A few of the struggling cryptocurrency exchange’s assets were frozen by authorities. On Friday, as the company’s solvency issues grew worse and Sam Bankman-Fried, its top executive, came under more scrutiny, FTX and other companies in the sector rushed to contain losses.
An already faltering bitcoin and other tokens have taken a beating from the week-long saga that started with a run on FTX, one of the biggest cryptocurrency exchanges, and a failed takeover attempt by archrival Binance.
According to a source on Thursday, as the exchange desperately tries to preserve itself following a wave of customer withdrawals, FTX is frantically trying to raise roughly $9.4 billion from investors and competitors.
Concerns for FTX appeared to grow. An FTX subsidiary, FTX Digital Markets, had its assets frozen, according to the Securities Commission of the Bahamas on Thursday.
According to a tweet from a Bloomberg reporter that cannot be independently verified, Bankman-Fried is also being looked into by the US Securities and Exchange Commission for possible securities law violations.
With losses totaling 17% this month, Bitcoin fell 4% to $16,858 on Friday. The FTT token for FTX was down 27% at $2.7, for a month-over-month loss of 89%.
The trading of bitcoin exchange-traded funds and futures has increased dramatically.
According to Kami Zeng, head of research at Hong Kong-based Fore Elite Capital Management, a crypto fund manager, “confidence was lost on day one of this fallout and there is no sign of it returning yet.”
“We are already observing the acts of authorities from the United States to Japan to the Bahamas, etc.
Expect more, which is exactly what the cryptocurrency market needs right now. People suffer injuries and demand protection.
Lawmakers in the United States increased their calls for action, including new regulations for the industry and an investigation into the causes of the FTX crash.
A source close to Japan’s SoftBank Group Corp (9984.T) said on Friday that the tech giant would write down all of its less than $100 million Vision Fund investments in the U.S. and foreign operations of cryptocurrency exchange FTX.
More cryptocurrency lenders and platforms described soaring volumes and precautions once losses started to climb. BlockFi, a cryptocurrency lender, announced that it was halting client withdrawals until FTX was clarified.
Genesis Trading, a broker, stated that its derivatives division holds over $175 million in FTX-locked funds.
Matthew Dibb, chief operating officer of Singapore-based cryptocurrency investment management Stack Funds, stated that he thought there was a best-case 20–30% possibility of an FTX rescue.
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He mentioned that buyers of stranded deposits on FTX are paying 10 cents for every dollar.
“The harm appears to be done, and even if FTX were saved, it would no longer be a trading venue because they have lost all trust. An FTX rescue would benefit its customers and the crypto industry more than the company itself.
Bankman-Fried made mistakes after he intervened to preserve other crypto businesses, sowing the roots of FTX’s demise months earlier. FTX paid at least $4 billion to Alameda, according to sources cited by Reuters, to support the trading company following a string of losses.
The individual with firsthand knowledge of the situation claims that Bankman-Fried has discussed financing $1 billion from Justin Sun, the creator of the cryptocurrency token Tron, a rival exchange called OKX, and the stablecoin platform Tether.
The insider also said that he is trying to get the remaining money from various sources, including current backers like Sequoia Capital.
Whether Bankman-Fried will be able to raise the money he needs or whether these investors will take part is still up in the air.
The situation faced by FTX, a 30-year-old cryptocurrency CEO formerly estimated to be valued at close to $17 billion, is a spectacular fall from grace.
According to a source with knowledge of the investigation, the US securities commission is looking into how FTX.com handles customer monies and its crypto-lending operations.