FTX Opts for Capital Raise as Alameda Research Winds Down on Trading

A troubled cryptocurrency exchange, FTX has opted to raise capital to fill a shortfall as large as $8 billion in its finances. Reuters reports that the exchange will conduct its fundraising next week.

This is even as rival crypto exchange Binance bailed out of a non-binding agreement to take over the former's non-US operations on Wednesday. The development comes a day after the Founder and CEO, Sam Bankman-Fried told investors during a call that he was hoping FTX could raise between $3 billion and $4 billion in equity and debt to cover the shortfall.

In a memo seen by Reuters, Bankman-Fried told staff members that he had a discussion on the matter with Justin Sun, the Founder of the blockchain, Tron and the cryptocurrency token, Tronix. Meanwhile, Sun tweeted early on Thursday that his firm was "putting together a solution" for FTX. The goal is to "initiate a pathway forward" for the exchange, he said.

Further to my announcement to stand behind all Tron token (#TRX, #BTT, #JST, #SUN, #HT) holders on #FTX, we are putting together a solution together with #FTX to initiate a pathway forward. @FTX_Official

— H.E. Justin Sun🌞🇬🇩🇩🇲🔥 (@justinsuntron) November 10, 2022

In a series of tweets later on Thursday, Bankman-Fried also noted that he and his team were “doing everything we can to raise liquidity”.

10) So, right now, we're spending the week doing everything we can to raise liquidity.

I can't make any promises about that. But I'm going to try. And give anything I have to if that will make it work.

— SBF (@SBF_FTX) November 10, 2022

Alameda Research

Also, Bankman-Fried in his tweet on Thursday disclosed that FTX’s corporate sibling Alameda Research is gradually drawing its trading activities to a close. The subsidiary, which is based in Hong Kong, is a quantitative cryptocurrency trading firm that provides liquidity to digital assets markets.

15) First, one way or another, Alameda Research is winding down trading.

They aren't doing any of the weird things that I see on Twitter--and nothing large at all. And one way or another, soon they won't be trading on FTX anymore.

— SBF (@SBF_FTX) November 10, 2022

This is even as a recent review of a private document by CoinDesk showed that Alameda Research's balance sheet is full of FTX tokens (FTT), suggesting stronger ties to FTX. This likely explains why the subsidiary of the Bahamas-based cryptocurrency exchange intends to wind down its trading activities.

As of June 30, Alameda Research’s assets totalled around $14.6 billion with “unlocked FTT tokens” accounting for 25% or $3.66 million, the firm’s single biggest asset. Furthermore, CoinDesk’s review found that 15% or $2.16 billion of Alameda Research’s assets was held in “FTT collateral.”

On the liability side, the outlet found that loans accounted for 92.5% of the trading firm’s $8 billion of liabilities, amounting to $7.4 billion of loans. Again, of the total liability, $292 million was in “locked FTT.”