Are FTX Client Funds Doomed? SBF Sends Investors Email

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Last Updated on November 9, 2022 by Bitfinsider

Yesterday, the controversy between FTX and Binance boiled over. With the bankruptcy of FTX, the world’s second-largest exchange and one of the putative industry leaders, the cryptocurrency sector has had one of its worst days in recent memory.

Even though Binance signed a non-binding letter of intent (LOI) to buy FTX yesterday, there are still significant questions from all parties as to whether the deal will actually go through. This uncertainty around the insolvency of FTX and Alameda, as well as the potential for contagion effects, is presently exerting a significant amount of pressure on the market.

The ambiguity stems from the fact that the terms of the transaction have not been disclosed. In addition, the CEO of Binance, “CZ,” stated that he reserves the right to withdraw from the deal at any point and must do due diligence before the deal is finalized.

In a now-leaked letter to his investors, FTX CEO Sam Bankman-Fried (“SBF”) acknowledges this very worry.

SBF underlines in the following paragraph that he and CZ have struck a “non-binding agreement to purchase FTX.”

What precisely does this mean? That’s an excellent question, but I don’t have a definitive response because the details are still being worked out. SBF continues, “We’ll keep you informed as we discover more in the coming days and weeks.”

The final sentence of SBF’s report could set the tone and indicates increased uncertainty for client assets. He apologizes once more and says, “I’m sorry I didn’t do a better job, and I’ll do everything I can to preserve your investment and customer assets.”

The communication arrives after FTX underwent a big rush on the exchange on Tuesday, resulting in the suspension of withdrawals. According to the most recent announcements from SBF, the exchange is currently trying to clear the withdrawal backlog.

Despite the possibility of a Binance bailout, FTX investors may still find themselves in a precarious position. The agreement appears to be unstable. And SBF’s assertion that all customer monies are secure is equally dubious. Remarkably, SBF has deleted yesterday’s corresponding tweet.

The FTX CEO emphasizes on two occasions that protecting customers and the industry is “the highest responsibility.” We are optimistic that we will achieve all of these objectives, which implies that we will soon shift our emphasis to our second priority: our shareholders.

The extent of the hole to be patched will be a determining factor in whether or not the deal will proceed. The likelihood of an agreement may only be conjectured. Lex Moskovski, an analyst, thinks that Binance will certainly acquire FTX.

Adam Cochran, on the other hand, stated that the hole is likely far larger than the early estimations. According to his sources, there may be a significant number of such tiny funds “that are fully defunct and have their own poor books.”

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