Binance to acquire FTX, saving distressed crypto exchange from bankruptcy after ‘significant liquidity crunch’

This one didn’t take that long. Yesterday, we predicted that FTX might be on its way to bankruptcy after investors withdrew millions from the crypto exchange following the FTT token fiasco.

Fast forward a day later, Binance announced it is acquiring the distressed Sam Bankman-Fried crypto exchange FTX after the crypto exchange asked for help to address its liquidity crunch. In a series of tweets, CZ said Binance made the decision after FTX reached out to the firm for help. “To protect users, we signed a non-binding LOI, intending to fully acquire FTX and help cover the liquidity crunch. We will be conducting a full DD in the coming days,” he added.

In a post on Twitter, CZ said:

“This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire http://FTX.com and help cover the liquidity crunch. We will be conducting a full DD in the coming days.”

https://twitter.com/cz_binance/status/1590013613586411520

CZ also said on Twitter that due to the “highly dynamic situation,” 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.”

https://twitter.com/cz_binance/status/1590013615897477121

In one of the series of tweets, Sam Bankman-Fried said: “A *huge* thank you to CZ.

“A *huge* thank you to CZ, Binance, and all of our supporters. This is a user-centric development that benefits the entire industry. CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world.”

4) A *huge* thank you to CZ, Binance, and all of our supporters. This is a user-centric development that benefits the entire industry. CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world.

— SBF (@SBF_FTX) November 8, 2022

It all started over the weekend after the CEO of the largest crypto exchange Binance Changpeng “CZ” Zhao tweeted that his exchange would reduce its exposure to FTX and slowly withdraw billions of its holdings in FTX’s native token, FTT, “due to recent revelations that have come to light.”

A couple of hours after his tweet, investors appear to be taking their tokens off FTX just as Binance dumps its FTT (the token behind FTX). According to data from Nansen, mass withdrawals from FTX have accelerated, as investors’ weekly stablecoin outflows from FTX reached a whopping $451 million.

Then, there were speculations that FTX is on the verge of insolvency but FTX CEO Sam Bankman-Fried denied the reports. But as the rumors mounted over the weekend about the FTX’s solvency, Bankman-Fried tweeted early Monday morning that “FTX is fine. Assets are fine.”

According to a report from CoinDesk, Alameda holds $14.6 billion in assets plus $8 billion in liabilities as of June 30. That’s not all. CoinDesk also found that Alameda’s largest asset was about $3.66 billion of “unlocked FTT” and $2.16 billion of “FTT collateral.” This implies that the $5.82 billion in total FTT that Alameda owns is equal to 193% of the total known market cap of FTT, which is about $3 billion, according to data from CoinMarketCap.

FTX was founded in 2019 by 29-year-old MIT graduate Sam Bankman-Fried and his co-founder Gary Wang. The Bahamas-based crypto exchange FTX offers derivatives products like futures and options as well as spot trading. Once an unknown startup, FTX has become a key player in the crypto space, rivaling the likes of Coinbase and Binance.

Bankman-Fried, who currently resides in Hong Kong, is now worth at least $25 billion making him the richest person in crypto, according to Forbes. Sam graduated from the Massachusetts Institute of Technology in 2013 at the age of 21. He was skilled in math and loved to solve problems and give back to society.