FTX has suspended registrations for new users, has held talks with Justin Sun, and is facing allegations that customer funds were used to prop up a sister company.
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Sam Bankman-Fried has told FTX.com investors that the exchange is teetering on the brink of bankruptcy unless it secures an urgent cash injection, according to Bloomberg.
Speaking after Binance announced it would no longer be proceeding with plans to take over the trading platform, Sam Bankman-Fried warned FTX currently faces a shortfall of up to $8 billion.
At present, the one-time billionaire said that the trading platform needs $4 billion in order to stay solvent — telling those on the call:
"I f***** up."
There are multiple developments in this fast-moving story — with FTX finally suspending registrations for new users after repeatedly being urged to do so by the crypto community.
A "significant liquidity crunch" has led to withdrawals being suspended, and many customers being unable to access their funds.
Several high-profile personalities on Crypto Twitter have confirmed that they were among those affected.
Now CZ has pulled out, Tron's founder Justin Sun has revealed that he is "putting together a solution together with FTX to initiate a pathway forward."
However, there's uncertainty over whether Sun is hoping to come to the rescue of the exchange as a whole, or protect those who held Tron-based tokens on the doomed trading platform.
Meanwhile, Cobie — a popular account on Crypto Twitter — has published screenshots of what appear to be leaked messages that SBF sent to his employees on Slack.
"My number one priority right now is to do right by customers. After that, it's to do right by you guys and by investors' but only after #1."
SBF goes on to say that FTX is attempting to conduct a raise to make customers, current investors and employees whole, adding:
"In, and only in, a hypothetical world where everything turns out amazingly and everyone else is done right, maybe myself as an investor fourth and last — but that's not a particularly important part of anything we're going to be doing as a company."
The message appears to confirm that talks have been held with Justin Sun, with more details to follow in the future. SBF went on to admit:
"I completely understand that this is a tough time for all of you, and I'm really f****** sorry for that. I also understand that everyone has their own thoughts about the right decisions for the companies to make."
The embattled CEO went on to tell his staff that "we do need to be all rowing in the same direction," and wrote:
"I won't begrudge any of you if you want to take a breather or choose your own path in life."
CoinMarketCap has been unable to verify whether these leaked Slack messages are genuine.
Understanding What Happened
According to Reuters, Alameda Research — SBF's trading firm and FTX's sister company — "suffered a series of losses from deals" in May and June this year.
It's alleged that Bankman-Fried transferred at least $4 billion in FTX funds to prop up Alameda, with two people telling the news outlet that some of this consisted of customer deposits. Reuters goes on to claim that other FTX executives were not told about the transfer.
Last week's CoinDesk report appeared to lift the lid on Alameda Research's finances — and revealed that much of the $14.6 billion on its books consisted of FTT, FTX's native token.
This, when combined with the revelation that Binance intended to offload $580 million in FTT tokens because of "recent revelations," led to a rush of withdrawals at FTX that totalled $6 billion in just 72 hours.
Given how FTX is meant to be an exchange that simply custodies user funds, questions are now being asked about why the company hasn't been able to honor these withdrawals in full.
