Sam Bankman-Fried is racing to raise as much as $8bn to save his crypto empire as more of his former backers write down their investments in the FTX exchange.
The 30-year-old conceded on Twitter on Thursday that the FTX trading venue has an insufficient store of readily accessible funds to meet client demands. Investors pitched by Bankman-Fried described a chaotic appeal from the humbled crypto chief executive to plug his company’s financial hole.
The outcome of Bankman-Fried’s dash for cash will determine the fate of FTX amid mounting doubt about its ability to remain afloat without an injection of fresh capital, and anxiety for customers with money stuck on the frozen exchange. In a sign of how pressures are rising across businesses affiliated with him, FTX US, which is separate from the international exchange, said it may halt trading on its platform in coming days.
Investors put the amount Bankman-Fried is seeking between $6bn to $8bn. Alameda Research, his trading firm, owes $10bn to FTX, said two people familiar with the matter.
Several investors have marked down their equity stakes in FTX to zero, suggesting they are unlikely to put in more cash. Paradigm, an investor with a $300mn holding in the trading venue, had reduced the value of its investment to zero, following venture capital firm Sequoia, which announced the move on Wednesday.
One investor said Bankman-Fried was looking to tap crypto exchange OKX, stablecoin operator Tether and Tron founder Justin Sun for the fresh fundraising.
Tether chief technology officer Paolo Ardoino told the Financial Times the company was not playing any 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 the stablecoin issuer’s help.
“We were asked if we were interested to invest or lend money. We said no,” Ardoino said.
Sun did not respond to a request for comment but has said on Twitter: “We are putting together a solution together with FTX to initiate a pathway forward.”
Late on Thursday, FTX said it had reached an agreement with Tron establishing a “special facility” allowing holders of some crypto tokens to swap assets one-to-one from FTX to external wallets.
OKX turned down an exclusive deal to bail out FTX on Tuesday but is still considering whether to commit funds, said people familiar with the matter. Its executives are concerned about the risk FTX misused customer deposits and the possibility of lawsuits by clients.
Investors and customers have approached the prominent American litigator David Boies about launching a suit, people familiar with the matter said. Meanwhile, Bankman-Fried has hired Paul Weiss partner Martin Flumenbaum, known for representing the junk bond trader Michael Milken who was jailed for violating US security 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 carry out a series C funding round matching its $32bn valuation from January.
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 message by himself. He doesn’t have a guy,” the investor added.
Bankman-Fried blamed poor internal record keeping for a mistaken accounting of leverage and liquidity on the exchange. “I’m sorry . . . I fucked up,” he said.
He pledged current assets and any money raised would be used first to pay back customers, and offered to step down as chief executive if the company survives.
“There are a number of players who we are in talks with, [letters of intent], term sheets, etc,” Bankman-Fried said. “I can’t make any promises about that.”
Additional reporting by William Langley, Chan Ho-him and James Fontanella-Khan
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