FTX founder Sam Bankman-Fried attempts to raise fresh cash despite bankruptcy

Samuel Bankman-Fried, founder and CEO of FTX. (AFP)
Samuel Bankman-Fried, founder and CEO of FTX. (AFP)

Summary

Alongside a few remaining employees, Mr. Bankman-Fried spent the weekend calling around in search of new commitments from investors

FTX filed for bankruptcy last week, but the cryptocurrency exchange’s founder still thinks that he can raise enough money to make users whole, according to people familiar with the matter.

Mr. Bankman-Fried, alongside a few remaining employees, spent the past weekend calling around in search of commitments from investors to plug a shortfall of up to $8 billion in the hopes of repaying FTX’s customers, the people said.

The efforts to cover that shortfall have so far been unsuccessful. The Wall Street Journal couldn’t determine what Mr. Bankman-Fried is offering in return for any potential cash infusion, or whether any investors have committed.

FTX filed for bankruptcy protection Friday, and Mr. Bankman-Fried resigned as chief executive of the company. He remains its largest shareholder. The bankruptcy announcement shocked FTX customers who had hoped they could recover assets. Now-deleted tweets from Mr. Bankman-Fried in the days before the filing assured users that the company was “fine."

Companies under bankruptcy protection sometimes receive loans meant to help maintain operations. Debtor-in-possession financing means that if companies survive, the first funds they earn will go toward paying down that lifeline. It is less common for a company to try to raise fresh equity capital early on in the bankruptcy process, since debtholders hold priority over any remaining assets.

Even if Mr. Bankman-Fried were successful in raising funds, he would likely have to negotiate with creditors and gain approval from bankruptcy court officials.

In Mr. Bankman-Fried’s case, the funds aren’t meant to sustain a bare-bones staff, but to repay individual traders and institutional clients who have been unable to get funds out, the people said.

FTX lent billions of dollars worth of customer assets to fund risky bets by its affiliated trading firm, Alameda Research, the Journal has reported, setting the stage for its quick collapse. Mr. Bankman-Fried told investors last week he needed emergency funding to cover a shortfall of up to $8 billion due to withdrawal requests.

FTX’s bankruptcy could involve more than one million creditors, its lawyers said in court filings late Monday. Before the chapter 11 filing, Mr. Bankman-Fried had spoken to companies including rival crypto exchanges Coinbase and Kraken, plus hedge funds and venture capital investors in the hope of a bailout, according to people familiar with those talks. His largest rival, Binance, agreed briefly to buy FTX, before backing out.

The amount needed to make FTX solvent would likely be multiples of the $1.9 billion the company raised during its existence. FTX’s most recent funding round was in January, when it raised $400 million from a long list of Silicon Valley and Wall Street names, including Tiger Global and SoftBank Group Corp.

During the summer, FTX initiated talks to raise a further $1 billion from investors, with the goal of acquiring companies in the market downturn, according to people familiar with the efforts. FTX hoped to close the round in September but struggled to, the people said. Mr. Bankman-Fried visited the Middle East in the weeks before the firm’s collapse in a quest to secure funds, the people said.

 

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
more

MINT SPECIALS