3. Cryptocurrencies Capitulate as No Binance Bailout for FTX
- Bankman-Fried told FTX.com investors Wednesday that without a cash injection the company would need to file for bankruptcy.
- In addition to the financial strains, FTX is drawing attention from U.S. authorities.
The week’s rout in cryptocurrencies deepened, with Bitcoin tumbling to its lowest level in two years, as Binance walked away from its planned takeover of FTX.com.
FTT, the utility token of the FTX exchange, collapsed by more than 40%, following a more-than-70% tumble on Tuesday.
The price of SOL, the native token of the Solana blockchain which is associated with both FTX and FTX.com CEO Sam Bankman-Fried’s trading house Alameda Research, was down as much as 46% on Wednesday, taking losses this year to 90%.
A Binance spokesperson said.
“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com.”
“Our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help.”
Bankman-Fried told FTX.com investors Wednesday that without a cash injection the company would need to file for bankruptcy.
The exchange is attempting to raise rescue financing in the form of debt, equity, or a combination of the two, and Bankman-Fried informed investors his crypto exchange faced a shortfall of up to US$8 billion and needed US$4 billion to remain solvent.
FTX has a prominent list of backers such as Sequoia Capital, BlackRock, Tiger Global Management, SoftBank Group and Singapore’s sovereign wealth fund Temasek Holdings.
In addition to the financial strains, FTX is drawing attention from U.S. authorities.
The U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission are thought to be investigating whether the firm properly handled customer funds, as well as its relationship with other parts of Bankman-Fried’s empire, including his trading house Alameda Research, which many have long alleged actively trades against clients.