FTX scrambles for emergency funds as contagion fears grow
![](https://www.cityam.com/wp-content/uploads/2021/08/Changpeng-Zhao-Binance-CEO-scaled-1.jpeg?w=742)
Fears of a crypto contagion have spread today as exchange FTX scrambles to raise emergency funds and stave off collapse, following the collapse of a rescue deal with its main rival.
The industry has been plunged into chaos in recent days after FTX, one of the sector’s biggest exchanges led by founder Sam Bankman-Fried, announced it would sell itself to rival Binance as it faced down a reported $8bn blackhole in its balance sheet.
Binance abandoned the deal on Wednesday citing concerns over the state of FTX’s books, leaving the beleaguered exchange rushing to try and raise funds from investors.
Bankman-Fried, who has bailed out other ailing firms in the sector this year, apologised on Twitter this afternoon, saying he “f*cked up” and “should have done better”.
He added that the exchange was in talks with a “number of players” to raise emergency capital. Justin Sun, founder of crypto network Tron, said in a tweet he was “putting together a solution together with FTX to initiate a pathway forward”.
The turmoil sent Bitcoin to a fresh two year lows of around $15,600 dollars as investors were rattled by fears of a wave of collapses.
Analysts at JP Morgan predicted the price of the most valuable cryptocurrency could plunge to as low as $13,000 as the crisis at FTX and its sister firm Alameda Research spreads.
The “size and interlinkages” of FTX and Alameda with other players in the crypto ecosystem look likely to spark a “new cascade of margin calls, deleveraging and crypto company/platform failures”, the Wall Street bank warned.
The FTX crisis is set to hit the firm’s high profile backers, including prolific venture investor Sequoia Capital, which said it had marked its holding in the firm down to $0. BlackRock, Ontario Teachers’ Pension Plan and Softbank are also set to suffer major losses from a collapse.
The crisis began after a public spat between Bankman-Fried and Binance founder Changpeng Zhao ended with the latter liquidating his entire holdings of FTX’s coin FTT, sparking a run on the firm’s assets and a liquidity crunch.
FTX is now reportedly facing a probe from the US Securities and Exchange Commission over its handling of client funds.
An SEC spokesperson told City A.M.: “The SEC does not comment on the existence or nonexistence of a possible investigation.”
The industry has already been rocked by a string of bankruptcies and collapses this year, including the coin Terra Luna, which shed almost the entirety of its value in a major sell-off in the Spring, as well as the failure of crypto lender Celcius and digital hedge fund Three Arrows Capital.
Bitcoin has shed around 70 per cent of its value in the past year and more than $1tn has been wiped off the value of the industry in a so-called crypto winter.