Binance backs out of bailout plan to rescue FTX, causing further turmoil across crypto markets
11/10/2022 / By Arsenio Toledo
Cryptocurrency exchange platform Binance has backed out of a deal to acquire FTX, a similar crypto company, leaving the latter on the verge of total collapse.
Just months ago, FTX and its sister trading firm Alameda Research were two of the largest cryptocurrency firms in the world. Their 30-year-old founder and CEO, crypto trader and entrepreneur Sam Bankman-Fried, was one of the world’s richest people. But following a liquidity crunch that virtually wiped out all of the company’s value, he will be lucky to hold on to just some of his $24 billion fortune. (Related: “Crypto Nostradamus” John Perez: $2 trillion loss in value just the start, larger crypto crash incoming.)
On Tuesday, Nov. 8, Binance signed a non-binding deal to purchase FTX’s non-U.S.-based businesses for an undisclosed amount, which would rescue the company from the liquidity crisis that has nearly wiped out most of its $32 billion value and save Bankman-Fried from potentially being put under hundreds of millions of dollars of debt to venture capitalists.
But less than 48 hours later, Binance CEO Chanpeng Zhao canceled the deal and scrapped plans to backstop customers’ funds, concluding that the scale of FTX’s financial troubles is far too big to solve with a buyout.
“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged U.S. agency investigations, we have decided that we will not pursue the potential acquisition of FTX,” said Binance in a statement.
“Every time a major player in an industry fails, retail consumers will suffer,” the statement continued. “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.”
FTX’s collapse affecting wider crypto market and the wealth of billionaires and other companies
Many of FTX’s other investors are also pulling out. Silicon Valley venture capital firm Sequoia Capital said it would mark down the $214 million it invested in FTX as a loss after the whole turmoil cast serious doubts over its survival.
FTX’s whole ordeal began earlier this month when Binance’s Zhao publicly stated that his company was selling its entire holding of FTX’s native token, FTT, causing a massive selloff that made the company’s value plummet. In just two days, FTT lost around 80 percent of its value to be worth just $5, wiping out more than $2 billion. After another half-day, FTT shrank to $2.30, making the value of all remaining tokens just roughly $308 million.
Zhao claimed this sale was being done due to unspecified “recent revelations that came to light,” fueling speculation that he and Bankman-Fried were in the middle of a personal dispute. All of this turmoil caused a three-day bank run, with many of FTX’s clients rushing to sell all of their FTT holdings and plummeting the company’s value.
FTX and Alameda’s collapse would also deal a massive blow to FTX’s blue-chip backers, including BlackRock, the Ontario Teachers’ Pension Plan in Canada, Japanese conglomerate SoftBank and hedge fund billionaires Izzy Englander and Paul Tudor Jones.
This crisis has also affected the value of other cryptocurrencies. Bitcoin fell by 23 percent since Monday, Nov. 7, and at one point traded as low as $15,700 – the lowest its value has been since Nov. 2020 – before stabilizing itself. As of press time it is currently trading at $16,412. Meanwhile, Ether, the second-largest crypto asset, plunged in value by more than 30 percent since Tuesday and is currently trading under $1,200.
Bankman-Fried has spent the days since the beginning of the crisis attempting to appeal to investors for support to prop up the exchange as more and more of the company’s customers pull out. The CEO has even turned to rival crypto exchanges for a possible bailout to no avail.
It is still unclear who Bankman-Fried will turn to next to throw FTX a lifeline. According to one of his recent calls with investors, FTX needs at least $8 billion as this is how much it needs to provide its clients demanding withdrawals.
Learn more about the cryptocurrency collapse at CryptoCult.news.
Watch this news clip featuring the Chinese founder and CEO of Binance hoping Elon Musk will implement crypto features on Twitter following his acquisition.
This video is from the Chinese Taking Down Evil CCP channel on Brighteon.com.
More related stories:
Robinhood fires nearly a quarter of its employees as crypto collapse diminishes company earnings.
Crypto broker Voyager Digital suspends customer trading, deposits, withdrawals and loyalty rewards.
Sources include:
Submit a correction >>
Tagged Under:
bailout, Binance, bitcoin, Bitcoin collapse, crypto, crypto collapse, crypto cult, cryptocurrency, economic crash, finance, financial crash, FTX, liquidity crunch, market crash
This article may contain statements that reflect the opinion of the author
RECENT NEWS & ARTICLES
