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10 Nov, 2022 12:53

Major crypto hub issues bankruptcy warning

FTX is facing a liquidity shortfall of up to $8 billion, according to Bloomberg
Major crypto hub issues bankruptcy warning

The chief executive of cryptocurrency exchange FTX, Sam Bankman-Fried, has told investors that without a cash injection the company would need to file for bankruptcy, Bloomberg reported on Thursday, citing sources. 

According to a person with direct knowledge of the matter, Bankman-Fried informed investors during a conference call on Wednesday that his crypto exchange faced a shortfall of up to $8 billion and needed $4 billion to remain solvent. The unnamed source explained that FTX is attempting to raise rescue financing in the form of debt or equity, or a combination of the two.

“I f***ed up,” Bankman-Fried reportedly said, adding he would be “incredibly, unbelievably grateful” if investors could help. The call occurred before crypto exchange Binance abandoned its plans to acquire FTX.

Bloomberg’s source noted that Bankman-Fried repeatedly told investors during the call that it was simply not true that Binance’s CEO Changpeng Zhao was walking away from the takeover. About an hour later, however, Binance said it was indeed backing out.

“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,” Binance said in a statement.

Binance backed out of the deal after a due diligence exam and recent reports of mishandled customer funds, as well as alleged investigations by US authorities into the company. Abandonment of the deal triggered a meltdown in the cryptocurrency market, with the price of Bitcoin sinking to its lowest level in two years.

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