The Rescuer to be Rescued? Not This Week
Posted by Colin Lambert. Last updated: November 10, 2022
After attempting to bail out multiple failed entities in the crypto space, exchange group FTX has itself sought rescue after a liquidity crunch, rumours about its viability and a highly-public spat with Binance brought the company to its knees.
Ironically, the situation worsened after Binance said it was selling FTX’s FTT token at the weekend due to concerns about the company’s health. Binance then revealed it signed a non-binding letter of intent to acquire FTX, but later pulls out of the deal.
In a tweet, Changpeng Zhao, Binance’s CEO, said “This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire [FTX] and help cover the liquidity crunch. We will be conducting a full DD [due diligence] in the coming days.”
He added, “There is a lot to cover and will take some time. This is a highly dynamic situation, and we are assessing the situation in real time. Binance has the discretion to pull out from the deal at any time. We expect FTT to be highly volatile in the coming days as things develop.”
The potential deal was confirmed by FTX CEO Sam Bankman-Fried, who is facing something of a comedown after being hailed as a saviour when the firm bailed out BlockFi and Voyager Digital earlier this year. Bankman-Fried was also reported as saying last year that buying Goldman Sachs was possible for the exchange group.
FTX’s US operations are apparently not part of the deal and continue, the firm says, to operate normally.
The potential deal barely lasted 24 hours, however, with Binance moving from Twitter to a formal statement, when it said that after due diligence, and taking into account news reports which revealed allegations of mishandled customer funds and alleged US agency investigations, the firm had decided “we will not pursue the potential acquisition of FTX.com”.
Predictably, the events prompted a sharp drop in cryptocurrency values, with Bitcoin plunging from above $20,000 to below $16,000 before stabilising.
