Crypto exchange Binance signed a letter of intent to acquire rival FTX Trading, the companies said Tuesday, but things changed Wednesday when Binance said it won’t proceed with the deal.
“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 FTX,” Binance tweeted.
Binance’s decision comes after the company reviewed FTX’s books and structure. “In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” Binance said, adding “we believe in time that outliers that misuse user funds will be weeded out by the free market.”
FTX faces a liquidity crunch, Binance founder Changpeng Zhao noted on Twitter Tuesday.
“There is a lot to cover and will take some time,” he wrote. “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.”
FTX would continue to operate normally during this period, founder and CEO Sam Bankman-Fried assured customers, but that changed Thursday when a message on the exchange said withdrawals can’t be processed and advised clients not to initiate any deposits.
Bankman-Fried told investors he needs $8 billion to avoid a shortfall from withdrawal requests by customers, The Wall Street Journal reported. The amount appears to be closer to $9.4 billion to rescue the exchange, Reuters reported Thursday. So far, $1 billion has come from crypto-token Tron founder Justin Sun, another $1 billion from OKX crypto exchange, $1 billion from crypto firm Tethers and $2 billion from investment funds.
Bankman-Fried posted a Twitter thread Thursday apologizing multiple times for the current state of his company and saying he’s going to raise liquidity.
Bitcoin price dropped Wednesday in part because of the news of the second-biggest crypto exchange facing a financial crisis. Bitcoin dropped to just over $16,000, the lowest the cryptocurrency has been since late 2020. It rebounded Thursday after a lighter-than-expected inflation report.