HONG KONG/SINGAPORE/NEW YORK, Nov 10 (Reuters) – FTX Chief Executive Sam Bankman-Fried on Thursday launched an urgent push to raise funds to save his company as the crypto exchange seeks to cap a $8 billion hole in their finances. according to tweets and a memo to employees.
Bankman-Fried said he was in talks with “several players” in the crypto sector, including Justin Sun, who is the founder of crypto token Tron, after a potential bailout deal with larger rival Binance collapsed. But he added in the memo that he did not want to “imply anything about the odds of success.”
He also said his company Alameda Research, which sources have said was partly behind FTX’s problems, was ending the deal.
The fight marks a stunning fall for the 30-year-old crypto executive, who in a matter of days went from industry savior status to one in need of saving.
The troubles at FTX, one of the world’s largest crypto exchanges, have triggered a broader crisis of confidence in cryptocurrencies, with bitcoin falling below $16,000 overnight for the first time since late 2020.
However, a rally in the broader market following better-than-expected US inflation data also boosted cryptocurrencies in the late morning. FTX’s native token, FTT, is down more than 90% this week and was trying to hold around $3.50. Bitcoin was trading at $17,428, up 11%.
Sun, founder of cryptocurrency network Tron, said in a tweet Thursday that “we are preparing a solution together with #FTX to start a path forward,” without elaborating. Sun did not respond to a request for comment.
A spokesman for FTX declined to provide additional details about the talks.
RAISING FUNDS
The seeds of FTX’s downfall were sown months earlier, in mistakes made by Bankman-Fried after he stepped in to save other crypto companies, sources have said.
Users rushed to withdraw $6 billion in FTX crypto tokens in a matter of days, after a news report earlier this month raised questions about Alameda’s balance sheet and Binance CEO Changpeng” CZ” Zhao, tweeted that his company would be selling its entire stake in the FTX token, FTT. The exit caused a liquidity crisis at FTX.
In the note, seen by Reuters, Bankman-Fried said it would make “an increase” in the coming week to make good on customers and “potential new investors.”
Another exchange, OKX, said it had been approached by Bankman-Fried earlier in the week, which described $7 billion in liabilities it needed to cover quickly.
“This was too much for us,” Lennix Lai, head of financial markets at OKX, told Reuters.
Bloomberg reported that Bankman-Fried had told investors that FTX was facing a shortfall of up to $8 billion and that the company would have to file for bankruptcy unless it received more funding.
RISKS OF CONTAGION
Some investors were canceling the funds deposited in FTX. Venture capital fund Sequoia Capital wrote down a $150 million exposure to zero on Wednesday. Canada’s Ontario Teachers’ Pension Plan, Tiger Global and Japan’s Softbank are also investors in FTX.
One focus for investors is the unknown size of customer losses and the impact on sentiment of the latest and possibly biggest collapse in an industry that has become a minefield for investors.
Crypto asset manager Coinshares said it has a total exposure of $30.3 million to FTX.
Broker Robinhood ( HOOD.O ) said it has no direct exposure to FTX, but Bankman-Fried has a stake in the company and its shares fell sharply on Tuesday and Wednesday.
“A top exchange failing, that’s on a different level,” said Danny Chong, CEO of decentralized finance firm Tranchess, with potentially wider ramifications than the failure of stablecoin TerraUSD and crypto hedge fund Three Arrows Capital this year.
The U.S. securities regulator is investigating FTX.com’s handling of customer funds and crypto-lending activities, according to a source with knowledge of the inquiry.
A message on the FTX website said it was no longer processing withdrawals or accepting new users. Bankman-Fried said FTX.US, the exchange’s US operations, however, had not been financially affected.
Bankman-Fried, who is from California but lives in the Bahamas, where FTX is headquartered, said the company would take a “hard look” at governance. “I won’t be around if they don’t want me,” he wrote in one tweet.
Reporting by Angus Berwick in New York; Georgina Lee in Hong Kong and Tom Westbrook in Singapore; Elizabeth Howcroft in London Written by Paritosh Bansal Editing by Megan Davies, Anna Driver and Matthew Lewis
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