FTX CEO Seeks $9.4 Billion in Rescue Funds as Bahamas Freezes Assets

FTX is trying to raise about $9.4 billion (about Rs. 75,960 crore) from investors and rivals, a source said on Thursday, as Chief Executive Sam Bankman-Fried urgently seeks to save the cryptocurrency exchange that has been plagued by customer withdrawals. .

Bankman-Fried has discussed raising $1 billion (about Rs. 8,080 crore) each from Justin Sun, founder of cryptocurrency token Tron, rival exchange OKX and stablecoin platform Tether, according to a source with knowledge of the matter. specific to this matter.

It is seeking the remainder from other funds, including current investors in FTX such as venture capital fund Sequoia Capital, the source added.

However, it is not clear whether Bankman-Fried will be able to raise the funds he needs and whether these investors will participate.

Tether’s chief technology officer, Paolo Ardoino, tweeted that they “have no plans to invest in or lend assets to FTX.”

One of the 30 to 40 investors in FTX’s data room is Daniel Loeb’s Third Point, but according to a source familiar with the matter the hedge fund is not discussing giving FTX more money.

FTX and Sequoia did not immediately respond to requests for comment on the latest news of the negotiations. OKX was also not immediately available for comment on the latest news of the negotiations. Earlier on Thursday, however, OKX told Reuters it had been contacted this week by Bankman-Fried, who described $7 billion in debt that needed to be covered immediately.

“That was beyond our control,” Lennix Lai, director of capital markets at OKX, told Reuters.

FTX was also hit by the Bahamas Securities Commission, where the company is based, freezing the assets of FTX Digital Markets and “related parties”. FTX Digital Markets Ltd is a subsidiary of FTX, licensed in the Bahamas.

“The Commission has quickly dealt with this situation and continues to do so,” the commission said, adding that the “reasonable course” was to place the unit “in temporary liquidation to preserve assets and stabilize the company”.

FTX did not immediately respond to a request for comment.

In a tweet, FTX said it has reached an agreement with Tron to establish a special facility that will allow customers to exchange certain crypto assets from FTX to external wallets. It said initially $13 million (roughly Rs. 105 crore) would be used to facilitate the exchange.

A spokesperson for Tron said this is “the first step for us” but “we are open to talk about other rescue plans” and said the discussion is ongoing. The credit line is “undoubtedly one of the topics” but a spokesperson for the department said it had not been discussed in detail.

Earlier in the day, Bankman-Fried said in tweets and a memo to employees seen by Reuters that he was negotiating with “multiple players” in the crypto sector, including Sun, after the rescue agreement with arch-rival Binance fell apart. . .

But he added that he did not want to “say anything about the chances of success.”

Bankman-Fried also said his trading firm Alameda Research, which sources said was partly responsible for FTX’s problems, was ending trading.

FTX’s plight marks the dramatic downfall of a 30-year-old crypto giant that was once worth around $17 billion (roughly Rs. 1,37,415 crore), but after a few days changed from its industry savior status to the one it needed . savings.

Problems at FTX, one of the world’s largest crypto exchanges, have caused a wider crisis of confidence in cryptocurrencies, with Bitcoin falling below $16,000 (around 13 lakh rands) on the first night since late 2020.

However, the broader market’s surge after better-than-expected US inflation data buoyed cryptocurrencies. FTX’s native token, FTT, rose nearly 140 percent to $3.83 (roughly Rs. 300) in afternoon trade but is down more than 80 percent for the week. Bitcoin rose 13 percent.

Trading volumes for Bitcoin futures and exchange-traded funds have exploded amid the turmoil.

FTX said it could not process any withdrawals, except for some in the Bahamas due to regulations there. Bankman-Fried said FTX.US, the US exchange’s operations, had no financial impact.

to collect funds

The seeds of FTX’s downfall were sown months ago, in mistakes made by Bankman-Fried after he stepped in to save other crypto firms, sources said. Sources told Reuters that FTX transferred at least $4 billion (about Rs. 32,330 crore) to Alameda, including customer deposits, to shore up the trading firm after a series of losses.

Bankman-Fried told investors that Alameda owed FTX about $10 billion (roughly Rs. 80,820 crore), the Wall Street Journal reported. FTX loaned Alameda more than half of its funds, the newspaper said.

The US securities regulator is investigating FTX.com’s handling of customer funds and crypto lending activities, according to a source with knowledge of the investigation.

Reuters was unable to learn which specific activities were the focus of the investigation. At the time the White House said the development shows why “smart regulation” is needed.

Users rushed to withdraw $6 billion of crypto tokens from FTX within days, after a news report earlier this month raised questions about Alameda’s balance and Binance CEO Changpeng “CZ” Zhao tweeted that his company will sell all of its shares to FTT, giving the owners. discounts on FTX trading fees. Cash outflows caused a drop in FTX’s cash flow.

© Thomson Reuters 2022

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