Crypto exchange Binance has changed its mind to save FTX
A day after the official announcement of the takeover
Binance reviewed the FTX documents and decided to cancel the deal.
FTX won’t be saved by its biggest competitor — a day after announcing the takeover, Binance said it didn’t like what it found in the documents.
Bloomberg writes that the management of FTX faced a “financial black hole” – a gap between liabilities and assets in the crypto exchange, which, according to the publication’s sources, is probably more than $6 billion.
“As a result of the review, as well as recent reports of misuse of customer funds and possible US investigations, we have decided that we will not proceed with the potential acquisition of FTX. We had hoped to be able to support FTX customers to ensure liquidity, but the issues are beyond our control and we cannot help,” Binance said on Twitter.
As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of https://t.co/FQ3MIG381f.
— Binance (@binance) November 9, 2022
After Binance’s announcement, bitcoin fell 9.9% to $16,853. This brings this week’s decline to almost 20%.
The rejection of the takeover bid caps a tumultuous week for FTX. On November 2, Coinbase published a report that revealed that Sam Bankman-Fried’s crypto exchange was facing a liquidity crisis. In response to the article, Binance CEO Changpeng Zhao announced that the company would sell about $529 million worth of FTT (the FTX token), prompting the token to drop more than 70% to around $6.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 Binance (@cz_binance) November 6, 2022
It was later reported that Binance was buying FTX, and the owners had only signed a “letter of intent” — which effectively meant that the deal was non-binding.
“This is a very dynamic situation, and we are evaluating it in real time. Binance has the right to withdraw from the deal at any time,” Zhao said on Tuesday.
The following morning, The Wall Street Journal and Coinbase published separate reports claiming that Binance was leaning heavily against the takeover. Less than an hour later, Bloomberg wrote that the US Securities and Exchange Commission (SEC) is investigating FTX’s actions to determine whether the company misused customer funds.
The review began a few months ago with an investigation into FTX US and its crypto lending activities. FTX’s ties to its American counterpart and Sam Bankman-Fried’s trading house Alameda Research are currently under investigation. The publication’s sources claim that in the past few days, regulators have requested detailed information about the ownership structure of FTX US and FTX.com — auditors are interested in any duplication of management structures and boards of directors, as well as financial relationships between the two entities.
It is worth noting that the Department of Justice and the SEC are also investigating Binance. According to a Reuters report, the crypto giant has processed a total of $7.8 billion in Iranian transactions since 2018 — in defiance of U.S. sanctions aimed at shutting Iran off from the global financial system. Almost all funds flowed between Binance and Iran’s largest crypto exchange, Nobitex – the latter published instructions on its website on how to circumvent the sanctions.
