FTX looks for $9.4 bln in rescue funds from investors, rivals -source

Nov 10 (Reuters) – FTX is trying to raise as much as $9.4 billion from investors and rivals, a source said on Thursday, as Chief Executive Sam Bankman-Fried urgently seeks to revive the cryptocurrency exchange, which has been hit by a rapid withdrawal. save the customer destroyed.

Bankman-Fried has discussed raising $1 billion each from Justin Sun, founder of crypto token Tron, rival exchange OKX and stablecoin platform Tether, according to a source with direct knowledge of the matter.

It is seeking the rest from other funds, including existing investors in FTX, such as venture capital fund Sequoia Capital, the source added.

It was unclear, however, whether Bankman-Fried would be able to raise the funds it needed and whether these investors would participate.

Tether’s chief technology officer, Paolo Ardoino, tweeted that it “has no plans to invest or lend to FTX assets.”

One of the 30 to 40 investors in FTX’s data room is Daniel Loeb’s Third Point, but the hedge fund is not discussing paying FTX more, according to a source familiar with the matter.

FTX and Sequoia did not immediately respond to requests for comment on the latest news of the negotiations. OKX was also not immediately available for comment on the latest news of the negotiations. Earlier on Thursday, however, OKX told Reuters it had been approached this week by Bankman-Fried, which described $7 billion in liabilities that needed immediate coverage.

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“It was too much for us,” Lennix Lai, director of financial markets at OKX, told Reuters.

In a tweet, FTX said it has reached an agreement with Tron to build a special facility to allow customers to transfer some crypto assets from FTX to external wallets. She said an initial $13 million in capital would be used to facilitate transactions.

A Tron spokesperson said that this is “a first step for us” but that “we are open to discussions about other rescue plans” and that negotiations are ongoing. A line of credit was “definitely one of the issues” but the spokeswoman said it had not been discussed in detail.

Earlier in the day, Bankman-Fried said in a tweet and memo to employees seen by Reuters that he was in talks with “a number of players” in the crypto sector, including Sun, after agreeing to a bailout deal. which potentially broke up with big rival Binance. .

But he added that he did not want to “give anything away about the chances of success.”

Bankman-Fried also said that his trading firm Alameda Research, which sources said was partly behind FTX’s problems, has ceased trading.

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FTX’s debacle marks a stunning downfall for the 30-year-old crypto executive who was once worth nearly $17 billion, but in a matter of days was transformed from his status as an industry savior to one in need of a rescue.

Problems at FTX, one of the world’s largest cryptocurrency exchanges, have sparked a broader crisis of confidence in cryptocurrencies, with bitcoin falling below $16,000 overnight since the end of 2020.

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However, gains in the broader market after better-than-expected US inflation data boosted cryptocurrencies. FTX’s native token, FTT, rose nearly 140% to $3.83 in afternoon trading but is down more than 80% for the week. Bitcoin rose 13%.

Trading volume in bitcoin futures and exchange-traded funds exploded amid confusion.

FTX said it was unable to track any withdrawals, except for some in the Bahamas due to regulations there. Bankman-Fried said FTX.US, the exchange’s US operations, was not financially affected.

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The seeds of FTX’s downfall were planted months ago, in mistakes made by Bankman-Fried after he stepped in to save other crypto companies, sources said. Sources told Reuters that FTX transferred at least $4 billion to Alameda, including some customer deposits, to shore up the trading firm after a series of losses.

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Bankman-Fried told investors that Alameda owed FTX about $10 billion, the Wall Street Journal reported. FTX had loaned more than half of its customers’ money to Alameda, the newspaper said.

The US securities regulator is investigating FTX.com’s handling of consumer funds and crypto-lending activities, according to a source familiar with the investigation.

Reuters could not learn what specific activities were under investigation. The White House, meanwhile, said the developments show why “smart management” is needed.

Users rushed to withdraw $6 billion in crypto tokens from FTX in a matter of days, after a report earlier this month questioned Alameda’s balance sheet and Binance CEO Changpeng “CZ” Zhao tweeted that his firm would sell its entire stake in FTT. sell, which gives owners discounts on FTX trading fees. The exit caused a liquidity crunch at FTX.

Reporting by Angus Berwick and Anirban Sen in New York, Georgina Lee in Hong Kong, Tom Westbrook in Singapore, Elizabeth Howcroft in London, Hannah Lang and Chris Prentice in Washington, and Noor Zainab Hussain in Bangalore Writing by Paritosh Bansal Editing by by Megan Davies, Anna Driver and Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.

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