Binance is backing out of its deal to purchase FTX, leaving the cryptocurrency exchange run by Sam Bankman-Fried on the edge of collapse.
Binance pulled the plug on the acquisition a day after it announced a non-binding deal to buy FTX’s non-U.S. businesses for an undisclosed amount of money, saving the crypto exchange from a deepening liquidity crisis.
Earlier this year, FTX was valued at $32 billion U.S. in a private funding round.
In a tweet, Binance said: “Our hope was to be able to support FTX’s customers to provide liquidity… But the issues are beyond our control or ability to help.”
Binance, the world’s biggest cryptocurrency exchange by trading volume, added that it quickly changed course once it discovered “mishandled customer funds and alleged U.S. agency investigations” at FTX.
Media reports say that Sam Bankman-Fried, who founded and runs FTX, told investors that his company is facing a shortfall of $8 billion U.S. from customer withdrawal requests and needs emergency funding or it will likely file for bankruptcy.
FTX is facing a shocking and unexpected collapse that’s shaken the crypto world. Sam Bankman-Fried was reassuring investors as recently as Monday of this week (November 7) that the company’s assets were fine.
Bankman-Fried then said on Tuesday this week (November 8) that customers had demanded withdrawals of nearly $6 billion U.S. He also deleted tweets stating that FTX had enough assets to cover clients’ holdings and withdrawal requests.
Investors became spooked and began pulling their money out of FTX last weekend following reports that the cryptocurrency exchange’s finances were not secure, and as the price of the company’s proprietary digital token, FTT, plunged more than 80%.
The drama surrounding FTX has led to a steep selloff in cryptocurrencies this week, with the price of Bitcoin (BTC) falling 15% on Wednesday (November 9) and trading below $16,000 U.S. for the first time since November 2020.
