Investors describe Sam Bankman-frenzied Fried's race to secure up to $8 billion to save his company.
The Bahamas securities commission has blocked the assets of a portion of Sam Bankman-crypto Fried's empire and appointed a liquidator for one of his firms, as the embattled entrepreneur scrambled to fund up to $8 billion to preserve FTX.
The Bahamas Securities Commission took action against FTX's Bahamian affiliate, FTX Digital Markets, on Thursday. The regulator stated that no business assets may be transferred without the consent of a provisional liquidator. In 2021, FTX relocated from Hong Kong, where it was founded, to the Bahamas.
“The commission is aware of public statements suggesting that clients’ assets were mishandled, mismanaged and/or transferred to Alameda Research,” the announcement said. Alameda is Bankman-Fried’s crypto trading business.
On Thursday, Bankman-Fried was attempting to raise up to $8 billion to preserve his cryptocurrency company, as more of his former investors wrote down their shares in the FTX exchange.
BlockFi, a digital asset lending platform, halted client withdrawals as a result of the crisis-induced contagion in the cryptocurrency market.
BlockFi stated on Thursday that it was unable to conduct business as usual because to the "lack of certainty over the status" of FTX and Alameda. During the cryptocurrency collapse earlier this year, the CEO of FTX extended a $250 million loan to BlockFi.
The 30-year-old acknowledged on Twitter that the FTX trading venue does not have enough readily available funds to meet consumer demand. Investors presented by Bankman-Fried described a haphazard plea from the humiliated crypto chief executive to close the company's financial gap.
The outcome of Bankman-drive Fried's for cash will determine the fate of FTX in the face of rising doubts about its ability to survive without an injection of fresh capital and mounting worry among clients whose funds are trapped on the frozen exchange. Separate from the international exchange, FTX US, which is associated with him, indicated it may cease trading on its platform in the coming days, indicating that tensions are mounting across his enterprises.
Investors estimate that Bankman-Fried is seeking between $6 billion and $8 billion. Alameda Research, his trading firm, owes FTX $10 billion, according to two individuals with knowledge of the situation.
Several investors have reduced their FTX ownership shares to zero, indicating that they are unlikely to commit additional capital. Following venture capital company Sequoia, an investor with a $300 million stake in the trading venue, Paradigm, lowered the value of its investment to zero on Wednesday.
According to one investor, Bankman-Fried planned to raise funds from crypto exchange OKX, stablecoin operator Tether, and Tron founder Justin Sun.
Chief technology officer of Tether Paolo Ardoino told the Financial Times that the company was not involved in an FTX rescue. He stated that Bankman-Fried had reached out to the stablecoin issuer some days prior to the botched Binance bailout announcement to request assistance.
“We were asked if we were interested to invest or lend money. We said no,” Ardoino said.
Sun did not respond to a request for comment, but the company stated on Twitter, "We are collaborating with FTX to establish a road ahead."
Late on Thursday, FTX said that it had achieved a deal with Tron to develop a "special facility" that would allow holders of certain crypto tokens to exchange assets directly from FTX to external wallets.
OKX rejected an exclusive arrangement to rescue FTX on Tuesday, but is still reviewing whether to commit funds, according to sources with knowledge of the situation. Its officials are concerned about the potential that FTX misappropriated customer funds and the possibility of client lawsuits.
According to sources acquainted with the subject, investors and customers have approached the famed American attorney David Boies about filing a lawsuit. In the meantime, Bankman-Fried has engaged Martin Flumenbaum, a partner at Paul Weiss known for representing Michael Milken, a junk bond trader who was imprisoned for violating U.S. security rules and ultimately pardoned.
Boies declined to comment, and Flumenbaum did not respond to a request for comment immediately.
The attempt to raise financing comes less than a month after FTX was prepared to conduct a series C capital round equal to its January valuation of $32 billion.
According to one investor, Bankman-Fried appears to be managing the financial rescue effort without the assistance of competent advisors. "It appears that he is managing this process through text message on his own. He is single," the investor continued.
Bankman-Fried attributed the erroneous accounting of leverage and liquidity on the exchange to poor internal recordkeeping. "I'm sorry . . . I fucked up."
If the company survives, he offered to resign as CEO and committed current assets and that any funds generated would be utilised to pay back customers first.
“There are a number of players who we are in talks with, [letters of intent], term sheets, etc,” Bankman-Fried said. “I can’t make any promises about that.”
By fLEXI tEAM