The two largest offshore cryptocurrency exchanges are merging, after a week of public wrangling between Binance chief executive Changpeng Zhao and FTX boss Sam Bankman-Fried sparked a run on the latter’s stock exchange and an embarrassing forced sale on Tuesday.
“This afternoon, FTX asked for our help,” Zhao tweeted. “There is a major liquidity crisis. To protect users, we have signed a non-binding agreement [letter of intent]with the intention of fully acquiring FTX.com.
The news was confirmed in a tweet from Bankman-Fried. He said: “The circle is complete, and the first and last investors of FTX.com are the same: we have reached an agreement on a strategic transaction with Binance for FTX.com (pending DD, etc.). “
The deal will see FTX be “fully acquired” by Binance, in exchange for covering the liquidity crunch at the beleaguered exchange. Other terms were not disclosed by either party.
Binance.US and FTX.US, the associated US regulated exchanges of the two companies, will remain independent.
Bankman-Fried is a major donor to the US Democratic Party, and FTX was one of the top 20 contributors to Joe Biden’s presidential campaign, donating more than $5 million. Bankman-Fried is reported to have donated about $40 million this year ahead of today’s midterm elections.
The two CEOs are among the most prominent players in the industry, known by their initials – CZ and SBF – and each capable of moving the markets with just a tweet. They have worked together in the past, with Binance investing in FTX at the start of the exchange.
But on Sunday, CZ posted a short thread explaining that, “due to recent revelations that have come to light,” the company would be selling approximately $2 billion worth of FTT crypto tokens that FTX had created years prior and issued to investors.
Although CZ did not elaborate on the allegations, its publication came just days after a pseudonymous crypto researcher, Dirty Bubble Media, accused another of SBF’s companies, Alameda Research, of insolvency: Alameda held a significant share of its own assets in FTT. “It’s almost as if SBF found a way to hack into the financial system, printing billions of dollars out of thin air against which it was able to borrow massive sums from unknown counterparties,” the post said.
Binance’s decision to sell the tokens drew an immediate response, with FTX users rushing to withdraw their funds from the exchange. On Monday, SBF fired back at CZ, assignment“A competitor is trying to sue us with false rumors. FTX is good. Assets are good. FTX has enough to cover all client holdings… I would love that, [CZ]if we could work together for the ecosystem.
CZ feigned ignorance, saying he had written the thread “in 5 minutes… I didn’t know it was going to be ‘the straw that broke the camel’s back’. My tweets were simple. There were questions about a large FTT deposit ($580 million) at Binance, and we were transparent that we are closing our FTT position.
In the meantime, the withdrawals continued, until Tuesday morning FTX stopped processing customer requests to withdraw their money. The blockchain records show a four-hour interval in which only one particular type of crypto asset, called an ERC-20 token, was recorded leaving the exchange’s digital vaults. At 4 p.m., SBF conceded defeat.
“Our teams are working to clear the withdrawal backlog as is,” he wrote after announcing the sale of FTX. “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 may take a little time to set up, etc. – we apologize. But the important thing is that customers are protected.
“A *huge* thank you to CZ, Binance and all of our supporters. This is user-centric development that benefits the entire industry… I know there have been rumors in the media of conflict between our two exchanges, but Binance has shown time and time again that they are committed to a more decentralized global economy while working to improve industry relations with regulators.We are in good hands.
#Binance #buy #FTX #major #cryptocurrency #exchange #merger