Sam Bankman-Fried’s crisis at FTX.com is rapidly worsening, with a lifetime crypto wonderkind warning of bankruptcy if his firm cannot secure funds to cover the $8 billion shortfall.
Bankman-Fried informed investors about the gap on Wednesday, shortly before rival exchange Binance abruptly turned down a takeover offer. He said FTX.com needs $4 billion to remain solvent and is attempting to raise hedge financing in the form of debt, equity, or a combination of both, according to a person with direct knowledge of the matter.
“I f—ed up,” Bankman-Fried said to investors on the call, according to people familiar with the conversation. He said he would be “incredibly, incredibly grateful” if investors could help.
An FTX representative declined to comment.
His acceptance of the firm’s deep problems and limited options is a surprising turning point for Bankman-Fried, who was once worth $26 billion and compared to John Pierpont Morgan. It also underscores the uncertainty looming over FTX, its clients and the crypto markets.
As US officials are investigating FTX, large chunks of Bankman-Fried’s assets have evaporated and rivals are profiting from its woes. Chief Executive Officer Vlad Tenev said on Thursday that Robinhood Markets Inc. has seen its biggest crypto influx in the past two days. Data from Cryptoquant show, Binance and Coinbase Global Inc. It has also seen a huge influx.
Investor Sequoia Capital wrote off the full value of its holdings in FTX.com and FTX.us, a sign that the firm sees no clear way to recoup its investment.
Hanging in the balance as the exchange tethers the fate of not only its investors and lenders, but anyone who has been unable to retrieve client assets because it halted some withdrawals in the week. The failure of crypto firms Celsius and Voyager saw billions in customer funds tied up in bankruptcy proceedings.
FTX has a prominent list of backers such as Sequoia Capital, BlackRock Inc., Tiger Global Management and SoftBank Group Corp. Nevertheless, Banksman-Fried remained defiant during a busy 24-hour period, which included growing speculation that the deal would not go through with Binance. He repeatedly told investors during a conference call on Wednesday afternoon that it was not true that Changpeng Zhao was walking away from the acquisition, the person said.
About an hour later, Binance said that it was indeed retreating.
“Our hope was to be able to support FTX’s clients by providing liquidity, but the issues are beyond our control or ability to help,” Zhao-founded crypto exchange Binance said in a statement.
In addition to the financial pressure, FTX is attracting the attention of US authorities.
Bloomberg News reported Wednesday that the Securities and Exchange Commission and the Commodity Futures Trading Commission are investigating whether the firm properly handled client funds, as well as its ties to other parts of Bankman-Fried’s crypto empire. Including his trading house Alameda Research. Justice Department officials are also working with SEC lawyers, one of the people said.
Zhao said in a memo on Wednesday that there was no “master plan” for handling FTX, and that “user confidence has been seriously shaken.”
Yuki Yang, Hannah Miller and Tanziel Akhtar contributed to the story.
catch all business News, market news, today’s fresh news events and breaking news Updates on Live Mint. download mint news app To get daily market updates.