NEW YORK – FTX chief executive officer Sam Bankman-Fried told employees he was evaluating all options for his firm after a deal with cryptocurrency exchange Binance fell through on Wednesday.
The proposed deal between Mr Bankman-Fried and rival Binance chief executive officer Changpeng Zhao was the latest emergency bailout in the cryptocurrency world this year as investors divested from riskier assets amid rising interest rates. The cryptocurrency market is down about two-thirds from its peak at $1.07 trillion.
“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged investigations by the US authorities, we have decided that we will not pursue the potential acquisition of FTX.com,” Binance said in a statement on Wednesday.
It leaves Mr. Bankman-Fried, 30, who had previously thrown lifelines to other faltering digital asset platforms, with dwindling options himself.
“I am working here as fast as I can on the next steps. I wish I could give you all more clarity than I can,” said Mr. Bankman-Fried, who is from California but lives in the Bahamas, where FTX is based, in a message to FTX employees seen by Reuters Has.
Mr. Bankman-Fried, whose fortune was estimated at $17 billion as of September, according to Forbes, had made billions from cryptocurrency prices in Asia as of 2017 before heading FTX.
Mr. Bankman-Fried said in the employee message that his goals are to protect customers and provide whatever assistance he can to employees and investors.
“I will keep fighting for these (goals) as best I can as long as it is right for me. I am reviewing all options.”
Mr Bankman-Fried also told staff that Binance had not previously expressed any reservations about the deal.
“I am deeply sorry that we ended up in this place and for my role in it,” he wrote. “It’s on me, and me alone, and it sucks, and I’m sorry, not that it makes it any better.”
In a later message to staff, seen by Reuters and sent around 6 p.m. Eastern Time (Wednesday 2300 GMT), Mr Bankman-Fried said: “I’ll be posting many more updates tonight, I promise.”
A representative from FTX did not immediately respond to a request for comment.
FTX.com is also under scrutiny by US regulators for its handling of customer funds as well as its crypto lending. The US Securities and Exchange Commission (SEC) is investigating crypto exchange FTX.com’s handling of customer funds amid a liquidity crisis, as well as its crypto lending activities, a source with knowledge of the investigation said on Wednesday. Bloomberg first reported on the investigation.
Bloomberg also reported that the Department of Justice (DOJ) is investigating the turmoil and officials are cooperating with the SEC. A DOJ spokesman declined to comment on the Bloomberg report.
FTX’s troubles are the latest sign of trouble in the fast-paced cryptocurrency world, which has seen prices plummet this year as a broader downturn in financial markets prompted investors to dump riskier assets.
After rapid growth in 2020 and 2021, Bitcoin is down more than 60% in 2022, and was last down 13% on the day at $16,277.
FTT, the smaller token tied to FTX, is down another 67% after plummeting 72% on Tuesday.
Investors in FTX have been hurt by the turmoil. Sequoia Capital said while its exposure to FTX is limited, it has reduced its investment to zero.
“It’s been a really devastating year for the industry,” said Ryan Wong, a senior researcher at crypto exchange Huobi. Mr Wong said the turmoil in the industry was “leading to massive public distrust of centralized facilities”.
Speculations about FTX’s financial health that began over the weekend led to $6 billion in withdrawals in the 72 hours leading up to Tuesday morning. Binance on Tuesday unveiled a proposal to acquire the competing exchange’s assets outside the United States.
The deal to cover a “liquidity crisis” was non-binding and subject to further due diligence, leading some investors and analysts to wonder if it would go through.
The Wall Street Journal reported Wednesday that Mr. Bankman-Fried told investors he needed emergency funding to cover up to $8 billion in payout requests, citing sources familiar with the situation. FTX did not immediately respond to a request for comment.
Mr. Zhao tweeted a letter to employees earlier Wednesday that said there was no “master plan” behind the deal and that “FTX’s failure is not good for anyone in the industry” and is not a win.
Mr. Zhao also urged investors not to trade FTT tokens and ignore the prices.
Binance wasn’t the only potential partner being sought. Ahead of Binance’s proposed deal, Bankman-Fried reached out to cryptocurrency exchange OKX for a deal Monday morning, but the exchange declined to go ahead. – Reuters