The Bahamas securities regulator froze the assets of part of Sam Bankman-Fried’s crypto empire and moved to appoint a liquidator for one of its assets as the entrepreneur raced to raise up to $8 billion to save FTX.
The Bahamas Securities Commission took action Thursday against Bahamian subsidiary FTX Digital Markets. FTX. The regulator said that no assets belonging to the business can be transferred without the approval of the temporary liquidator. FTX was moved to the Bahamas from Hong Kong, where it was launched in 2021.
“The Commission is aware of public statements suggesting that clients’ assets have been misused, mismanaged and/or transferred to Alameda Research,” the announcement said. Alameda, Bankman-Fried crypto- Trade business.
Bankman-Fried was looking to raise up to $8 billion to bail out the crypto company on Thursday as many of his former backers wrote of their investments in FTX.
The crisis has spread to the crypto industry as BlockFi, a digital asset lending platform, pauses customer withdrawals.
BlockFi said on Thursday that FTX and Alameda will not be able to run their business as usual due to “the situation is unclear”. In the midst of a crypto crash this year, the head of FTX get out of jail BlockFi with a $250 million loan.
The 30-year-old acknowledged on Twitter that the FTX trading platform has an insufficient repository of readily accessible funds to meet customer demands. Investors have received a chaotic appeal from the humble crypto chief executive to close his company’s financial gap.
The outcome of Bankman-Fried’s search for cash will decide its fate amid growing doubts that FTX can survive without a capital injection and concerns for customers with funds in the frozen stock market.
FTX US, which is separate from the international exchange, said it may halt trading on its platform in the coming days, in a sign of how pressures are mounting among its affiliated businesses.
FTX’s Australian business took over on Friday. Customers were advised not to deposit any money or take any action. Japan has ordered FTX’s local subsidiary to suspend some of its activities.
Investors estimate that Bankman-Fried is seeking $6 billion to $8 billion. Trading firm Alameda Research owes FTX $10 billion, two people familiar with the matter said.
Several investors, including Paradigm, which has a $300 million conglomerate, and venture capital firm Sequoia, which announced the move Wednesday, have cut their stakes in FTX to zero.
One investor said that Bankman-Fried wants to use crypto exchange OKX, stablecoin operator Tether, and Tron founder Justin Sun for fundraising.
Tether chief technology officer Paolo Ardoino told the Financial Times: “We were asked if we were interested in investing or lending. We said no.” He said Bankman-Fried contacted the stablecoin issuer a few days ago to ask for help, before the canceled Binance bailout was announced.
Sun did not respond to a request for comment, but said on Twitter, “We are creating a solution together with FTX to start a path forward.”
FTX on Thursday said it has reached an agreement with Tron to set up a “private facility” that will allow some crypto token holders to exchange assets one-to-one from FTX to external wallets.
OKX declined an exclusive deal to bail out FTX on Tuesday, but is still considering funding, according to sources familiar with the matter. Its executives are concerned about the risk of FTX misusing customer deposits and the possibility of customers being sued.
People familiar with the matter said investors and clients have approached prominent American litigator David Boies about filing a lawsuit. Meanwhile, Bankman-Fried recruited Paul Weiss partner Martin Flumenbaum, known to represent scrap bond trader Michael Milken, who was jailed and later pardoned for violating US security laws.
While Boies declined to comment, Flumenbaum did not immediately respond to a request for comment.
The fundraising pressure comes less than a month after FTX was ready to launch a Series C funding round, matching its January valuation of $32 billion.
One investor said Bankman-Fried appears to be running the financial bailout without professional advisors. “He appears to be running this process by text message himself. He has no man,” added the investor.
Bankman-Fried blamed poor internal record keeping for an incorrect accounting of leverage and liquidity in the stock market. “Sorry . . . I fucked up,” he tweeted.
He promised that existing assets and money raised would be used to repay customers first, and offered to step down as CEO if the company survives.
Bankman-Fried said, “There are a few players we’re discussing.” Said. “We’ll see how that turns out.”
Report by Kadhim Shubber, Arash Massoudi, Joshua Oliver and Scott Chipolina in London; Ortenca Aliaj in New York; and Richard Waters and Tabby Kinder in San Francisco. Additional reporting by William Langley Chan Ho-him in Hong Kong, James Fontanella-Khan in New York and Nic Fildes in Sydney.
