Binance Might Not Buy FTX After All

Binance Might Not Buy FTX After All

Somehow, things might be even worse than they first appeared at the crashing cryptocurrency exchange FTX. The blockchain firm, which up until very recently had been ranked as the third largest crypto platform, announced Tuesday that it was being acquired by rival exchange Binance. Now, a report from Coin Desk indicates that deal may fall apart, citing an unnamed “person familiar with the matter.”

Early November whispers and an allegedly leaked financial document indicated that FTX and its severed, corporate sibling Alameda Research might not have as much money as claimed. From there things snowballed, crypto pundits speculated, and the value of FTX’s token, FTT, plummeted. Currently, it’s sitting around $US3.72 ($5), down from about $US22 ($31) on Monday.

As his coin value dropped, FTX founder and CEO Sam Bankman-Fried allegedly went asking around for $US1 ($1) billion in bail out money from multiple Silicon Valley and Wall Street big wigs to try to salvage his exchange. And most of the blockchain platform’s legal and compliance staff abruptly quit on Tuesday, according to a report from Semafor.

Amid the chaos, Binance CEO Chengpeng Zhao stepped with an offer to buy up FTX. “To protect users, we signed a non-binding LIO [letter of intent], intending to fully acquire and help cover the liquidity crunch,” he tweeted in a statement yesterday. “We will be conducting a full DD [due diligence] in the coming days.” In non-crypto terms, “liquidity crunch” means that FTX is running out of cash to finance its own transactions. The exchange stopped processing withdrawals yesterday morning.

In a longer post made Wednesday morning, Zhao added that “FTX going down is not good for anyone in the industry. Do not view it as a ‘win for us.’” Bankman-Fried also tweeted about the acquisition. “I know that there have been rumours in media of conflict between our two exchanges, however Binance has shown time and time again that they are committed to a more decentralized global economy…We are in the best of hands,” he wrote.

Yet, apparently Binance’s brief peek into FTX’s finances could be enough to stop the acquisition deal in its tracks, regardless of any negative reverberations FTX’s downfall could have for other crypto firms.

“Roughly half a day into that process of reviewing FTX’s internal data and loan commitments has led Binance to strongly lean against completing the transaction, [our source] said,” Coin Desk wrote.

Binance and did not immediately respond to Gizmodo’s request for comment. If the rescue deal does fall apart, FTX would become one of multiple blockchain projects to crumble in this year’s “crypto winter.” Unfortunately, it would also mean that Martin Shkreli was right about something.

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