Crypto exchange dashes to fill $8 billion hole as investors write down equity.
JOSHUA OLIVER, RICHARD WATERS, ORTENCA ALIAJ, JAMES FONTANELLA-KHAN, WILLIAM LANGLEY, AND CHAN HO-HIM, FT - 11/10/2022, 4:27 PM
FTX is on the brink of collapse as chief Sam Bankman-Fried races to secure billions of dollars to salvage his empire after Binance ditched an 11th-hour rescue of one of the world’s biggest crypto exchanges.
Venture capital firm Sequoia Capital said it would mark down its $214 million investment in FTX to zero after a run on the exchange in recent days blew a massive hole in its balance sheet and cast serious doubts over its survival.
“In recent days, a liquidity crunch has created solvency risk for FTX,” Sequoia said in a note on Wednesday to investors in its fund.
The abrupt change in fortune for FTX and its sister trading firm Alameda Research marks a spectacular fall for Bankman-Fried, a 30-year-old trader and entrepreneur who is one of the industry’s most prominent figures. Bankman-Fried was one of the world’s richest people just months ago, but large swaths of his $24 billion fortune will evaporate if FTX and Alameda Research go bust.
A collapse would also deal a blow to FTX’s blue-chip backers, which include BlackRock, Canada’s Ontario Teachers’ Pension Plan, SoftBank, and hedge fund billionaires Paul Tudor Jones and Izzy Englander.
In recent days, Bankman-Fried has appealed to investors for support to prop up the exchange as customers fearful of its financial health demanded their money back. FTX needs $8 billion to steady the ship, according to people with knowledge of the matter.
Bankman-Fried also turned to rival crypto exchanges including OKX and Binance for a bailout, which led to a short-lived plan by Binance chief executive Changpeng Zhao to buy FTX and backstop customers’ funds.
Full article: https://arstechnica.com/tech-policy/2022/11/ftx-on-brink-of-collapse-after-binance-abandons-rescue/