FTX's U.S. business is in trouble

When global crypto exchange FTX imploded earlier this week, a spokesperson declared that the company's U.S. affiliate was separate and solid.

Be smart: That was wishful thinking.

What to know: FTX US is indeed legally distinct from its global sister, based in California instead of in the Bahamas.

• It has its own staff of around 75 employees, and raised its own $400 million venture capital round earlier this year at an $8 billion valuation. It also has its own regulatory licenses.
• According to multiple sources, FTX US doesn't have counterparty relationships with Alameda Trading, the crypto hedge fund that is at the source of FTX's liquidity crunch, nor does it hold the troubled FTT tokens.
• FTX US primarily serves institutional customers. It has done an enormous amount of retail marketing, including Super Bowl ads and sports stadium sponsorships, but most of that was for brand awareness if and when FTX US decided to do a major individual customer acquisition push.

The problem: There are just as many ties that bind.

• This begins with founder, CEO and majority owner Sam Bankman-Fried. If FTX files for bankruptcy protection, it is possible that creditors will go after Bankman-Fried's other assets — including FTX US.
• Then there's the brand itself. It's on fire. No institution or individual is going to trade via FTX US, particularly when there are more reputable alternatives. Even if FTX US is allowed to do business, it effectively cannot. Maybe that's why FTX US on Thursday afternoon noted that "trading may be halted" in a few days.
• Around half of compensation for many FTX US employees is in the form of company equity, which is heading toward zero. If they aren't already looking for new jobs, they will be soon.

What now: Other than bankruptcy? It's possible that a smaller U.S. exchange like Kraken will seek to buy FTX US in a fire-sale. Larger ones, like Coinbase, already have most of the same institutional clients and regulatory licenses, so it's not worth the headache.

• There's also the possibility that FTX US tries to spin out or sell some of its smaller pieces. For example, last year it bought a crypto derivatives exchange called LedgerX that could be of interest to certain financial services players.
• An FTX spokesperson hasn't yet responded to Axios' request for comment.

The bottom line: FTX US is separate from FTX. But its fate is likely to be equal.

Go deeper: Inside Sam Bankman-Fried's call with investors