FTX reaches out to Kraken for help as it scrambles for $9.4B bailout; Alameda owes exchange $10B

After Binance walked away from the FTX takeover deal, the cryptocurrency exchange has turned to Kraken for a possible bailout, Reuters reported, citing two people familiar with the development.

The latest development emanates after FTX CEO Sam Bankman-Fried said he’s working on emergency moves to raise funds.

Further, Tron founder Justin Sun has surfaced as a potential messiah of the embattled cryptocurrency exchange since, according to reports, FTX CEO Sam Bankman-Fried approached Sun to intervene. The Tron co-founder also revealed that he and his team are working on a possible solution

This is only the initial step taken towards a wholistic solution that is being crafted to resuscitate and return to normalcy for all #FTX users. I greatly appreciate the collaborative work between @FTX_Official teams 🔥

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

Since Sun has shown interest in FTX, the TRON has hiked from $0.6 to $2.50 on FTX, momentarily, a 4000% increase.

Reuters has also reported that the embattled exchange’s CEO is looking for a bailout package to the tune of up to $9.4 billion, with a discussion of $1 billion coming from Justin Sun, OKX and Tether each and $2 billion from a group of investment funds.

Alameda Got $10 billion of user funds as loans from FTX

FTX lent billions of dollars to its affiliated trading firm, Alameda Research, to fund risky bets, according to a Wall Street Journal source.

The exchange had $16 billion in customer assets, but Alameda received $10 billion as a loan from it, and it now owes the exchange the entire sum.

So WSJ says FTX had $16b in customer assets, and they gave $10b to Alameda who blew it all…

Unbelievable

— db (@tier10k) November 10, 2022

Further, despite the looming troubles, FTX CEO maintained that the firm and all the assets are fine. Nonetheless, Binance entered into a non-mandatory agreement for a possible takeover, which created uncertainty about the firm’s position.

It struck a deal with giant rival Binance on Tuesday, but looking at the books, Binance pulled out the deal the next day, saying that FTX’s problems were “outside our control.”

Amid all these controversies, The Department of Justice, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC) are investigating the activities of the crypto exchange. 

Broken trust

The inability of FTX to honor withdrawal requests and maintain its position shocked crypto investors and damaged Bankman-Fried’s reputation in the cryptocurrency space.

This prompted many Twitter users to attack the firm and its CEO. For instance, James Powell, CEO and co-founder of Kraken, detailed that these recent events are the result of “recklessness, greed, self-interest, hubris, and sociopathic behavior” of some people who risk all the hard-earned progress this industry has made over the last decade.

FTX’s CEO, however, recently took to Twitter to clarify his position, stating he could have been more “communicating” during the last few days and didn’t have much to do during Binance’s deal. He also maintained that the firm is trying to put up liquidity, and they are in talks with a “number of players.”

According to Nansen data, FTX has reopened withdrawals.