From the current reality, FTX is likely to file for bankruptcy protection if it does not get the cash injections it needed to fulfill customers’ withdrawal requests.
Sam Bankman-Fried, the founder and Chief Executive Officer of the embattled cryptocurrency trading platform FTX Derivatives Exchange, has informed investors that the company may have to file for bankruptcy if it did not get immediate bailout funds.
The events that surround FTX over the past few days have fueled massive withdrawals of funds from the platform which the CEO says has come to an $8 billion shortfall. According to sources close to the matter who spoke to Bloomberg, Bankman-Fried was on a call with investors on Wednesday informing them about the state of things with the trading platform.
“I f—ed up,” Bankman-Fried told investors on the call, according to people with knowledge of the conversation. He said he would be “incredibly, unbelievably grateful” if investors could come to the firm’s aid.
Binance was initially projected as the rescuer for the firm when Changpeng Zhao, the exchange’s CEO tweeted earlier this week that it has signed a non-binding Letter of Intent to acquire the trading outfit. Binance backed out of the deal as revealed yesterday when the conducted Due Diligence showed FTX had more financial troubles than it was willing to take on at the moment.
With the cash deficit and liquidity pressures, Binance had to step away even though Bankman-Fried told investors on the call that that was not the case.
The fall of FTX has been compared to the Lehman Brothers moment by many experts in the field. From an exchange that was valued at $32 billion earlier this year and has investors like BlackRock, Sequoia Capital, Tiger Global Management, and SoftBank Group Corp.
FTX positioned itself as a lender of last resort to distressed crypto firms like Voyager Digital and BlockFi, both of whom it won the bid to acquire.
FTX Bankruptcy and Prospective US Investigations
From the current reality, FTX is likely to file for bankruptcy protection if it does not get the cash injections it needed to fulfill customers’ withdrawal requests. Should this happen, it will become a shadow of Voyager Digital which it is trying to save, billions of investor funds tied down in bankruptcy proceedings.
The exchange’s problems are also about to be compounded with the United States Securities and Exchange Commission (SEC), the Commodities Futures Trading Commission (CFTC), and the Department of Justice (DoJ) also investigating the trading platform, particularly on how it handled customer’s funds and its association with its US entities.
With user confidence notably shaken across the board, industry veterans are acknowledging how much of an impact this FTX downfall will have on the broader industry. Already, the prices of cryptocurrencies have taken a severe plunge this week with Bitcoin (BTC), Ethereum (ETH), and FTX Token (FTT) dropping by 17.83%, 22.65%, and 89.70% over the past week.
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
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