Cryptocurrency exchange Binance announced on Thursday that it has scrapped the proposed acquisition of its rival FTX.
Binance announced its official Twitter handle, “As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of http://FTX.com.”
After the announcement, the cryptocurrency market further plunged, sinking Bitcoin to a two-year low at $16K.
On Tuesday, CZ-led Binance offered to purchase FTX amid a significant liquidity crunch, but the deal crumbled.
“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help. Every time a major player in an industry fails, retail consumers will suffer. We have seen over the last several years that the crypto ecosystem is becoming more resilient and we believe in time that outliers that misuse user funds will be weeded out by the free market,” says Binance in a tweet.
The exchange adds, “as regulatory frameworks are developed, and the industry continues to evolve toward greater decentralisation, the ecosystem will grow stronger.”
Exploring other options
FTX, the world’s second-largest crypto exchange valued at $32B, is now on the brink of collapse. A notice on their official website says, “FTX is currently unable to process withdrawals. We strongly advise against depositing.”
FTX CEO Sam Bankman-Fried informed his employees about exploring other options for his firm after a deal with Binance collapsed, reports Reuters.
In a message to FTX employees, Bankman-Fried says, “I’m working, as quickly as I can, on the next steps here. I wish I could give you all more clarity than I can.”
“I’ll keep fighting for those (goals), as best as I can, as long as it’s correct for me too. I’m exploring all the options,” he adds. “I’m deeply sorry that we got into this place and for my role in it,” he wrote. “That’s on me, and me alone, and it sucks, and I’m sorry, not that it makes it any better.”
Sam Bankman-Fried also told investors he needs emergency funding to cover up to $8B due to withdrawal requests received in the past week after speculation about FTX’s financial health surfaced on the Internet, reports The Wall Street Journal on Wednesday.
Parallely, the Binance rival is also facing a probe from US regulators over its handling of customer funds and crypto-lending activities, according to Reuters and Bloomberg.
Sequoia marks down FTX investment
Post the FTX collapse, VC firm Sequoia announced that it will mark down its entire $210M investment in FTX to $0.
“Based on our current understanding, we are marking our investment down to $0,” the company said in a statement posted on Twitter.
In January, FTX raised $400M in a Series C round of funding at a valuation of $32B. Besides Sequoia, FTX is backed by other investors, including BlackRock, Tiger Global, Insight Partners, and Paradigm.
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