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After the wild rollercoaster ride between the two world’s largest exchanges, Binance has now backed out of its deal to purchase its rival FTX just a day after signing an agreement to rescue the company.
Binance dropped the bid because “the issues are beyond our control or ability to help,” thus leaving the latter–which was valued at $32 billion earlier this year– is now on the brink of collapse.
Binance noted that the decision to backout was made due to a review of FTX’s handling of customer deposits, alongside alleged US agency investigations against the firm.
On Wednesday. Binance CEO Changpeng “CZ” Zhao announced that they had a non-binding deal to buy FTX’s non-U.S. businesses in the hope to rescue the company from a liquidity crisis. The deal, however, allows Binance to have the discretion to pull out of the deal at any time–which now happened. (Read more: Binance Signs Deal to Acquire FTX Exchange)
Despite the emergence of the deal, FTX’s FFT already lost 80% of its value, crashing down to $5 from its Monday value of $23. The crash wiped out more than $2 billion in a day. Then by Wednesday, it fell even more to just around $2.30. (Read more: FTX Token Price Drops 80% as News of Binance Buying FTX Surface)
Following this, CZ shared two big lessons to be learned from this incident. According to him, “never use a token you created as collateral” and “don’t borrow if you run a crypto business.Don’t use capital “efficiently”. Have a large reserve.”
“Binance has never used BNB for collateral, and we have never taken on debt,” he added.
In a report from Bloomberg, the gap between FTX’s assets and liabilities may be more than US$6 billion.
Priorly, CZ denied the allegations about FTX conspiracy noting that their prior decision to liquidate their FTT is not a move against the rival crypto exchange. (Read more: Just House Cleaning: Binance To Liquidate Own FTX Tokens)
On the other hand, the current tough situation of FTX is further burdened as all of its legal and compliance teams have quit.
In a staff message from FTX CEO Sam Bankman-Fried, he stated that his goals were to protect customers and provide any help he could for staff and investors.
“I’ll keep fighting for those (goals), as best as I can, as long as it’s correct for me to. I’m exploring all the options.”
The plunge on the value of FTX and Alameda Research have vaporized 94 percent of Bankman-Fried’s wealth, the largest one-day drop among billionaires that the outlet has ever recorded. (Read more: Bear Market Destroys Crypto Billionaires Wealth)
Currently, there are no posts from all of the social media accounts and websites of FTX Ventures, Alameda, and FTX itself. They may have been down or made private.
This article is published on BitPinas: Binance Will No Longer Acquire FTX
Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.