FTX CEO looking at all options as Binance deal collapses

The wealth of FTX's CEO Sam Bankman-Fried was estimated at US$17 billion as at September, according to Forbes. PHOTO: NYTIMES

WASHINGTON - FTX chief executive Sam Bankman-Fried told employees he was exploring all options for his firm after a deal with cryptocurrency exchange Binance collapsed on Wednesday.

The proposed deal between Mr Bankman-Fried and rival Binance chief executive Zhao Changpeng had been the latest emergency rescue in the world of cryptocurrencies in 2022, as investors pulled out from riskier assets in the wake of rising interest rates. The cryptocurrency market has fallen by about two-thirds from its peak to US$1.07 trillion (S$1.5 trillion).

“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,” Binance said in a statement on Wednesday.

It leaves Mr Bankman-Fried, 30, who had previously been throwing lifelines to other faltering digital asset platforms, with dwindling options himself.

“I am working, as quickly as I can, on next steps here. 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 employees seen by Reuters.

The 30-year-old, whose wealth was estimated at US$17 billion as at September according to Forbes, had made billions arbitraging cryptocurrency prices in Asia beginning in 2017 before heading FTX.

Mr Bankman-Fried said in the staff message that his goals were to protect customers and provide any help he could for staff and investors.

“I’ll keep fighting for those (goals), as best as I can, as long as it is correct for me to. I am exploring all the options.”

Mr Bankman-Fried also told employees that Binance had not previously expressed reservations about the deal.

“I am deeply sorry that we got into this place and for my role in it,” he wrote. “That’s on me, and me alone, and it sucks, and I am sorry, not that it makes it any better.”

In a later message to staff, seen by Reuters, Mr Bankman-Fried said: “I will post many more updates tonight, I promise.”

A representative for FTX did not immediately respond to a request for comment.

The US Securities and Exchange Commission is investigating FTX.com’s handling of customer funds amid a liquidity crunch, as well its crypto-lending activities, a source with knowledge of the inquiry said on Wednesday. Bloomberg first reported the probe.

Meanwhile, Sequoia Capital on Wednesday assured investors that the firm had limited exposure to FTX and will pull out of its investment in the troubled cryptocurrency exhange.

Sequoia, one of the world’s top venture capital firms, said that its US$150 million exposure to both FTX and FTX.US in its third global growth fund represents less than 3 per cent of the fund’s total capital commitment.

FTX’s woes are the latest sign of trouble in the fast-moving world of cryptocurrencies where prices have slumped in 2022 as a broader downturn in financial markets prompted investors to ditch riskier assets.

After rapid growth in 2020 and 2021, bitcoin is down more than 60% in 2022 and was last off 13% on the day at US$16,277.

FTT, the smaller token tied to FTX, was down a further 67 per cent, after collapsing 72 per cent on Tuesday.

“It has been a truly devastating year for the industry,” said Mr Ryan Wong, a senior researcher at crypto exchange Huobi. The turmoil in the industry would “lead to massive distrust from the public towards centralised establishments”, he added. REUTERS

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