Binance backs out of FTX deal, the business said on Wednesday, threatening Sam Bankman-crypto Fried’s empire. The decision comes only one day after Binance CEO Changpeng Zhao said that the world’s largest cryptocurrency firm has signed a non-binding agreement to buy FTX’s non-US operations for an unknown sum, saving the company from a liquidity problem.
Binance backs out of FTX deal
Before Binance backs out of FTX deal, private investors valued FTX at $32 billion earlier this year. “In the beginning, our hope was to be able to support FTX’s customers to provide liquidity,” Binance stated in a tweet on Wednesday. “But the issues are beyond our control or ability to help.” Bankman-Fried was hustling on Monday night to acquire money from venture capitalists and other investors before going to Binance, according to individuals familiar with the situation. Zhao agreed to step in at first, but his business rapidly reversed direction, citing accusations of “mishandled customer funds and alleged U.S. agency investigations.”
It’s unknown who will purchase the ailing cryptocurrency exchange next. According to a person acquainted with the situation, Bankman-Fried notified investors that the firm is facing a shortfall of up to $8 billion due to withdrawal demands and need emergency finance. The Binance-FTX deal’s demise is the latest chapter in a startling implosion that has shaken the crypto industry this week. Bankman-Fried attempted to reassure investors on Monday that the company’s assets were in good condition. However, as Binance’s Zhao publicly said that his business was selling its holdings in FTX’s native token FTT, the selloff began, and FTX had no control over it.
According to reporter Eric Newcomer, Sequoia Capital, one of Silicon Valley’s most notable venture capital companies, invested $210 million in the company. According to Newcomer, FTX recently informed investors that its operating income in 2022 is expected to fall to $144 million this year, down from $338 million in 2021, while sales are expected to climb to $1.1 billion, up from $1 billion last year. Customers had requested $6 billion in withdrawals, according to Bankman-Fried on Tuesday. He also removed tweets from the day before claiming that FTX had sufficient money to protect clients’ stakes.
In a prior message to Binance staff, Zhao stated that he “did not master plan” FTX’s demise. He stated that the decline of FTX is “not good for anyone in the industry” and that staff should not “view it as a win for us.” He also instructed them not to exchange FTT tokens while this ordeal is ongoing. “If you have a bag, you have a bag,” he wrote. “DO NOT buy or sell.”
Between Monday and Tuesday, FTT dropped 80% of its value, plummeting to $5 and wiping out more over $2 billion in a single day. On Wednesday, it plunged by more than half to approximately $2.30, bringing the total worth of circulating tokens to around $308 million. Cryptocurrencies have dropped as a result of the deal instability, with bitcoin plummeting 15% on Wednesday after losing 13% the day before. For the first time since November 2020, it is trading below $16,000 per share. Meanwhile, ether has dropped more than 30% in the last two days and is on the verge of plunging below $1,000.
Here’s the company’s full statement:
“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.com.
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.
Every time a major player in an industry fails, retail consumers will suffer. We have seen over the last several years that the crypto ecosystem is becoming more resilient and we believe in time that outliers that misuse user funds will be weeded out by the free market.
As regulatory frameworks are developed and as the industry continues to evolve toward greater decentralization, the ecosystem will grow stronger.”
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