The biggest exchange in the world, Binance Holdings Ltd., intended to acquire troubled rival FTX.com on Tuesday. However, on Wednesday, Binance backed out of the agreement, citing FTX's financial issues as well as potential regulatory inquiries. With its decision to leave, the ongoing crypto market crash worsened, tumbling Bitcoin to its lowest point in two years.
Binance quit after reviewing the organization's structure and financial records. According to an organization statement, "The issues are beyond our control or ability to help".
According to sources, Sam Bankman-Fried (CEO of FTX) was frantically trying to gather money from venture capitalists and other investors on Monday night before he went to Binance due to a liquidity crisis. Changpeng Zhao (CEO of Binance) initially consented to help, but his organization swiftly changed its mind, citing reports of "mishandled customer funds and alleged U.S. agency investigations".
The collapse of the Binance-FTX agreement is the latest incident in a stunning breakdown that has shooked the cryptocurrency world this week. On Monday, Bankman-Fried tried to convince investors that the company's assets were secure.
However, the selloff started after Binance's Zhao publicly announced that his company was selling its holdings in FTX's native token, FTT, and FTX could not stop it.
Following Binance's announcement, FTX's website unexpectedly went offline. FTX later came back online with a banner warning that the exchange is unable to process withdrawals and that it is strongly advised against depositing funds.
There have also been reports that Sam Bankman-Fried called investors to inform them that the exchange required $8 billion in emergency funding to assist pay for the withdrawal demands and was looking to raise $3 billion to $4 billion.
Who will purchase the struggling cryptocurrency exchange next is unclear.
What Are Binance and FTX?
Binance and FTX are two of the main cryptocurrency exchanges which serve as markets for buying, selling, and storing tokens by investors. With a significant margin, Binance is the largest cryptocurrency exchange by volume. FTX is among the top five, according to cryptocurrency data company CoinMarketCap (owned by Binance).
Additionally, they've been led by two of the most well-known and charismatic personalities in the cryptocurrency industry: Sam Bankman-Fried and Changpeng Zhao.
Zhao, a Canadian citizen, born in China and moved to Vancouver at the age of 12, obtained a degree in Computer Science from McGill University in Montreal. He founded Binance in Shanghai in 2017, in the same year the Chinese government banned cryptocurrency exchanges. He’s now based in Dubai.
Bankman-Fried founded Alameda Research, a quantitative trading organisation and traded foreign ETFs at Jane Street Capital before establishing FTX.
Why Did They Fall Out?
Binance invested in FTX, a derivatives exchange, back in 2019. The next year, Binance introduced its cryptocurrency derivatives and soon rose to the top of the market.
As the two corporations adopted increasingly different strategies with regulators, tensions grew. While Bankman-Fried was testifying before the U.S. Congress, Binance was allegedly under regulatory investigation worldwide. Additionally, the two businesses have been bidding against one another for Voyager Digital's assets. FTX.US, FTX's American subsidiary, won the auction.
A few months ago from now, Zhao and Bankman-Fried have been bickering on Twitter, arguing about anything from accusations of frontrunning deals to influencing U.S. legislators.
The cryptocurrency exchange platform Binance combines finance and digital technology. It was established in 2017 and is registered in the Cayman Islands. Developer Changpeng Zhao, who had previously produced high-frequency trading software, founded the company. Initially established in China, Binance later relocated its headquarters as a result of the country's escalating regulation of cryptocurrencies. The platform offers a variety of cryptocurrency-related products and services, including decentralization and infrastructure solutions, education, data and research, social good, investment and incubation, trading and finance, and more.
The cryptocurrency exchange company FTX Exchange creates a platform for established trading companies. Sam Bankman-Fried and Gary Wang co-founded it in 2018 to create the best derivatives exchange and advance this industry's standardization.
They create a robust platform for professional trading organizations and user-friendly for beginners. For all significant cryptocurrencies, leveraged tokens, and OTC, FTX enables quarterly and perpetual futures.