal Bahamas Police Force said Sunday it is investigating FTX, adding to the company's woes. The police force said in a statement on Sunday it was working with Bahamas securities regulators to "investigate if any criminal misconduct occurred" involving the exchange, which had moved its headquarters to the Caribbean country last year.

Is anyone else investigating?

Even before the bankruptcy filing and missing funds, the US Department of Justice and the Securities and Exchange Commission began examining FTX to determine whether any criminal activity or securities offenses were committed, according to a person familiar with matter who spoke to The Associated Press last week on condition of anonymity because they could not discuss details of the investigations publicly.

What are the repercussions?

Companies that backed FTX are writing down investments, and the prices of bitcoin and other digital currencies have fallen. Politicians and regulators are calling for stricter oversight of the unwieldy industry. FTX said on Saturday that it was moving as many digital assets as can be identified to a new "cold wallet custodian," which is essentially a way of storing assets offline without allowing remote control.

FTX had entered into a number of sports-related deals, some of which are crumbling. The NBA's Miami Heat and Miami-Dade County decided on Friday to terminate their relationship with FTX, and will rename the team's arena. Earlier on Friday, Mercedes said it would immediately remove FTX logos from its Formula One cars.