Changpeng Zhao, co-founder and chief executive of Binance, said the exchange signed a letter of intent to acquire the non-US assets of FTX, after the latter “asked for help” amid a liquidity crunch. The deal between high-profile rivals Sam Bankman-Fried, FTX’s chief executive, and Binance’s CZ came as speculation about FTX’s financial health snowballed into $6 billion (roughly Rs. 48,921 crore) of withdrawals in the 72 hours before Tuesday night. The bailout of one of the biggest and most prominent companies in the global cryptocurrency industry by its chief competitor reverberated across the market.
The deal with Binance ends an explosive and very public row between Bankman-Fried and Zhao and will combine two of the world’s biggest crypto exchanges.
This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire https://t.co/BGtFlCmLXB and help cover the liquidity crunch. We will be conducting a full DD in the coming days.
— CZ 🔶 Binance (@cz_binance) November 8, 2022
FTX’s troubles accelerated over the weekend when Binance said it intended to offload its holdings of FTX’s token, FTT, citing concerns over the exchange’s financial stability and sending the token plunging in price.
Bankman-Fried responded on Monday, saying a “competitor is trying to go after us with false rumors.” He added he would “love it” if he could work with Zhao together for the ecosystem.” The FTX chief also tried to calm markets by saying: “FTX is fine. Assets are fine.”
But on Tuesday, he tweeted, “CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world.” Bankman-Fried also vowed that all customer assets would be “covered one for one.” FTX confirmed the deal; the two companies did not immediately disclose the terms.
In a note to investors late on Tuesday (via Reuters), Bankman-Fried attempted to reassure FTX investors, saying that “protecting shareholders is our highest priority,” but said details of the deal were “still being hashed out.” If completed, the deal will consolidate Binance’s position as the largest platform in crypto trading.
The crypto industry has struggled over the past year, particularly since the failure of the terra and luna tokens in May. The price of flagship tokens bitcoin and ether plunged, and several big companies have collapsed, including lender Celsius Network and hedge fund Three Arrows Capital.
The rescue deal is also a major setback for Bankman-Fried, who has long been viewed as a relatively stable and ambitious figure in the often shaky world of crypto.
In the wake of this year’s crypto market collapse, he earned a reputation as an industry savior after aiding failing companies. In June, the FTX chief announced a $250 million (roughly Rs. 2,038 crore) loan to ailing crypto lender BlockFi. The loan followed further assistance for crypto broker Voyager Digital, which was rescued by an FTX loan worth about $485 million (roughly Rs. 3,953 crore) in cash and Bitcoin.
