In what may seem like the proverbial “nail in the coffin,” Binance yesterday announced its withdrawal from acquiring Sam Bankman-Fried’s ailing crypto exchange, FTX.
Binance’s CEO, Changpeng Zhao, took to Twitter to break the news, citing the results of corporate due diligence, as well as recent news reports regarding mishandled customer funds and alleged US agency investigations as the main reasons for not proceeding with the potential acquisition of FTX.
As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of https://t.co/FQ3MIG381f.
— Binance (@binance) November 9, 2022
This abrupt withdrawal, while shocking and particularly unsettling for investors with significant holdings in FTX and its native token, FTT, may have been anticipated to some extent. In his Twitter thread announcing the acquisition on Tuesday, CZ subtly hinted at the possibility of backing out of the deal if it was “too radioactive.”
There is a lot to cover and will take some time. This is a highly dynamic situation, and we are assessing the situation in real time. Binance has the discretion to pull out from the deal at any time. We expect FTT to be highly volatile in the coming days as things develop.
— CZ 🔶 Binance (@cz_binance) November 8, 2022
CZ penned a memo sent to the Binance team globally, noting that FTX’s collapse wasn’t a win for Binance and the entire crypto ecosystem. He rued the crash’s impact on investor confidence and the potential increase in difficulty in obtaining operational licenses.
In a bid to restore some stability to the failing exchange, CZ confirmed that the liquidation of Binance’s FTT holdings had been halted. He also appealed to investors not to panic sell or engage in bank runs. Finally, CZ reiterated the need to shift focus from crypto prices to developing products with significant use cases.
In the spirit of transparency, might as well share the actual note, sent to all Binance team globally a few hours ago.https://t.co/IUNkPcLC8T pic.twitter.com/XGlIJB7EV5
— CZ 🔶 Binance (@cz_binance) November 9, 2022
CZ also cited two major takeaways from the entire debacle.
- Never use a token you created as collateral.
- Don’t borrow if you run a crypto business. Don’t use capital “efficiently.” Have a large reserve.
He stated, “Binance has never used BNB for collateral and we have never taken on debt,” recommending that “all crypto exchanges do merkle-tree-proof-of-reserves and that “crypto exchanges should not run on fractional reserves” as conventional banks do. He affirmed that Binance would soon “commence proof-of-reserves to ensure full transparency.”
Since Binance announced its withdrawal from the acquisition deal, FTX CEO Sam Bankman-Fried has remained silent on social media.
At press time, FTX’s native token, FTT, is trading at $2.83 with a 24-hour trading volume of $1,497,888,783. FTT’s price is down 35.9% in the last 24 hours.
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