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FTX’s Bankman-Fried Struggles for Cash After Binance Deal Collapse

FTX's Bankman-Fried Struggles for Cash After Binance Deal Collapse
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HONG KONG/SINGAPORE/NEW YORK, Nov 10 (Reuters) – FTX CEO Sam Bankman-Fried on Thursday launched an urgent push to raise funds to bail out his company as the crypto exchange tries to match a reported May 8 -Bill the billion dollar hole in their finances. according to tweets and a memo to employees.

Bankman-Fried said he was in talks with “a number of players” in the crypto space, including Justin Sun, the founder of crypto token Tron, following a potential bailout deal with larger rival Binance fall apart. But he added in the memo that he “didn’t want to imply anything about the prospects of success.”

He also said his company Alameda Research, which sources said was partly behind FTX’s problemshandled the trade.

The mess marks a stunning downfall for the 30-year-old crypto executive, who morphed from status as industry savior into one in need of salvation in a matter of days.

Trouble at FTX, one of the world’s largest crypto exchanges, has sparked a broader crisis of confidence in cryptocurrencies, with Bitcoin falling below $16,000 overnight for the first time since late 2020.

However, a rise in the broader market following better-than-expected US inflation data also boosted cryptocurrencies in late morning trading. FTX’s native token, FTT, is down more than 90% this week and attempting to stabilize around $3.50. Bitcoin traded at $17,428, up 11%.

Sun, founder of cryptocurrency network Tron, said in a tweet on Thursday, “We are putting together a solution together with #FTX to start a way forward,” without giving further details. Sun did not respond to a request for comment.

An FTX spokesman declined to give further details about the talks.

RAISING FUNDS

The seeds of FTX’s downfall were sown months earlierin mistakes Bankman-Fried made after stepping in to bail out other crypto firms, sources said.

Users rushed to withdraw $6 billion worth of crypto tokens from FTX in days after a news report earlier this month raised questions about Alameda’s balance sheet and Binance CEO Changpeng “CZ” Zhao tweeted that his firm would sell its entire stake in FTX token, FTT. The outflow caused a liquidity crisis on FTX.

In the memo, seen by Reuters, Bankman-Fried said he would “implement a pay raise” for the next week to accommodate clients and “potential new investors.”

Another exchange, OKX, said It had been raised earlier in the week by Bankman-Fried, who described $7 billion in liabilities that needed to be met quickly.

“It was too much for us,” Lennix Lai, director of financial markets at OKX, told Reuters.

Bloomberg reported that Bankman-Fried had told investors that FTX was facing a deficit of up to $8 billion and that the company would have to file for bankruptcy if it didn’t get more funding.

INFECTION RISKS

Some investors wrote off funds invested in FTX. Venture capital fund Sequoia Capital wrote down a $150 million commitment on Wednesday. Canada’s Ontario Teachers Pension Plan, Tiger Global and Japan’s Softbank are also FTX investors.

A focus for investors is the unknown level of customer losses and the crisis in sentiment from the latest and possibly biggest meltdown in an industry that has turned into a minefield for investors.

Crypto asset manager Coinshare said this is the case $30.3 million Total exposure to FTX.

Broker Robinhood (HAUBE.O) said it has no direct exposure to FTX, but Bankman-Fried holds a stake in the company and its shares fell sharply on Tuesday and Wednesday.

“The failure of a top exchange — that’s on another level,” said Danny Chong, CEO of decentralized finance firm Tranchess, with potentially broader ramifications than the failures of stablecoin TerraUSD and crypto hedge fund Three Arrows Capital this year.

According to a source with knowledge of the investigation, the US Securities and Exchange Commission is investigating FTX.com’s handling of customer funds and crypto lending activities.

A message on the FTX website said that it is no longer processing withdrawals or accepting new users. Bankman-Fried told FTX.US that the exchange’s US operations have not been financially impacted.

Bankman-Fried, who is originally from California but lives in the Bahamas, where FTX is based, said the company will “examine closely” its governance. “I won’t be around if I’m not wanted,” he wrote in a tweet thread.

Reporting by Angus Berwick in New York; Georgina Lee in Hong Kong and Tom Westbrook in Singapore; Elizabeth Howcroft in London writing from Paritosh Bansal Editing by Megan Davies, Anna Driver and Matthew Lewis

Our standards: The Thomson Reuters Trust Policy.

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