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FTX Crypto Exchange Boss Says He Is Trying to Raise More Money FTX Crypto Exchange Boss Says He Is Trying to Raise More Money
(about 3 hours later)
The cryptocurrency executive Sam Bankman-Fried said he would try to raise funds over the next week to prop up his crypto exchange FTX, which collapsed after a bank run that sent the crypto markets into meltdown this week. The cryptocurrency executive Sam Bankman-Fried said he would try to raise funds over the next week to prop up his crypto exchange FTX, which collapsed after a run on deposits that sent the crypto markets into meltdown this week.
Mr. Bankman-Fried shared details of the plans in a memo to FTX employees early on Thursday morning. “The goal of the raise will be first to do right by customers; second by current and possible new investors,” he wrote. “Third all of you guys.” Mr. Bankman-Fried shared details of the plans in a memo to FTX employees early on Thursday morning. “The goal of the raise will be first to do right by customers; second by current and possible new investors,” he wrote in the memo, which was obtained by The New York Times. “Third all of you guys.”
He said that FTX has “a lot theoretically in and/or potentially for the raise,” but acknowledged those deals may not ultimately come together. He also said that FTX has held talks with the crypto entrepreneur Justin Sun, who tweeted on Wednesday that he was working on “putting together a solution” with FTX. He said that FTX has “a lot theoretically in and/or potentially for the raise,” but acknowledged those deals may not ultimately come together. He also said that FTX had held talks with the crypto entrepreneur Justin Sun, who tweeted on Wednesday that he was working on “putting together a solution” with FTX.
The size of the hole in FTX’s balance sheet remains unclear, but it could be as large as $8 billion, according to a person familiar with the figures, who was not authorized to discuss them. Mr. Bankman-Fried’s message to his employees came a day after a deal to sell the firm to the rival crypto exchange Binance collapsed, casting doubt on whether FTX can survive and drawing increasing scrutiny from regulators at several agencies.
The company collapsed this week after a bank run set off by FTX’s top rival, Changpeng Zhao, the chief executive of the giant exchange Binance. On Tuesday, Binance announced that it had tentatively agreed to buy FTX, only to pull out of the deal a day later after conducting a due-diligence process. FTX’s downfall has sent shock waves through the broader crypto industry and set back years of efforts to pull the industry into the mainstream of finance. The prices of the virtual currencies Bitcoin and Ether have plunged.
An FTX spokesman declined to comment. The memo was earlier reported by Reuters. It is unclear who would put money into FTX after Binance backed out of its deal. At least one investor passed because of concerns about the relationship between FTX’s customer deposits and its trading firm, Alameda Research, according to a person with knowledge of the situation who was not authorized to discuss it.
The total amount of money owed by FTX remains unclear, but it could be as much as $8 billion, according to three people familiar with the figures who were not authorized to discuss them.
The company collapsed this week after a run on deposits set off by Changpeng Zhao, the chief executive of Binance. On Tuesday, Binance announced that it had tentatively agreed to buy FTX, only to pull out of the deal a day later.
Shortly before the Binance deal fell through, Mr. Bankman-Fried held a call with investors, where he appeared disheveled and apologized repeatedly, using an expletive to emphasize how much he had messed up, according to a person familiar with the call.
He blamed some of FTX’s struggles on a negative public-relations campaign against the firm that he said had been going on for about a month. He also insisted that the Binance transaction would go through, the person said, and explained that FTX had some assets available — but that it would be unable to liquidate them quickly enough to meet demand.
On Wednesday evening, Sequoia Capital, one of FTX’s largest backers, said it now considered its $213 million investment worthless in a letter to its own investors. The firm said FTX was at risk of bankruptcy, though it didn’t know “the full nature and extent” of the risk.
Paradigm, a crypto-focused investment fund, had invested $278 million in FTX. In a letter to its investors viewed by The New York Times, the firm said its investment was likely to go to zero. FTX’s problems “will take many months to fully understand,” the firm wrote.
Dozens of investors, including major firms like Lightspeed Venture Partners, BlackRock and Thoma Bravo, had previously committed money to FTX, which had once been considered one of the most promising and stable crypto exchanges.
An FTX spokesman declined to comment. Mr. Bankman-Fried’s memo to staff was earlier reported by Reuters.
FTX’s collapse is under investigation by the Securities and Exchange Commission, according to two people familiar with the matter. The S.E.C. had been requesting that the company voluntarily turn over information for several months. The Commodity Futures Trading Commission is also looking into the collapse. In addition, federal prosecutors in Manhattan have an inquiry, said a person briefed on the matter.
One issue the federal authorities are examining is whether customer funds were misused by FTX to prop up Alameda, a trading firm that Mr. Bankman-Fried founded and that remains closely tied to the exchange.
The collapse of FTX has also shaken its employees, some of whom say they feel betrayed. Many staff received their salaries through deposits into their FTX accounts, meaning the implosion of the company could drain their savings, according to a person familiar with the matter.
In the memo to employees, Mr. Bankman-Fried apologized for the chaos. “Ultimately it’s my responsibility to make sure the right things happen,” he said. He said that two executives, Ryne Miller and Zach Dexter, were handling day-to-day operations at the firm’s U.S. arm, and that Constance Wang, the firm’s chief operating officer, was involved in the fund-raising efforts.
Mr. Bankman-Fried, in a somewhat unusual move, also took to Twitter on Thursday morning to post a mea culpa of sorts, in which he said, “I’m sorry,” and “should have done better.” In a series of posts, he said he could not communicate more with customers and investors because his “hands were tied during the duration of the possible Binance deal.”
An attorney for Mr. Bankman-Fried at the law firm Paul Weiss did not return a request for comment.
This is a developing story. Check back for updates.This is a developing story. Check back for updates.