A Bahamian securities regulator has frozen the assets of part of Sam Bankman-Fred’s crypto empire and moved to appoint a liquidator for one of his entities, as the businessman scrambled to raise up to $8 billion to bail out FTX.
The Bahamas Securities Commission took action Thursday against FTX Digital Markets, a subsidiary of the Bahamas FTX. The regulator said no assets belonging to the company could be transferred without the approval of a temporary liquidator. FTX moved to the Bahamas in 2021 from Hong Kong, where it was launched.
“The Committee is aware of public statements indicating that client assets have been mishandled, mismanaged, and/or transferred to Alameda Research,” the announcement said. Alameda is Pinkman Fried encryption Commercial Business.
Bankman-Fried was seeking to raise up to $8 billion to save his crypto company on Thursday as more of his former backers wrote down their investments in FTX.
The crisis has led to a contagion in the crypto sector as BlockFi, a digital asset lending platform, has temporarily halted customer withdrawals.
BlockFi said Thursday that it cannot operate its business as usual due to the “unclear situation” of FTX and Alameda. Amid the Crypto Crash This Year, the Head of FTX Has Been Suffering Salvaged BlockFi with a $250 million loan.
The 30-year-old admitted on Twitter that the FTX trading platform has an insufficient store of easily accessible funds to meet customer requirements. Investors have described the chaotic call of the humble cryptocurrency CEO to bridge his company’s financial gap.
The outcome of Bankman-Fried’s cash rush will determine the fate of FTX amid growing doubts about its ability to stay afloat without capital injections, and worrying about clients with funds stuck on a frozen exchange.
In a sign of how pressure is mounting across its affiliates, FTX US, which is separate from the international exchange, said it may halt trading on its platform in the coming days.
The Australian FTX business was put into administration on Friday. Its clients have been advised not to deposit any money or make any trades. Japan has ordered the domestic subsidiary of FTX to suspend some of its operations.
Investors estimate Bankman-Fried is seeking between $6 and $8 billion. Alameda Research, his trading company, owes $10 billion to FTX, two people familiar with the matter said.
Several investors have reduced their stakes in FTX to zero, including $300 million holding company Paradigm and venture capital firm Sequoia, which announced the move on Wednesday.
One investor said Bankman-Fried was looking to tap crypto exchange OKX, Tether operator, and Tron founder Justin Sun, to raise funds.
“We were asked if we were interested in investing or lending money. We said no,” Paolo Ardoino, chief technology officer of Tether, told the Financial Times. stable currency.
Sun did not respond to a request for comment but said on Twitter: “We are working out a solution with FTX to start a path forward.”
On Thursday, FTX said it had reached an agreement with Tron to set up a “special facility” that would allow holders of certain cryptocurrencies to exchange assets from FTX to offshore wallets.
OKX rejected an exclusive deal to bail out FTX on Tuesday but is still considering whether to commit money, people familiar with the matter said. Its executives are concerned about the risks of FTX misuse of customer deposits and the potential for lawsuits by customers.
People familiar with the matter said investors and clients contacted prominent US litigator David Boies about the suit’s release. Meanwhile, Bankman-Fried has hired Paul Weiss’ partner, Martin Flumenbaum, known to represent junk bond trader Michael Milken who has been jailed for violating US security laws and later pardoned.
Boyes 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 prepared to implement a Series C funding round that matches its $32 billion valuation as of January.
One investor said that Bankman Fried appeared to be leading the rescue effort without professional advisors. He appears to be running this process by texting himself. “He doesn’t have a man,” the investor added.
Bankman-Fried blamed poor internal record-keeping for the mis-accounting of leverage and liquidity in the exchange. “I’m sorry… he had sex,” he tweeted.
He pledged that existing assets and any money raised would be used first to pay customers – and offered to step down as CEO if the company survived.
“There are a number of players that we have conversations with,” Bankman-Fried said. “We’ll see how that ends.”
Additional reporting by Kazem Shubar, Arash Masoudi, Joshua Oliver and Scott Shipulina in London; Ortenca Aliaj in New York; and Richard Waters and Tabby Kinder in San Francisco. Additional reporting by William Langley Chan Hoh in Hong Kong, James Fontanella Khan in New York and Nick Fields in Sydney.
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