FTX, one of the largest crypto exchanges, needs to raise $8 billion in liquid capital or face bankruptcy.
- FTX announced suddenly on Tuesday that it was being purchased by rival exchange Binance to bail out an ongoing “liquidity crunch.”
- The purchase scared the market and caused a mass crypto selloff. Major currencies took a hit Wednesday, with some losing as much as 60% of their value in 24 hours.
- Other exchanges like Robinhood have seen major upticks in business.
- Things have only gotten worse, with FTX co-founder Sam Bankman-Fried telling his investors Wednesday that the company has no choice but to raise rescue financing through debt and equity to cover. It lacks the capital to meet withdrawal requests.
- Binance backed out of its non-binding deal on Wednesday, noting misuses of funds and ongoing investigations. This likely leaves FTX to collapse, CNBC reports.
- U.S. authorities, including the Department of Justice, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, have begun investigating FTX, Bloomberg reports.
Why it’s News
The news of the fall of FTX has rocked the crypto world for two days, sending markets into a nosedive and destroying institutions that were seemingly popular and solvent just a week ago.
“The acknowledgment of his firm’s deepening troubles and limited options is a stunning turn for Bankman-Fried, who was once worth $26 billion and likened to John Pierpont Morgan. It also underscores the uncertainty hanging over FTX, its clients, and cryptocurrency markets,” says Bloomberg.
“The disintegration of the Binance-FTX deal is the latest chapter in a shocking collapse that’s rocked the crypto world this week. Bankman-Fried tried to reassure investors just on Monday that the company’s assets were fine. But after Binance’s [CEO] said publicly that his company was selling its holdings in FTX’s native token FTT, the sell-off was on, and FTX could do nothing to stop it,” says CNBC.
The collapse may additionally hurt customers. As Bloomberg reports, the failures of previously large crypto exchanges like Voyager and Celcius resulted in billions of dollars worth of assets being tied up in legal proceedings.
FTX is a web platform and mobile app where consumers can buy, sell, and trade cryptocurrencies, NFTs, and stocks. The platform has an NFT marketplace where consumers can browse various collections, buy NFTs, sell them—for a small fee.