In an abrupt reversal, cryptocurrency exchange Binance pulled out of a deal to acquire its embattled rival FTX, saying the company’s problems were “beyond our control or ability to help.”
Binance, the world’s largest cryptocurrency exchange, said it reviewed FTX’s finances as part of the “due diligence” process and cited reports of “mismanaged client funds and alleged investigations by US agencies” in announcing that the deal it was undone.
The reversal is the latest twist in a dramatic and fast-paced saga involving the most powerful players in the cryptocurrency world.
It also marks an impressive drop for Sam Bankman-Fried, the 30-year-old industry rock star who founded FTX in 2019. Bankman-Fried, known to insiders like SBF, regularly drew comparisons to investment icons like Warren Buffett and JP Morgan. while designing a series of bailouts for struggling cryptocurrency companies earlier this year.
He has appeared in advertisements alongside celebrities such as Gisele Bündchen, part of a campaign to bring cryptocurrency into the mainstream.
Without a bailout, FTX is poised to collapse, along with the rest of Bankman-Fried’s vast crypto empire.
According to the Wall Street Journal, Bankman-Fried told investors on Wednesday that he needed emergency funding to cover a shortfall of up to $8 billion due to withdrawal requests received in recent days. Virtually all digital assets sank this Wednesday due to the turmoil at FTX.
Bitcoin dropped below $16,000, its lowest level in two years, after Binance confirmed it would not buy FTX. The cryptocurrency is down more than 75% from its all-time high, close to $69,000 a year ago. Ether, the second most popular token, is down around 13% to $1,137 – also 75% below its all-time high.
Representatives for Binance and FTX did not immediately respond to requests for comment. Even for assets known for their volatility, it was a brutal week.
The FTX saga intensified over the weekend as Binance CEO Changpeng Zhao said his company would liquidate its holdings in FTX as they speculated on the company’s financial health. In essence, this forced a $580 million capital call that Bankman-Fried did not have the liquidity to service.
Despite the rancor between Bankman-Fried and Zhao, the rivals appeared to unite in a deal that stunned the crypto world on Tuesday when Binance said it would acquire FTX pending due diligence.
Still, investors worried about the deal being concluded and promptly sold digital assets of all kinds.
According to Bloomberg, the FTX collapse is already under investigation by the Securities and Exchange Commission (CVM) and the Commodity Futures Trading Commission. The agency said regulators are investigating whether FTX handled customer funds properly, citing people familiar with the investigation.
An SEC spokesperson said the commission does not comment on the existence or non-existence of a possible investigation. The CFTC declined to comment.
Source: CNN Brasil
Joe Jameson, a technology journalist with over 2 years of experience, writes for top online news websites. Specializing in the field of technology, Joe provides insights into the latest advancements in the industry. Currently, he contributes to covering the world stock market.
