CZ Ditches FTX Deal

On Wednesday, the deal between Binance and FTX collapsed. Sam Bankman-Fried (SBF), FTX executive, said in an address to his employees that he was now discovering every option.

The demise of FTX did not begin yesterday. It started with the series of SBF’s mistakes when bailing out other crypto firms as the market was collapsing. Several deals included Bankman-Fried’s Alameda Research trading house. According to recent research on its financial condition, a significant share of its actives was FTX’ token FTT. After the research, FTT’s price plummeted by 80%.

The relationship between Bankman-Fried and Binance executive Changpeng “CZ” Zhao started in 2019, when CZ invested in FTX. With the latter promptly growing, it became the real and formidable competitor of Binance. The relationship between the two went south. Eighteen months after the investment, CZ announced he would sell his share in FTX, the sum was paid partly in FTT token. CZ and SBF exchanged rather sharp twits accusing each other of trying to damage the business for several month.

In light of the recent revelations about Alameda, Zhao said Binance would sell all its FTTs, causing a “giant withdrawal surge” as users raced to withdraw as much as $6 billion in FTT tokens. At first, SBF claimed that the surge was not unexpected and FTX would deal with it. By Monday, however, it was evident that the situation was much graver that he claimed.

Having previously twitted, “Obviously, Binance is trying to go after us. So be it”, SBF then turned to his arch-enemy in need of bailing out and CZ at first agreed. He signed a “non-binding letter of intent” to acquire FTX to help cover “liquidity crunch.”

The deal sent shockwaves around the crypto market, with the price of major coins going down and Bitcoin slumping to its two-years lowest. The potential acquisition was the latest of crypto rescues this year with the market shrinking by two-thirds.

Although on Wednesday already, Binance statement read as follows,

"As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged U.S. agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com."

CZ was quick to mention that it was not some kind of a “master plan”, in a tweet with a crying emoji he said that he had “tried”, Binance added that the issues "were beyond their control."

By leaving the deal, Binance also avoided the regulatory scrutiny that would likely follow the acquisition. Different financial regulators around the world have issued warnings about Binance for operating without a license or violating money laundering laws. One of them is the U.S. Department of Justice which is investigating Binance for possible money laundering and criminal sanctions violations.

Left with no saviour, SBF posted many twits apologising for situation. Now, he will have to turn to other platforms. And they should agree to help him. For example, it was not the case with OKX cryptocurrency exchange, reports Reuters.