Just a day after Binance announced that it will be helping FTX with the liquidity crunch, the company made the announcement of backing out of this deal. FTX was on the verge of collapse because of insufficient funding and Binance came to its rescue on 8 November only to leave it stranded a day after (9 November).
The Binance CEO announced through a tweet that
“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity,” Binance said in a tweet on Wednesday. “But the issues are beyond our control or ability to help.”
According to sources, Bankman-Fried was desperately trying to gather funding from venture capitalists and other investors before he went to Binance. Zhao initially consented to help, but his business swiftly changed its mind, pointing to allegations of “mishandled customer funds and alleged U.S. agency investigations.”
The company statement included: –
“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.”
The statement further talked about the crypto industry as “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.”
According to the Wall Street Journal, Bankman-Fried informed investors that the company is in need of emergency capital due to a shortfall of up to $8 billion resulting from withdrawal demands.
Just on Monday, Bankman-Fried made an effort to convince investors that the company’s assets were secure. However, the market crash started after Binance’s Zhao announced publicly that his company was selling its holdings in FTX’s native token FTT, and FTX was unable to stop it.
Later on Tuesday, Bankman-Fried reported that $6 billion worth of withdrawal requests had been made by consumers. Additionally, he removed tweets from the day before that said FTX had sufficient funds to cover clients’ shares.
Binance told its employees that it’s not a masterplan
Zhao stated that the collapse of FTX “is not good for anyone in the industry” and that employees should not “see it as a win for us” in an email to staff that he later made public.
This happened on the next day of the announcement of signing the Non-Binding Deal LOI with the FTX. In the Memo Zhao also added for its employees that “DO NOT trade FTT tokens, If you have a bag, you have a bag. DO NOT buy or sell”
Zhao continued, “User confidence is seriously shattered,” and he predicted that the controversy will increase regulatory oversight of exchanges.
FTX was known to be a competitor of Binance and before this deal, there was a big dispute between the CEO’ of both companies where FTX’s CEO even blamed Zhao for spreading a false rumor about the company. So what’s your view on this?
What is the market situation over this?
Between Monday and Tuesday, FTT already lost 80% of its value, dropping to $5 (₹407.85) and wiping out more than $2 billion in a single day. On Wednesday, it dropped by more than half to about $2.30 (₹187.61), bringing the entire market value of the tokens in circulation down to about $308 million. According to the Coinmarketcap at the moment FTT is trading at the value of ₹185.71 ($2.28)
In the midst of the deal turbulence, cryptocurrency prices have tumbled, with bitcoin plummeting 15% on Wednesday after losing 13% on Tuesday. For the first time since November 2020, it is currently trading at this low value of $16,699 (1365368.69). Ethereum, on the other hand, has dropped more than 30% in the last two days and is almost at $1,177 (₹96235.64).
For more content related to cryptocurrency, check-out Suncrypto Academy.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. All content provided is for informational purposes only, and shall not be relied upon as financial/investment advice. Opinions shared, if any, are only shared for information and education purposes. Although the best efforts have been made to ensure all information is accurate and up to date. Occasionally unintended errors or misprints may occur. We recommend you to please do your own research or consult an expert before making any investment decision. You may write to us at [email protected].
