Crypto giant Binance drops bid to save rival, fueling chaos in digital assets |  CNN Business

Crypto giant Binance drops bid to save rival, fueling chaos in digital assets | CNN Business

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CNN Business

In a sharp reversal, cryptocurrency exchange Binance pulled out of a deal to acquire embattled rival FTX, saying the company’s issues were “outside our control or our ability to help”.

Binance, the world’s largest crypto exchange, said it reviewed FTX’s finances as part of the due diligence process, and it cited reports of “mismanaged client funds and alleged US agency investigations.” announcing that the agreement was cancelled.

The reversal is the latest twist in a dramatic and fast-paced saga involving the most powerful players in the crypto world.

It also marks a stunning fall for Sam Bankman-Fried, the 30-year-old industry rock star who founded FTX in 2019. Bankman-Fried, known to insiders as SBF, has regularly drawn comparisons to icons of investing like Warren Buffett and JP. Morgan as he staged a series of bailouts for struggling crypto firms earlier this year. He appeared in ads alongside celebrities like Gisele Bündchen, as part of a campaign to bring crypto into the mainstream.

Without a bailout, FTX is on the verge of collapse, along with the rest of Bankman-Fried’s vast crypto empire.

According to the Wall Street Journal, Bankman-Fried told investors on Wednesday that it needed emergency funding to cover a shortfall of up to $8 billion from withdrawal requests received in recent days.

Virtually all digital assets sank on Wednesday due to the FTX turmoil.

Bitcoin fell below $16,000, its lowest level in two years, after Binance confirmed that it would not buy FTX. The cryptocurrency has fallen more than 75% from its all-time high of nearly $69,000 a year ago. Ether, the second most popular token, fell around 13% to $1,137 – also 75% from its all-time high.

Representatives for Binance and FTX did not immediately respond to requests for comment on Wednesday.

Even for assets known for their volatility, it’s been a brutal week.

The FTX saga escalated over the weekend, when Binance CEO Changpeng Zhao said his company would liquidate its holdings in FTX as speculation swirled around the company’s financial health. Essentially, this forced a $580 million capital call that Bankman-Fried did not have the necessary cash.

Despite the bad blood between Bankman-Fried and Zhao, the rivals appeared to come together on a deal that stunned the crypto world on Tuesday, when Binance announced it would acquire FTX pending due diligence.

Still, investors worried about the deal going through and quickly sold off digital assets of all kinds.

According to Bloomberg, FTX’s collapse is already under investigation by the Securities and Exchange Commission and the Commodity Futures Trading Commission. The outlet reported that regulators are investigating whether FTX is handling client funds properly, citing people familiar with the investigation.

An SEC spokesperson said the commission does not comment on the existence or non-existence of a possible investigation.

The CFTC declined to comment.

—Matt Egan of CNN Business contributed to this article.

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