Binance, the world’s largest cryptocurrency firm, announced on Tuesday that it has reached a deal to buy its rival crypto exchange FTX for an undisclosed amount. FTX’s US division, a separate entity called FTX US, is not included in the deal.
In a tweet, Binance CEO Changpeng Zhao says, “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 FTX and help cover the liquidity crunch.”
Zhao further added that Binance would be conducting full diligence in the coming days and the firm can pull out from the deal anytime.
Sam Bankman-Fried, CEO of FTX, confirmed the deal in a tweet. He also said that his teams were working on clearing the withdrawal backlog.
“This will clear out liquidity crunches. This is one of the main reasons we’ve asked Binance to come in.”
How the events unfolded?
Binance was the first major investor to back FTX, but as FTX became more popular, the relationship between the two started to decline.
The latest deal comes in the wake of a CoinDesk’s report last week, triggering concern that the balance sheet of FTX’s corporate sibling, Alameda Research, was too heavily reliant on illiquid tokens including FTX’s own FTT.
Both FTX and Alameda were founded and are largely owned by Bankman-Fried.
According to the CoinDesk report, Alameda had $14.6B in assets. However, most of the assets on the balance sheet were FTX’s own FTT tokens.
Two of the most influential people in the crypto industry, Bankman-Fried and Changpeng Zhao, have had a strained relationship.
It got worse in the past few days when both started hurling snarky remarks at each other on Twitter, following CoinDesk’s news on the leaked balance sheet from Alameda Research.
Consequently, Zhao said that his company plans to sell its holdings of FTX’s FTT token, pushing down the price of FTT.
In a reply to Binance CEO, Alameda’s ex-CEO Caroline Ellison said she would buy all of Binance’s FTT tokens for $22 each to minimise the impact on prices.
Early Tuesday, FTX customers began experiencing difficulties withdrawing money from their accounts. Customers even took to FTX’s Telegram group and Twitter to complain about the issue. As the day progressed, the situation worsened.
And that’s when Bankman Fried requested help from Binance CEO.
FTT, the token native to FTX, shot up briefly after the deal but plummeted by more than half.
Coinbase clarifies
In a blog post, Coinbase assured its investor that it has minimal exposure to FTX and no exposure to its token, FTT.
“Currently, we have $15 million worth of deposits on FTX to facilitate business operations and client trades. We have no exposure to Alameda Research, and we have no loans to FTX,” the company clarifies.
