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FTX’s Bankman-Fried scrambled for funds after Binance trading collapsed

HONG KONG/SINGAPORE/NEW YORK (Reuters) – FTX Chief Executive Sam Bankman-Fried said on Wednesday that FTX had a reported $8 billion hole in its finances, prompting him to bolster the company. launched an urgent pressure to raise money to save the company. According to a tweet and a note to employees.

Bankman-Fried said he is in talks with “many players” in the crypto sector, including Justin Sun, founder of crypto token Tron. I don’t want to,” he added in the note.

He also said his company, Alameda Research, which sources say is behind the FTX trouble, is scaling back its deal.

The scramble has meant an incredible downfall for the 30-year-old crypto industry executive, who has gone from being an industry savior to someone in need of salvation in a matter of days.

Problems with FTX, one of the world’s largest cryptocurrency exchanges, have caused bitcoin to fall below $16,000 overnight for the first time since late 2020, sparking a wider crisis of confidence in cryptocurrencies.

But a market-wide surge after US inflation data beat expectations also boosted the cryptocurrency in late-night trading. FTX’s native token, FTT, has fallen more than 90% this week and was trying to stabilize around $3.50. Bitcoin rose 11% and he was trading at $17,428.

“Together with #FTX we will put together a solution and pave the way forward,” Sun, the founder of cryptocurrency network Tron, said in a tweet on Thursday, but gave no further details. No. Sun did not respond to a request for comment.

An FTX spokesperson declined to provide additional details about the negotiations.

fundraising

According to sources, the seeds of FTX’s downfall were sown in the mistakes Bankman-Fried made after he stepped in to save other cryptocurrency companies months ago.

After news reports earlier this month raised questions about Alameda’s balance sheet, and Binance CEO Changpeng “CZ” Zhao tweeted that his company would sell all shares in FTX’s token, FTT, users were down in numbers. We rushed $6 billion in crypto tokens out of FTX within days. The outflow triggered a liquidity crunch on FTX.

In a memo seen by Reuters, Bankman-Fried said it would “finance” next week to get customers and “potential new investors” to do it right.

Another exchange, OKX, said it was contacted by Bankman-Fried earlier this week.

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

Bloomberg reported Bankman-Fried told investors that FTX faces a shortfall of up to $8 billion and that unless additional funding is available, the company will have to file for bankruptcy.

contagion risk

Some investors were writing off the money put into FTX. Venture capital fund Sequoia Capital on Wednesday cut its $150 million exposure to zero. Canada’s Ontario Teachers Pension Plan, Tiger Global and Japan’s Softbank are also investors in his FTX.

One of the highlights among investors is the blow to sentiment from the unknown scale of customer losses and the latest and perhaps the biggest disruption in an industry that has become a minefield for investors.

Crypto asset manager Coinshares said its total exposure to FTX was $30.3 million.

Broker Robinhood (HOOD.O) said it wasn’t directly involved in FTX, but Bankman-Fried owns shares in the company, which fell sharply on Tuesday and Wednesday.

Danny Chong, CEO of decentralized finance firm Tranchess, has announced that he will invest in stablecoin TerraUSD and cryptocurrency hedge fund Three Arrows Capital this year. He said it could have a bigger impact than bankruptcy.

U.S. securities regulators are investigating FTX.com’s handling of customer funds and cryptocurrency lending activities, according to sources familiar with the investigation.

A message on the FTX website said they were no longer processing withdrawals or accepting new users. Bankman-Fried said FTX.US’ US operations were not financially affected.

Bankman-Fried, a Californian who lives in the Bahamas, where FTX is based, said the company would “take a hard look” at its governance. “If I wasn’t wanted, I wouldn’t be around,” he wrote in a tweet thread.

Reported by Angus Berwick, New York. Georgina Lee from Hong Kong and Tom Westbrook from Singapore.Elizabeth Howcroft, London Written by Paristosh Bansal Editing by Megan Davis, Anna Driver, Matthew Lewis

Our standards: Thomson Reuters Trust Principles.

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