FTX used over half of its customer assets to fund risky wagers - report
The downfall of FTX stemmed from the cryptocurrency exchange lending billions of dollars worth of customer funds to back risky wagers by its sister company, Alameda Research, The Wall Street Journal reported Thursday, citing a person with knowledge on the situation.
In what FTX CEO Sam Bankman-Fried described as a misjudged call, the exchange distributed loans to trading firm Alameda using money that originated from customer deposits to use for trading, the person told The WSJ, noting that Alameda owes FTX nearly $10B.
That being said, since FTX had $16B in customer assets, it loaned out over half of its customer funds to Alameda, the person added.
Customer withdrawals were halted at FTX earlier this week after the exchange was reportedly overwhelmed with some $6B of withdrawal requests over the weekend. Its failure to fill those withdrawal requests resulted in a liquidity crunch.
That prompted FTX to sign a non-binding deal to sell itself to rival Binance, but that proposed agreement lasted just a day after the former cited "issues beyond our control or ability to help," including fund mishandling and regulatory issues.
After a more than two-day pause in withdrawal processing, though, FTX has seemingly started resuming withdrawals since around 11:00 a.m. ET, according to Etherscan.
Earlier, SBF pledges to use "every penny" FTX has to repay its users.