Binance Holdings’ letter of intent to acquire Zhao came after a bitter feud between the two men boiled over, with Zhao actively undermining confidence in FTX’s finances and helping spark an exodus of users from the three-year-old FTX.com exchange. A day before accepting Binance’s deal, Bankman-Fried said on Twitter that assets on FTX were “good.” On Tuesday, he had changed his voicemail.
Such moves would be banned on Wall Street but are not uncommon in this restless corner of finance, which remains largely unregulated roughly a decade after its founding. Ironically, it was Bankman-Fried who was pushing for greater regulation, which Zhao largely opposed.
“I’m sorry that I haven’t done better and I will do what I can to protect clients’ assets and your investment,” Bankman-Fried wrote in a letter to investors. “Wish I had more details for you guys right now; I don’t know yet,” the letter read.
After initially rising on the news, cryptocurrency prices have plummeted as deal terms are scarce and uncertainty swirls over whether it will even happen. Binance said the deal came after “a significant liquidity crisis” occurred on FTX and the company asked for its help. The takeover is a surprising twist for FTX, whose 30-year-old founder had emerged in recent years as the prime-ready face of crypto and amassed a fortune approaching $20 billion.
The acquisition — which does not involve FTX.US, a separate exchange also founded by Bankman-Fried — will reshape the $1 trillion-plus industry that is already facing a prolonged market downturn. Both founders made the announcement on Twitter simultaneously. “To protect users, we have signed a non-binding letter of intent, intending to fully acquire FTX.com and help cover the liquidity crisis,” Zhao said in a tweet.
FTX was hit by about $6 billion in withdrawals in the 72 hours to Tuesday morning, Reuters reported, citing a message sent to staff by Bankman-Fried.
“Our teams are working to clear the backlog of withdrawals,” Bankman-Fried said on Twitter. “It will eliminate liquidity problems; all assets will be hedged 1:1. This is one of the main reasons we asked Binance to come.
It’s a quick improvement for Bankman-Fried, who’s no stranger to bare-knuckle feats in his role as founder of Alameda Research, the crypto trading firm whose fate hasn’t been mentioned in tweets. announcing the bailout. The former Jane Street trader made no apologies for Alameda’s desire to take profit opportunities in the Wild West crypto space, framing it as part of a long-term plan to give billions to charity.
FTX.com was valued as recently as January at $32 billion in a funding round investors such as Temasek, Paradigm, Ontario Teachers’ Pension Plan Board and SoftBank Vision Fund 2.
Bitcoin oscillated between gains and losses, falling below $19,000 for the first time since October 21.
For the broader crypto industry, the demise of FTX is another example of a once-powerful player being grounded when a crisis of confidence forced a run on its assets. Like others before him, including lenders Celsius Networks and hedge fund Three Arrows Capital, reserves proved insufficient when market sentiment turned against him, even though top executives said all was well. .
The tension between Bankman-Fried and Zhao has been simmering almost from the start. In 2019, Binance invested in FTX, then a derivatives exchange. The following year, Binance launched its own crypto derivatives, quickly becoming the leader in this space.
Tensions rose as the two companies were increasingly viewed as different by regulators. Bankman-Fried was testifying in Congress, while Binance faced regulatory investigations around the world and pointed out that it is not headquartered anywhere.
The two companies also fought over assets, with both bidding for Voyager Digital’s assets. FTX won the Voyager auction.
The drama came to a head on Sunday, when Zhao announced that he would sell all his holdings of FTT, the native token of the FTX exchange, worth $529 million at the time due to “recent revelations that have been revealed”. The tweet followed a story from CoinDesk saying that Alameda Research, a trading house owned by Bankman-Fried, had much of its assets in FTT token. FTT fell more than 70% to around $6, according to prices on CoinMarketCap.
Binance is by far the largest crypto exchange, with a trading volume of around $40 billion to date. FTX is second in spot trading, with a volume of around $4 billion, according to data from CoinMarketCap. CoinMarketCap is owned by Binance.
(Adds quote from Bankman-Fried letter to investors.)
Dave Liedtka, Beth Williams
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