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Financial technology companies, long seen as a threat by the likes of JPMorgan Chase & Co., are increasingly becoming acquisition targets for traditional U.S. banks as rising interest rates and falling valuations crimp their expansion, Reuters reported. The valuations of listed financial technology firms have plunged 70% in 2022, analysts at Jefferies Group said last week. In the same period, the valuations of banks in the S&P 500 are down 33%, while valuations for the S&P 500 are down 23%, according to data from Refinitiv IBES. The decline presents an opportunity for Main Street banks to buy companies and beef up their technology for digital banking, online payments and other financial services and diversify beyond lending. Huntington Bancshares Inc. is one such bank. The Columbus, Ohio, regional bank is scouring for more targets after it bought Torana, a payments fintech, in May. Investors have dumped fintech stocks this year alongside other technology shares, which perform better when economic growth is strong. With the U.S. tipping toward a potential recession and interest rates rising, the outlook for fintechs has eroded. The high-profile blowup of crypto exchange FTX last week has also shaken confidence.

Voyager Digital Ltd. is trying to sign a deal to sell itself to one of the bidders that lost the auction for the bankrupt crypto lender, after the winner of that auction, FTX, was itself forced into insolvency proceedings, Bloomberg News reported. One of the losing bidders included crypto exchange CrossTower. CrossTower did not immediately respond to a request for comment. FTX violated its contract to buy Voyager out of bankruptcy, according to Voyager’s main bankruptcy attorney Joshua Sussberg. FTX has agreed that Voyager can pursue other bids, but has not yet confirmed that the company is pulling out of the contract to buy the smaller crypto company, Sussberg said in court yesterday. The events underscore how the sudden implosion of FTX, the second-biggest cryptocurrency exchange in the world, is rippling through the industry, hurting smaller, troubled crypto companies like Voyager. The Voyager deal unraveled after FTX founder Sam Bankman-Fried resigned as chief executive and the company filed its own chapter 11 bankruptcy. FTX won a weeks-long auction for Voyager under a deal tied to court approval of the creditor payment plan, lawyers said during a court hearing held by telephone.

FTX’s offshore status and its willingness to keep American traders off its Bahamas-based exchange in large part shielded the company from strict U.S. laws that govern trading and how investments can be sold to the public. But FTX’s implosion last week and reports that it used customer funds to back an affiliate’s risky venture investments have exposed the company and its founder to potential criminal liability, according to attorneys who specialize in white-collar criminal law, WSJ Pro Bankruptcy reported. The Manhattan U.S. attorney’s office is investigating FTX’s collapse, according to people familiar with the matter. One focus for prosecutors, at least initially, is likely to be examining reports that FTX lent customer funds to Alameda Research, a crypto-trading firm that traded on FTX and other exchanges. FTX founder Sam Bankman-Fried, who resigned as chief executive on Friday, also founded and owns Alameda Research. Mr. Bankman-Fried has acknowledged in tweets that he made mistakes before his company’s downfall and bankruptcy. FTX’s terms of service told its users that they own the cryptocurrencies in their accounts. “None of the digital assets in your account are the property of, or shall or may be loaned to, FTX Trading,” the document says. The terms of service with FTX Trading Ltd. — the entity that filed for bankruptcy last week in Delaware federal court — are still online.

The top U.S. banking regulator at the Federal Reserve is urging Congress to pass legislation that would impose regulation on cryptocurrencies in the wake of the swift collapse last week of FTX, a leading crypto exchange, the Associated Press reported. Michael Barr, the Fed’s vice chair for supervision, said in prepared testimony released Monday that “recent events in crypto ... have highlighted the risks to investors and consumers associated with new and novel asset classes and activities when not accompanied by strong guardrails.” Barr, who took office in July, is scheduled to testify before Congress today for the first time as vice chair. He did not refer specifically to FTX in his written remarks. Yet his appearance comes after FTX, the third-largest crypto currency exchange, formerly led by Sam Bankman-Fried, filed for bankruptcy Friday. The fall of FTX has rippled throughout the crypto world, with lender BlockFi pausing customer withdrawals. Barr said “some financial innovations offer opportunities, but as we have recently seen, many innovations also carry risks.” Those include runs on deposits, collapsing asset values, misuse of customer funds, fraud, theft, manipulation, and money laundering, he said. “These risks, if not well controlled, can harm retail investors and cut against the goals of a safe and fair financial system,” Barr said. The collapse of FTX occurred outside the banking system, Barr noted, a focus of his oversight. “But recent events remind us of the potential for systemic risk if interlinkages develop between the crypto system that exists today and the traditional financial system,” he said.

Cryptocurrency lender BlockFi Inc. is preparing a potential bankruptcy filing after halting withdrawals of customer deposits and acknowledging it has “significant exposure” to bankrupt exchange FTX, WSJ Pro Bankruptcy reported. BlockFi paused withdrawals and limited activity on its platform last week, saying it couldn’t operate business as usual given the uncertainty about FTX. BlockFi is now planning to lay off some of its workers while the troubled firm prepares for a possible chapter 11 itself, people familiar with the matter said. BlockFi didn’t respond to requests for comment. A bankruptcy filing would make Jersey City, N.J.-based BlockFi the latest casualty of the sudden collapse of Sam Bankman-Fried’s crypto empire, which is comprised of FTX, FTX US, trading firm Alameda Research and more than 100 affiliated entities. FTX and its related companies filed for bankruptcy protection Friday without disclosing which other crypto firms may have holdings tied up on its exchange. In a blog post on Monday, BlockFi said it has “significant exposure” to FTX and Alameda, including loans to Alameda, assets held at FTX.com and undrawn amounts from its credit line with FTX US. The company denied that a majority of its assets are custodied at FTX.