Binance pulls out of deal with crypto exchange FTX. This is due to due diligence concerns. The cancellation has pushed the Bitcoin price to a two-year low.
It was supposed to be a rescue operation, but now things are completely different: The deal between the crypto exchange FTX and competitor Binance does not come about. Bitcoin fell to a two-year low as a result of the broken deal. And other cryptocurrencies are also suffering from Binance’s cancellation of FTX.
Deal between Binance and FTX bursts
FTX founder and CEO Sam Bankman-Fried decided to sell large parts of his multi-billion dollar company to avoid liquidity shortages. As various media confirmed, both crypto exchanges had therefore already signed a non-binding agreement.
FTX fails due diligence
Like the news agency Reuters reported, that is now passé. Binance does not want to pursue the deal any further.
As a result of the company’s due diligence, as well as recent news reports of mishandled customer funds and alleged investigations by the US authorities, we have decided that we will not pursue the potential acquisition of FTX.com any further.
Bankman-Fried examines all possibilities
The competitor’s withdrawal is likely to put the FTX CEO in a difficult position. Working as fast as he can on the next steps, Bankman-Fried shared, “I wish I could give you all more clarity than I can.”
It is his goal to protect customers and to offer employees and investors every possible help. The 30-year-old billionaire wants to stick to that even after Binance’s cancellation.
I will continue to fight for these (goals) as best I can as long as it is right for me. I check all possibilities.
Binance started the FTX crisis
The supposed deal between Bankman-Fried and Binance boss Changpeng Zhao, also known as CZ, came about as speculation about the financial health of FTX led to consumers withdrawing a total of six billion US dollars within 72 hours.
It was Zhao himself who was through a Tweet Pressure built up on FTX.
As part of Binance’s exit from FTX equity last year, Binance received around $2.1 billion in cash (BUSD and FTT). Due to the recent revelations that have come to light, we have decided to liquidate any remaining financial transaction taxes on our books.
Tensions between both crypto exchanges
The fact that Binance FTX wanted to help should have been particularly uncomfortable for Bankman-Fried. Both he and competitor CZ have a turbulent relationship.
Binance invested in FTX back in 2019 before the world’s largest crypto exchange exited the investment in July 2021. Tensions have reportedly escalated between the two CEOs over the past few days, culminating in a disagreement that was fought out on Twitter.
Maybe that’s why Binance CEO CZ felt it was important to explain that there was no master plan behind the failed deal. in one Brief he also emphasized to his employees that the demise of FTX was not good for anyone in the industry.
Don’t think of this as a “win” for us. User confidence has been badly shaken. Regulators will scrutinize exchanges even more.
Regulators are investigating Binance and FTX
And Zhao is right. Noisy Reuters US regulators want to investigate FTX for its handling of customer funds and crypto lending activities.
In addition, the US Department of Justice is analyzing potential money laundering violations at Binance.
FTX still needs help
After the collapsed deal with Binance, Bankman-Fried continues to seek help. He told his investors that he needed emergency funding to cover up to $8 billion in redemption requests.
The FTX CEO had previously contacted OKX. However, the crypto exchange rejected an agreement.
According to a report by BBC Meanwhile, venture capital firm Sequoia Capital said it was fully writing off its more than $210 million investment in FTX because the cryptocurrency exchange was facing bankruptcy.
Based on current knowledge, the company will write down its investments to $0, one said Twitter-Post.
A notice: This post first appeared on November 9, 2022 and has been updated due to Binance’s retirement.
Crypto market in crisis
The proposed sale of FTX to Binance would have been the latest emergency bailout in the crypto world this year. In the face of rising interest rates, investors are increasingly withdrawing from risky assets.
The cryptocurrency market is down about two-thirds from its peak at $1.07 trillion. The crisis is evident at all levels.
Bitcoin at two-year low
After rapid growth in 2020 and 2021, bitcoin price is down more than 60 percent in 2022. Most recently, it was about 13 percent below the daily rate of $ 16,277.
FTT, the smaller token tied to FTX, fell another 67 percent after previously plunging 72 percent.
As the BBC reported that after the deal between Binance and FTX ended, the price of other digital coins also fell. Experts would also fear further fluctuations in the crypto market if FTX actually goes bankrupt.
It’s been a devastating year for the industry, said Ryan Wong, senior researcher at crypto exchange Huobi. The turmoil would lead to massive public distrust of centralized institutions.