‘I f****d up’: FTX founder scrambles for cash as Bahamas regulator freezes assets
The founder of crypto exchange FTX admitted he “f*cked up” yesterday as his firm scrambles to raise emergency funds and stave off a collapse that could spark contagion across the industry.
The market has been plunged into chaos after FTX, led by founder Sam Bankman-Fried or ‘SBF’, revealed a major liquidity crisis earlier this week that has left it teetering on the edge of bankruptcy.
Bankman-Fried was dealt a fresh blow today as the securities regulator of the Bahamas, where FTX is headquartered, froze parts of his FTX empire and prevented the transferral of assets without approval.
“The commissions is aware of public statements suggesting that clients’ assets were mishandled, mismanaged and/or transferred to Alamaeda Research,” an announcement from the regulator said. Alameda is FTX’s sister trading firm.
Writing on Twitter yesterday, Bankman-Fried – who previously suggested his firm could one day buy Goldman Sachs – apologised and admitted he “should have done better”, adding that the exchange was in talks with a “number of players” to raise emergency capital.
“Right now, we’re spending the week doing everything we can to raise liquidity,” he wrote, adding that he “can’t make any promises about that”.
The firm was reportedly in talks to secure a $9.4bn funding package yesterday, Reuters reported, with potential backers including Justin Sun, founder of crypto network Tron, and rival exchange OKX.
Sun had emerged as a potential saviour earlier in the day, tweeting that he was “putting together a solution together with FTX to initiate a pathway forward”. In a sign that discussion have been taking place, the two firms struck a deal to allow FTX users to swap certain assets off the exchange onto external wallets, after FTX froze withdrawals earlier in the day. Some withdrawals have since restarted.
Speaking with City PM, crypto exchange OKX – which was approached for a deal prior to Binance earlier in the week – also suggested that a rescue was not off the table.
“We passed on the initial opportunity before they engaged with Binance and at this point we are just evaluating the situation before we consider any participation from our side,” global CMO Haider Rafique, told City PM.
The emergency cash-raise comes after an emergency takeover by its main rival Binance imploded on Wednesday over a reported $8bn blackhole in FTX’s books.
The crisis comes amid a torrid year for crypto in which more than $1trillion has been wiped off the market, causing a string of collapses including the coin Terra Luna, which shed almost the entirety of its value in a major sell-off in the Spring, as well as crypto lender Celcius and digital hedge fund Three Arrows Capital.
Shockwaves
A collapse of FTX, valued at $32bn in January and previously regarded as one of the most stable firms in the sector, would send shockwaves through the industry and strike a blow to a host of high profile backers.
Prolific venture investor Sequoia Capital said yesterday it had marked its holding in the firm down to $0. BlackRock, Ontario Teachers’ Pension Plan and Softbank are also set to suffer major losses.
The turmoil sent Bitcoin to a fresh two year low of around $15,600 early yesterday morning, before recovering to trade at around $17,300 currently. Bitcoin has shed nearly 70 per cent of its value in the past year.
Analysts at JP Morgan predicted the price of the most valuable cryptocurrency could plunge to as low as $13,000 as the crisis at FTX and its sister firm Alameda Research spreads.
The “size and interlinkages” of the firms with the wider crypto ecosystem look likely to spark a “new cascade of margin calls, deleveraging and crypto company/platform failures”, the Wall Street bank warned.