By
Godfrey Benjamin
April 23rd, 2024
The options left for FTX and Alameda Research are notably streamlined at this time. The expectation that the company’s assets outside of its US subsidiary will be acquired by Binance exchange fell apart as Binance pulled out of the deal.
Sam Bankman-Fried, the founder and Chief Executive Officer (CEO) of embattled FTX Derivatives Exchange notably transferred as much as $4 billion to save his other outfit, Alameda Research. According to an exclusive report from Reuters, the FTX boss felt the need to come to the aid of Alameda Research drawing on the losses the trading outfit suffered in its efforts to bail out other distressed crypto lending firms including BlockFi and Voyager Digital.
The Reuters report detailed the fact that Bankman-Fried did not consult with the other exchange’s executives when he made the transfer of funds for fear of the information leaking. The transferred funds were dominated by the exchange’s native token FTT and some shares of Robinhood Markets Inc (NASDAQ: HOOD).
There remains no idea what plans the FTX CEO had in mind when he made the transfer considering the fact that some customer deposits were also used as part of the bailout funds to Alameda Research. The implosion of FTX started when Coindesk reported on November 2 that the bulk of the cash in Alameda Research’s balance sheet was made up of the FTT, alongside a lot of financial details that did not add up.
The company’s woes became compounded when Binance CEO, Changpeng ‘CZ’ Zhao tweeted earlier this week that Binance was going to sell close to $600 million worth of FTT that it received as exit liquidity when Bankman-Fried bought CZ’s 20% stake in the company last year.
The update from CZ was met with panic amongst FTX’s users, most of whom placed a withdrawal request to take their funds off the platform. The withdrawal backlog came in at $6 billion according to on-chain data and confirmation from Bankman-Fried to employees on Slack.
Solutions to FTX and Alameda Research Woes
The options left for FTX and Alameda Research are notably streamlined at this time. The expectation that the company’s assets outside of its US subsidiary will be acquired by Binance exchange fell apart as Binance pulled out of the deal on Wednesday.
“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com,” the bigger trading platform tweeted on Wednesday.
This leaves FTX in a more dire position to source liquidity as fast as it can from investors in the form of debt, equity, or both.
While there are reports that detailed a lack of proper awareness on the part of FTX’s core investors including BlackRock, Sequoia Capital, and Tiger Global Management amongst others, Bankman-Fried is still hopeful the operational liquidity bailout can come from these investors.
According to him, failure to get the cash needed to fulfill the customer’s withdrawal request will force the firm to file for bankruptcy protection. The timeline for this remains unknown.