Binance Abandons FTX, Leaving the Cryptocurrency Exchange on the Verge of Bankruptcy

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Last Updated on November 11, 2022 by Bitfinsider

On Wednesday, Binance announced that it is abandoning its ambitions to acquire FTX, leaving Sam Bankman-Fried’s crypto empire on the verge of collapse.

The turnaround occurs one day after Binance CEO Changpeng Zhao stated that the world’s largest cryptocurrency exchange had signed a nonbinding agreement to purchase FTX’s non-U.S. businesses for an unknown sum, thereby rescuing the company from a liquidity crisis. Private investors valued FTX at $32 billion earlier this year.

“Our first goal was to serve FTX’s consumers by providing liquidity,” Binance said in a tweet on Wednesday. However, the problems are beyond our control and ability to resolve.

According to sources with knowledge of the situation, Bankman-Fried scrambled on Monday night to acquire funds from venture capitalists and other investors before he went to Binance. Zhao initially agreed to participate, but his company rapidly reversed course, alleging “mishandled customer cash and suspected U.S. agency probes.”

It is unknown who is next in line to purchase the struggling cryptocurrency exchange. According to a source familiar with the case, Bankman-Fried informed investors that the company faces a shortfall of up to $8 billion due to withdrawal demands and need emergency finance.

The collapse of the Binance-FTX agreement is the latest chapter in a startling implosion that has rocked the cryptocurrency industry this week. On Monday, Bankman-Fried attempted to reassure investors that the company’s assets were sound. Nonetheless, as Binance’s Zhao announced publicly that his company was selling its holdings of FTX’s native token FTT, the sell-off commenced, and FTX was unable to stop it.

Sequoia Capital, one of the most prominent venture capital firms in Silicon Valley, reportedly invested $210 million in the company, as reported by independent journalist Eric Newcomer. Newcomer writes that FTX has informed investors that its operating income in 2022 is predicted to decrease to $144 million, down from $338 million in 2021, while sales is projected to increase to $1.1 billion from $1 billion in 2021.

Bankman-Fried said on Tuesday that clients had requested withdrawals totaling $6 billion. Additionally, he erased tweets from the previous day that indicated FTX had sufficient assets to cover client holdings.

In a statement sent to Binance staff on Wednesday morning, Zhao stated that he “did not mastermind” the collapse of FTX. He stated that FTX’s decline is “bad for everyone in the industry” and that staff should not consider it as a “victory for us.”

In addition, he instructed them not to exchange FTT tokens during this hardship.

He wrote, “If you have a bag, you have a bag.” “DO NOT sell or buy.”

Between Monday and Tuesday, FTT had already lost 80% of its value, plummeting to $5 and wiping out more than $2 billion in a single day. It fell by more than half on Wednesday to approximately $2.30, reducing the total worth of all circulating tokens to approximately $308 million.

During the merger turbulence, cryptocurrencies have fallen, with bitcoin plunging 15% on Wednesday and 13% on Tuesday. For the first time since November 2020, it is trading below $16,000. Ether’s price has fallen by more than 30 percent in the past two days and is close to going below $1,000.

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