Binance to Rescue Crypto Rival FTX After ‘Liquidity Weakness’
Binance has agreed to buy rival cryptocurrency exchange FTX after a surge in customer withdrawals caused a liquidity crisis at Sam Bankman-Fried’s company.
Binance CEO Changpeng “CZ” Zhao wrote on Twitter that FTX “asked for our help,” adding, “There is a significant drop in liquidity.” Binance has signed a letter of intent to purchase FTX but said he had “the discretion to withdraw from the job at any time.”
FTX reached a $32 billion valuation earlier this year, and the company is backed by blue-chip investors including BlackRock, Canada’s Ontario Teachers’ Pension Plan and SoftBank.
The Binance deal ends the explosive and very public dispute between Bankman-Fried and Zhao — two of the most powerful figures in the crypto industry — and will bring together the world’s two largest crypto exchanges.
FTX’s woes accelerated over the weekend when Binance said it intended to offload its ownership of FTX’s token FTT, citing concerns about the exchange’s financial stability and causing the token’s price to sink.
Bankman-Fried responded Monday, saying “a competitor is trying to hound us with false rumors.” He added that he would “love it” if he could work with Zhao “together for the ecosystem”.
The head of FTX also tried to calm the markets by saying: “FTX is fine. The property is fine.”
But on Tuesday he tweeted: “CZ has done, and will continue to do, an amazing job of building the global crypto ecosystem and creating a freer economic world.” FTX confirmed the deal; the two companies did not immediately disclose terms.
If completed, the deal will leave Binance as the largest platform in crypto trading.
“This elevates Zhao as the most powerful player in crypto,” said Ilan Solot, co-head of digital assets at Marex Solutions. “Zhao’s worldview will be much more important, in terms of how he wants to interact with regulators and policymakers. . . the weight of his views will be much stronger.”
The crypto industry has had problems in the past year, especially since failure of terra and luna tokens in May. The price of the leading tokens Bitcoin and Ether has fallen and several major companies have collapsed, including lender Celsius Network and hedge fund Three Arrows Capital.
The bailout deal is also a big step back for Bankman-Fried, who has long been seen as a relatively stable and ambitious figure in the often volatile world of cryptocurrencies.
After this year’s crypto market collapse, he gained a reputation as an industry savior after helping failing companies. In June, the head of FTX announced a $250 million loan to crypto lender BlockFi.
The loan follows a further bailout of crypto broker Voyager Digital, which was bailed out by a FTX loan worth around $485 million in cash and bitcoin.
But Bankman-Fried’s ambitions extended to traditional markets: His exchange sought to shake up Wall Street’s futures and stock markets, buying stake at Robinhood, a retail broker.
In 2021, FTX signed a 19-year deal to rename the Miami Heat Arena as FTX Arena. In 2021, Bankman-Fried said he was buying Goldman Sachs it was not “off at all”.
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