Sam Bankman-Fried seeks up to $8 billion to save crypto empire
Sam Bankman-Fried is racing to raise as much as $8 billion to save his crypto empire as several of his former backers write down their investments in the FTX exchange.
The 30-year-old admitted on Twitter on Thursday that the FTX trading arena has an insufficient store with readily available funds to meet customers’ demands. Investors presented by Bankman-Fried described a chaotic appeal by the humble crypto boss to plug the company’s financial hole.
The outcome of Bankman-Fried’s quest for cash will determine the fate of FTX amid growing doubts about its ability to stay afloat without an infusion of new capital, and anxiety about customers with money stuck in the frozen exchange. In a sign of how pressure is mounting across businesses linked to him, FTX US, which is separate from the international exchange, said it may halt trading on its platform in the coming days.
Investors put the amount Bankman-Fried is seeking at between $6 billion and $8 billion. Alameda Research, his trading firm, owes $10 billion to FTX, two people familiar with the matter said.
Several investors have marked down their shares in FTX to zero, which suggests that they are unlikely to put in more money. Paradigm, an investor with a $300 million stake in the trading space, had reduced the value of its investment to zero, after venture capital firm Sequoia, which announced the move on Wednesday.
One investor said Bankman-Fried was looking to use crypto exchange OKX, stablecoin operator Tether and Tron founder Justin Sun for the new fundraising.
Tether chief technology officer Paolo Ardoino told the Financial Times that the company played no role in a rescue of FTX. He said Bankman-Fried had reached out several days ago, before the aborted Binance bailout was announced, to ask for help from the stablecoin issuer.
“We were asked if we were interested in investing or lending money. We said no, Ardoino said.
Sun did not respond to a request for comment, but tweeted: “We are putting together a solution together with FTX to start a way forward.”
Late Thursday, FTX said it had reached an agreement with Tron to establish a “special facility” that allows holders of some crypto tokens to exchange assets one-to-one from FTX to external wallets.
OKX rejected an exclusive deal to bail out FTX on Tuesday but is still considering whether to commit funds, people familiar with the matter said. Its executives are concerned about the risk that FTX misused customer deposits and the possibility of lawsuits from clients.
Investors and clients have approached prominent U.S. Attorney David Boies about filing a lawsuit, people familiar with the matter said. Meanwhile, Bankman-Fried has hired Paul Weiss partner Martin Flumenbaum, known for representing rogue bond trader Michael Milken who was jailed for violating US securities laws and later pardoned.
Boies declined to comment, while Flumenbaum did not immediately respond to a request for comment.
The push to raise funds comes less than a month after FTX was poised to complete a Series C funding round that matched its January $32 billion valuation.
One investor said Bankman-Fried appears to be running the financial rescue attempt without professional advisers. “It seems like he’s running this process by text alone. He doesn’t have a guy,” the investor added.
Bankman-Fried blamed poor internal record-keeping for an incorrect accounting of influence and liquidity on the stock exchange. “Sorry . . . I freaked out,” he said.
He promised working capital and any money raised would be used first to repay customers, and offered to step down as CEO if the company survived.
“There are a number of players that we are in talks with, [letters of intent]term sheets, etc,” said Bankman-Fried. – I can’t promise anything about that.
Additional reporting by William Langley, Chan Ho-him and James Fontanella-Khan
