FTX: Wall Street might cover the liquidity issue but not its insolvency
It appears that Sam Bankman-Fried has not heard of blockchain’s record-keeping capabilities. In a lengthy twitter thread on Thursday, the fallen cryptocurrency tycoon blamed the collapse of his FTX exchange on a clerical error. That looks odd.
SBF tweeted that he mistakenly believed that FTX customers had plenty of liquidity earlier this week to facilitate withdrawals. He was not aware of leverage within the FTX system. He could not have got it more wrong. Panicked FTX account holders were prevented from withdrawing their assets this week.
SBF insists that FTX is illiquid at the moment, but not insolvent. That is, its asset value exceeds that of liabilities. He seeks a multibillion-dollar cash infusion to bridge any cash flow gap. To some, giving FTX a lifeline at the moment might seem absurd. Never mind its highly opaque operations, severe regulatory and legal risks are mounting.
This story originally appeared on: Financial Times - Author:Tax Cognition
