Binance said it was abandoning initial plans to acquire embattled rival FTX after going through the company’s financial situation and structure.
“Our hope was to be able to provide liquidity to FTX customers, but the issues are beyond our control or ability to assist,” the exchange said.
Yesterday, Binance CEO Changpeng Zhao announced that his company had signed a non-binding agreement to acquire FTX after the Bahamian exchange experienced a severe liquidity crisis.
Barely a day later, it exited, which could trigger the crypto collapse in the coming days.
Binance says FTX collapse will make the industry stronger
while doing the due diligence, Bloomberg told That Binance found a potential $6 billion gap between FTX’s assets and liabilities.
Recent announcements by major US agencies investigating FTX’s handling of client funds eventually prompted Binance to halt acquisition proceedings.
The Securities and Exchange Commission reportedly launched an investigation into FTX and its lending products a few months ago.
Binance also sympathized with the consumers who would undoubtedly be affected by the collapse of FTX, adding that such incidents make the crypto industry stronger. It also highlighted the development of regulatory frameworks and crypto’s push toward more decentralization as a key driver of the industry’s growth from this point.
Since the announcement, FTX CEO Sam Bankman-Fried, better known by his initials SBF, has allegedly filed for bankruptcy.
Just a few months ago, SBF became the savior of cryptocurrency firms Voyager Digital and BlockFi.
FTX’s Death Spiral (Luna Anyone?)
The unwinding of FTX began with a damning financial report on Alameda Research, a quant trading firm that has close ties to SBF and FTX. The report revealed that a substantial portion of Alameda’s assets were in the form of FTX’s native token FTT, a relatively liquid token with a market cap of approximately $3 billion as of November 7, 2022.
Responding to the report, Binance CEO Changpeng ‘CZ’ Zhao stated that Binance will liquidate $580 million of FTT acquired after exiting an equity position in FTX’s parent company FTX Trading Ltd.
Following CZ’s announcement, FTX experienced a massive surge in FTT withdrawals, which stopped processing transactions from approximately 6:37 a.m. ET until about 12 p.m. ET. SBF later announced that Binance would help with its transaction backlog as part of a non-binding agreement in which Binance could acquire FTX.
A little over 24 hours later, Binance pulled out of the deal. CZ apologizes for being unable to help.
There has been no official comment from SBF or FTX regarding the latest developments.
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