Binance Walks Away from Acquiring FTX

Binance will abandon its deal to rescue the FTX cryptocurrency exchange after due diligence revealed concerns over its business practices. This leaves Sam Bankman - Fred’s crypto empire on the brink of collapse.

The reversal comes one day after Binance, one of the world’s largest crypto trading venues, reached a non-binding deal to buy FTX. Earlier this year, FTX was valued at $32bn with a huge number of blue-chip investors from BlackRock to Temasek.

FTX’s troubles accelerated when Binance planned to sell down more than $50mn worth of FTX’s own digital token called FTT, citing concerns over the exchange’s financial stability which led to a plunge in the token’s price. Not long after, FTX faced a significant liquidity crunch as it hits a record surge in customer withdrawals to the tune of $6bbn.

News around this deal has severely eroded confidence in the crypto industry. “Markets have now hit full panic”, said Jon de Wet, chief investment officer at crypto wealth manager Zerocap. Bitcoin, the most actively traded cryptocurrency, hit the lowest level since late 2020 while smaller coins faced steeper falls. US-listed crypto exchange Coinbase dropped about 14 per cent.

Binance’s U-turn was followed by FTX’s acknowledgement that it was unable to meet customers’ withdrawal demands without external funds. “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,” Binance said.

Written by: Quynh Chi Le

Source: Financial Times and CNBC