As it struggles to close a purported multi-billion dollar hole in its financial sheet, cryptocurrency exchange FTX has lost at least one possible saviour. On 10 November, Tether CTO Paolo Ardoino affirmed that the company has “no plans to invest or lend money to FTX/Alameda.”
Tether does not have any plans to invest or lend money to FTX/Alameda. Full stop.
— Paolo Ardoino 🍐 (@paoloardoino) November 10, 2022
Ardoino made his remarks in response to a Reuters report which claimed that the $9.4 billion gap at FTX had CEO Sam Bankman-Fried reaching out to many businesses for funding to keep the exchange solvent.
So, what happened?
According to a person with direct knowledge of the situation, Sam Bankman-Fried informed FTX.com investors on Wednesday that the company would need to file for bankruptcy if it didn’t receive a capital infusion.
Bankman-Fried informed investors on a call that his crypto-exchange faced a shortfall of up to $8 billion and needs $4 billion to remain solvent. This, before Binance abruptly changed its tune and withdrew its takeover offer, the person said, asking to remain anonymous because the conversation was private. According to the source, FTX is looking to seek rescue capital through debt, equity, or a mix of the two.
Tether, the cryptocurrency exchange OKX, and the venture capital firm Sequoia Capital are among the businesses that Bankman-Fried is said to have approached for funding. It is said that he requested at least $1 billion from each of the organizations.
The reaction of Tether’s CTO, however, seems to support the sentiment expressed in a blog post published a few days ago. In the same, Tether assured the community that it had no connection to Alameda or FTX.
To cooperate with law enforcement, the stablecoin issuer reportedly froze 46,360,701 Tether held by FTX in its Tron blockchain wallet on 10 November.
According to people with knowledge of the situation, Bankman-Fried frantically tried to gather money from venture capitalists and other investors before he went to Binance because of a liquidity crisis. Zhao initially consented to help, but his business swiftly changed its mind, citing accusations of “mishandled customer monies and purported U.S. agency investigations.”
Here, it’s worth pointing out that the former wunderkind of the cryptocurrency sector, who was once valued at $26 billion, took responsibility for his company’s worsening problems.
Unclear about the next move
On Tuesday, Bankman-Fried reported that $6 billion worth of withdrawal requests had been made by consumers. Additionally, he removed tweets from the day before that said FTX had sufficient funds to cover clients’ shares.
Who is next in line to purchase the troubled cryptocurrency exchange is unknown.
Impact on USDT
Through a partnership with the Tron blockchain, one that permits its assets to be swapped 1:1 with external wallets, FTX currently only seems to be able to continue a small number of withdrawals. As users hurried to leave the exchange as a result of the deal, Tron-based tokens traded at a premium of up to 1200% on the site.
In fact, Coinbase and CoinMarketCap data revealed that USD Tether (USDT) temporarily lost its peg to the U.S dollar. Before bouncing back to $0.99, the stablecoin traded hands at $0.96 on the charts.
Paolo Ardoino, the CTO of Tether, described the incident as “a hiccup.” However, analysts in the crypto-sphere think that USDT was de-pegged as a result of the collapse of FTT. Here, it should be added that CoinGecko later admitted fault for the pricing mismatch and blamed a data problem.