Binance announced in November 2022 that it would liquidate its remaining holdings of FTX Token (FTT), citing concerns that emerged after a leaked balance sheet showed how heavily Alameda Research depended on FTT.
In a series of tweets, Binance former CEO Changpeng Zhao said the exchange would sell its remaining FTT holdings but intended to do so in a way that reduced the impact on the market. Binance had received about $2.1 billion in BUSD and FTT when it exited its investment in FTX in 2021.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 BNB (@cz_binance) November 6, 2022
Why Alameda’s FTT holdings raised concerns
The controversy centered on the close financial relationship between FTX and Alameda Research. A leaked Alameda balance sheet showed billions of dollars in FTT, including about $3.66 billion in unlocked FTT and $2.16 billion in FTT collateral.
The figures raised questions about how much of Alameda’s reported value depended on a token issued by its affiliated exchange. The concern was not simply the size of Alameda’s FTT position. A large sale could put downward pressure on FTT, which could then reduce the value of collateral held by Alameda.
Cory Klippsten, CEO of Swan Bitcoin and a critic of many crypto tokens, publicly questioned the quality of Alameda’s assets.
The situation quickly became a liquidity problem. FTX faced a surge in customer withdrawals, while Binance’s proposed acquisition of FTX’s non-U.S. business collapsed days later. FTX and more than 100 affiliated companies subsequently filed for bankruptcy in November 2022.
Also Read: US Government Moves $800K in Seized Alameda Crypto to Coinbase Prime
From a token sale to the collapse of FTX
Before the collapse, Binance and FTX had been major competitors as well as business partners. Binance had been an early investor in FTX and later sold its stake back to the company.
The relationship had already become tense. CZ had criticized FTX’s efforts to acquire or support struggling crypto businesses during the 2022 market downturn.
Binance had also announced that it would convert users’ balances in several stablecoins into BUSD. The decision drew criticism from some industry participants. Others viewed the FTT sale as another example of competition between major centralized exchanges.
FTX CEO Sam Bankman-Fried initially described concerns about the company as unfounded. In response to CZ’s announcement, he tweeted that the industry should work together.
That did not prevent the collapse. Investigations later established that Bankman-Fried misappropriated billions of dollars in FTX customer funds. He was convicted in November 2023 and sentenced to 25 years in prison in March 2024.
The FTX bankruptcy is still being administered, with the estate pursuing asset recoveries and creditor distributions. FTT remains tradable on some markets, but it no longer has the utility it had when FTX operated. CoinMarketCap currently describes the token as having no use and warns that it may be liquidated by the bankruptcy estate.
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