STORY: Chief Executive Sam Bankman-Fried is urgently working to save cryptocurrency exchange FTX which has been dragged down by a rush of customer withdrawals.
FTX is now scrambling to raise about $9.4 billion from investors and rivals, according to an anonymous source, who told Reuters: Bankman-Fried has discussed raising $1 billion each from Justin Sun, the founder of crypto token Tron, rival exchange OKX, stablecoin platform Tether and some investors in FTX like venture capital fund Sequoia.
“I think it's undeniable that this is a black eye on the crypto industry.”
Charley Cooper, Managing Director at Enterprise Software Firm R3, said he can see why FTX rivals might want to save it from collapse:
“You have a group of entities within an, within an ecosystem that trade with each other, that hold positions in each other's crypto tokens. Money moves back and forth quite frequently, and it also draws in various different retail customers, which creates a reputational issue if any of them go down. So, it isn't surprising to me that various different companies like Sequoia, or Binance when they were looking at it, or Tron, decided that rather than let FTX go down, they felt if they could, they'd like to throw them a lifeline, because it's better for the industry as a whole if they survive together.”
In a tweet, FTX said it had reached a deal with Tron to establish a special facility that would allow clients to swap some crypto assets from FTX to external wallets.
But - Tether's chief technology officer tweeted that it had "no plans to invest in or lend assets to FTX."
FTX's predicament marks a stunning downfall for the 30-year-old crypto executive who was once worth nearly $17 billion…
And has triggered a broader CRISIS of confidence in cryptocurrencies.
White House Press Secretary, Karine Jean-Pierre on Thursday pointed to the need for crypto regulation:
“…Without proper oversight, crypto currencies, it risks harming everyday Americans. So this is something that we clearly monitor and that we see as an important issue. But the most recent news further underscores these concerns and highlights why prudent regulation of crypto currencies is indeed needed.
Cooper says an FTX collapse will likely spur more aggressive steps toward oversight.
“Gary Gensler, the chairman of the Securities and Exchange Commission, has been very vocal about the fact that he thinks much of the crypto industry should be regulated by security laws, that much of the tokens that we're talking about are indeed securities and therefore fall underneath those laws, and I think you're going to see a more aggressive push in the wake of the collapse of FTX by those regulators trying to stake out a claim in the absence of action by Congress.”