FTX, the crypto trading platform founded by billionaire Sam Bankman-Fried, is reportedly close to filing for bankruptcy protection following an about-face from rival Binance on a planned multi-billion dollar rescue.
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 an $8 billion hole in its finances that is likely to be compounded by Securities and Exchange Commission and Commodity Futures Trading Commission probes into the handling of customer funds.
Binance, the world’s biggest crypto exchange and founded by CEO Changpeng Zhao, backed out of its non-binding deal to rescue FTX.com, the international division of FTX, saying the group’s liquidity issues were “beyond our control or ability to help.”
Customer fund withdrawals have been suspended since last week, with FTX noting on its website Thursday that the onboarding of new clients has been suspended until further notice.
Earlier this month, the crypto-focused news website CoinDesk reported that Alameda Research, another digital asset firm owned by Bankman-Fried, held most of its $14.6 billion in assets in the FTT coin, citing leaked company financials. Group CEO Caroline Ellison disputed the report, noting in a Tweet that “that specific balance sheet is for a subset of our corporate entities, we have > $10b of assets that aren’t reflected there.”
Large institutional investors, including Japan’s SoftBank, Canada’s Ontario Teachers Pension Plan, Tiger Global and Sequoia Capital — which marked-down its $150 million equity holding to zero late Wednesday — all have exposure to FTX as well.
“Given the size and interlinkages of both FTX and Alameda Research with other entities of the crypto ecosystem, including DeFi platforms, it looks 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 slumped to a two-year low of around $15,900 during yesterday’s turmoil, were marked 1% higher on the Thursday session at $16,650 in early trading, but with FTX customers — locked out of their accounts since last week — facing huge losses in any bankruptcy proceedings, further declines across the crypto space are expected in the coming weeks.
FTX’s utility token, FTT, was last seen 41.1% lower on the day at $2.61 each, a more than 95% plunge from the highs it reached earlier this month.
Robinhood (HOOD) – Get Free Report shares, which plunged more than 13.5% during yesterday’s session, 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 the group has seen record crypto inflows over the past two days.
Coinbase Global (COIN) – Get Free Reportmeanwhile, was marked 2.11% higher at $46.95 each.