FTX assets have been frozen by the Bahamas regulator as the cryptocurrency struggles to survive

The Bahamas’ securities regulator has frozen the assets of part of Sam Bankman-Fried’s crypto empire and moved to appoint a liquidator to one of his businesses as the embattled entrepreneur races to raise $8 billion to save FTX.

The Bahamas Securities Commission on Thursday took action against FTX Digital Markets, the Bahamian subsidiary of FTX. No assets of the business can be transferred without the consent of the provisional liquidator, the regulator said. FTX moved from Hong Kong to the Bahamas, where it was launched in 2021.

“The Commission is aware of public statements suggesting that client assets were mismanaged, mismanaged and/or transferred to Alameda Research,” the announcement said. Alameda is Bankman-Fried’s cryptocurrency trading business.

Bankman-Fried was looking to raise $8 billion to bail out the crypto company on Thursday as more of its former backers wrote down their investments on the FTX exchange.

The crisis caused contagion in the crypto sector as digital asset lending platform BlockFi stopped withdrawing customers.

On Thursday, BlockFi said it would not be able to conduct business as usual due to a “lack of clarity on the status” of FTX and Alameda. Earlier this year, amid the collapse of cryptocurrencies, the head of FTX bailed out BlockFi, giving it a $250 million loan.

The 30-year-old admitted on Twitter that the FTX trading space has enough readily available funds to meet client demands. Investors pitched by Bankman-Fried described the disgraced cryptocurrency chief’s chaotic appeal to fill his company’s financial gap.

Bankman-Fried’s dash for cash will determine FTX’s fate amid growing doubt about its ability to stay afloat without injecting fresh capital and concern for customers with money stuck in frozen stock. FTX US, which is separate from the international exchange, said it may suspend trading on its platform in the coming days, in a sign of how pressure is mounting among its affiliates.

Investors estimate the amount Bankman-Fried is seeking at between $6 billion and $8 billion. His trading firm, Alameda Research, owes FTX $10 billion, two people familiar with the matter said.

Several investors reduced their stakes in FTX stock to zero, indicating that they are unlikely to invest more money. Paradigm, an investor with a $300 million holding in the trading venue, reduced the value of its investment to zero, following venture capital firm Sequoia, which announced the move on Wednesday.

One investor said Bankman-Fried is trying to find cryptocurrency exchange OKX, stablecoin operator Tether and Tron founder Justin Sun to raise money.

Paolo Ardoino, Tether’s chief technology officer, told the Financial Times that the company had no role in bailing out FTX. According to him, Bankman-Fried contacted the stablecoin issuer several days ago, before the canceled Binance bailout was announced.

“They asked us if we want to invest or lend. We said no,” Arduino said.

Sun did not respond to a request for comment, but said on Twitter: “We are putting together a solution with FTX to begin a path forward.”

On Thursday, FTX said it had agreed with Tron to create a “special facility” that would allow some crypto token holders to exchange assets from FTX to foreign wallets.

On Tuesday, OKX withdrew from an exclusive deal to bail out FTX but is still considering whether to fork over the money, people familiar with the matter said. Its executives are concerned about the risk of FTX misusing customer deposits and the possibility of lawsuits by customers.

People familiar with the matter said investors and clients have turned to prominent American litigator David Boies to launch the lawsuit. Bankman-Fried, meanwhile, hired Paul Weiss partner Martin Flumenbaum, known for representing junk bond trader Michael Milken, who was arrested and later pardoned for violating US securities laws.

Boies declined to comment, while Flumenbaum did not immediately respond to a request for comment.

The push to raise funds comes less than a month after FTX is set to raise $32 billion in Series C funding from January.

Bankman-Fried is managing the bailout without professional advisers, one investor said. “It looks like he’s managing the process himself via text message. She doesn’t have a boyfriend,” added the investor.

Bankman-Fried blamed poor internal accounting for the stock market’s misrepresentation of leverage and liquidity. “I’m sorry . . . I fucked up.”

He suggested that current assets and any money raised would be used primarily to pay back customers and that he would step down as chief executive if the company survived.

“We have a number of players we are negotiating with. [letters of intent], term sheets, etc.” Bankman-Fried said. “I can’t make any promises about that.”

Reporting by Kadhim Shubber, Arash Massoudi, Joshua Oliver and Scott Chipolina in London; Ortenca Aliaj in New York; and Richard Waters and Tabby Kinder in San Francisco. Additional reporting by William Langley, Chan Ho-him, and James Fontanella-Khan.

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