Crypto giant Binance pulls out of bid to save rival, sparking chaos in digital assets

Crypto giant Binance pulls out of bid to save rival, sparking chaos in digital assets

New York
CNN Business

In a sharp reversal, cryptocurrency exchange Binance has pulled out of a deal to acquire its rival FTX, saying the company’s problems were “beyond our control or ability to assist.”

Binance, the world’s largest crypto exchange, said it reviewed FTX’s finances as part of its due diligence process, and cited reports of “misuse of client funds and alleged investigations by US agencies” when it announced the deal was off.

The twist is the latest twist in a dramatic, fast-moving saga involving the crypto world’s most powerful players.

It also marks a stunning decline 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 investment icons such as Warren Buffett and JP Morgan, who previously designed a series of aid packages for struggling crypto firms this year. He has appeared in ads along with celebrities like Gisele Bündchen, part of a campaign to bring cryptocurrency into the mainstream.

Without a bailout, FTX is poised to 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 funds to cover a shortfall of up to $8 billion due to withdrawal requests received in recent days.

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

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

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

Even for an asset known for its 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 amid speculation about the company’s financial health. Essentially, it forced a capital requirement of $580 million that Bankman-Fried did not have the liquidity to meet.

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

Still, investors were concerned about getting the deal done and quickly sold off digital assets of all sizes.

According to Bloomberg, the FTX crash 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 managed client funds properly, citing people familiar with the investigation.

The SEC spokesman said that the commission does not comment on the existence or non-existence of a possible investigation.

The CFTC declined to comment.

—CNN Business’ Matt Egan contributed to this article.

#Crypto #giant #Binance #pulls #bid #save #rival #sparking #chaos #digital #assets

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button