FTX, the crypto trading platform created by billionaire Sam Bankman-Fried, is reportedly on the edge of going bankrupt and filing for bankruptcy protection following Binance’s refusal on a proposed multi-billion-dollar bailout.
Days after telling investors and platform depositors that FTX’s assets were “fine,” Bankman-Fried reportedly told investors on a conference call that FTX is facing a $8 billion hole in its finances, which is likely to become worse after a SEC and CFTC investigation into the handling of client funds.
Meanwhile , Binance, the world’s largest cryptocurrency exchange created by CEO Changpeng Zhao, has backed out of a non-binding deal to save FTX.com, the company’s international subsidiary, claiming that the group’s liquidity concerns were “beyond our control or power to aid.”
Customer fund withdrawals have been suspended since last week, and FTX said Thursday on its website that new customer onboarding has been halted until further notice.
Sam Bankman-Fried says sorry to FTX employees on Twitter.
According to leaked corporate financials, Alameda Research, another digital asset firm controlled by Bankman-Fried, held the majority of its $14.6 billion in assets in the FTT coins earlier this month. Group CEO Caroline Ellison denied the story, writing on Twitter, “that exact balance sheet is for a portion of our business entities. We have > $10 billion in assets that aren’t shown there.”
Large institutional investors with exposure to FTX include Japan’s SoftBank, Canada’s Ontario Teachers Pension Plan, Tiger Global, and Sequoia Capital, which reduced its $150 million stock investment to zero late Wednesday.
“Given the size and interlinkages of both FTX and Alameda Research with other entities of the crypto ecosystem, including DeFi platforms, it appears likely that a new cascade of margin calls, deleveraging, and crypto company/platform failures is starting – similar to what we saw last May/June following the collapse of Terra,” JPMorgan said in a Thursday morning note.
Bitcoin prices, which fell to a two-year low of around $15,900 during yesterday’s chaos, were marked 1% higher on the Thursday session at $16,650 in early trading, but with FTX customers – who have been locked out of their accounts since last week – facing massive losses in any bankruptcy proceedings, further declines across the crypto space are expected in the coming weeks.
FTT, FTX’s utility token, was last reported 41.1% down on the day at $2.61 per token, a more than 95% drop from its highs earlier this month.
Robinhood (HOOD) – shares were marked 4.6% higher in pre-market trading to indicate an opening bell price of $8.79 each after CEO Vlad Tenev said through his Twitter account that the online brokerage has “no direct exposure to Alameda, FTX, or any of its entities,” adding that the group has seen record crypto inflows over the past two days.
Meanwhile, Coinbase Global (COIN) was trading 2.11% higher at $46.95 per coin.