Binance backs out of FTX rescue, leaving the crypto exchange on the brink of collapse

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  • The company said on Wednesday that Binance is withdrawing from its plan to acquire FTX.
  • “The issues are beyond our control or ability to assist,” Binance said in a tweet.
  • FTX, which was valued at $32 billion earlier this year, is now in danger of collapsing.

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The company said on Wednesday that Binance is backing out of its plan to acquire FTX, putting Sam Bankman-Fried’s crypto empire on the verge of collapse.

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Binance CEO Changpeng Zhao announced a reversal a day after the world’s largest cryptocurrency firm reached a non-binding deal to buy FTX’s non-US businesses for an undisclosed amount, leaving the company with a liquidity crisis. saved from. Earlier this year, FTX was valued by private investors at $32 billion.

“Initially, our expectation was to be able to provide FTX clients with liquidity,” Binance said in a tweet on Wednesday. “But the issues are beyond our control or ability to help.”

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On Monday night, Bankman-Fried, facing a liquidity crisis, was scrambling to raise funds from venture capitalists and other investors before moving to Binance, according to sources with knowledge of the matter. Zhao initially agreed to step down, but his company quickly changed course, citing reports of “misappropriation of customer funds and an alleged US agency investigation”.

It is unclear who is next to buy the beleaguered crypto exchange. According to a person familiar with the matter, Bankman-Fried told investors that the company was facing a shortfall of up to $8 billion from withdrawal requests and needed emergency funding.

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The dissolution of the Binance-FTX deal is the latest chapter in a shocking collapse that rocked the crypto world this week. Bankman-Fried only on Monday tried to reassure investors that the company’s assets were fine. But when Binance’s Zhao publicly stated that his company was selling its stake in FTX’s native token FTT, the sell-off continued, and FTX could do nothing to stop it.

According to the reporter, Sequoia Capital, one of Silicon Valley’s foremost VC firms, invested $210 million in the company. Eric newcomer, FTX was recently telling investors that its operating income is forecast to fall to $144 million this year in 2022, down from $338 million in 2021, while revenue is expected to rise to $1.1 billion from $1 billion last year. The guess was, Newcomer reports.

Banksman-Fried said on Tuesday that customers had sought withdrawals of $6 billion. He also deleted the tweets from day one, indicating that FTX has enough assets to cover the holdings of clients.

Zhao told Binance employees in a memo earlier on Wednesday that he “did not create a master plan” for the collapse of FTX. He added that FTX going down “is not good for anyone in the industry” and that employees “shouldn’t see this as a win for us.”

He also told them not to trade FTT tokens during this test.

“If you have a bag, you have a bag,” he wrote. “Buy or don’t sell.”

FTT had already lost 80% of its value between Monday and Tuesday, falling to $5 and wiped out more than $2 billion in one day. It fell by more than half on Wednesday to around $2.30, bringing the total value of the coin down to around $308 million.

Amidst the turmoil of the deal, the cryptocurrency has fallen Bitcoin After falling 13% on Tuesday, it fell 15% on Wednesday. It is trading below $16,000 for the first time since November 2020. etherMeanwhile, it is down more than 30% over the past two days and is close to falling below $1,000.

Check out the company’s full statement here:

“As a result of corporate due diligence, as well as the latest news reports about mishandled client funding and alleged US agency investigations, we have decided that we will not pursue a potential acquisition.”,

Initially, our hope was to be able to provide liquidity to FTX’s clients, but the issues are beyond our control or ability to help.

Whenever a major player in an industry fails, retail consumers will suffer. We have seen over the past several years that the crypto ecosystem is becoming more resilient and we believe in time that outsiders abusing user funds will be weeded out of the free market.

As the regulatory framework evolves and the industry moves towards greater decentralization, the ecosystem will grow stronger.”

Improvement: FTX was telling investors that its operating income would drop to $144 million this year, down from $338 million in 2021.

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