WASHINGTON/LONDON, Nov 8 (Reuters) – Crypto giant Binance signed a non-binding deal on Tuesday to buy FTX’s non-U.S. unit to help cover a “liquidity crunch” at the rival exchange, a stunning bailout that sparked renewed interest among investors. created anxiety. Cryptocurrency
The deal between high-profile rivals Sam Bankman-Fried, FTX’s CEO, and Binance CEO Changpeng Zhao sparked speculation about FTX’s financial health. $6 billion withdrawn 72 hours before Tuesday morning.
The pressure on FTX comes from Zhao, who tweeted on Sunday that Binance would divest its holdings of the rival token due to unspecified “recent disclosures.”
“It’s scary to think that FTX, one of the world’s largest crypto exchanges, has been bitten by liquidity concerns and their biggest rival Binance is coming to their rescue,” said Dan Raju, CEO of Trader, a financial services provider and brokerage.
The move, a dramatic turnaround in fortunes for billionaire Bankman-Fried, 30, is the latest emergency rescue in the world of cryptocurrencies this year, as investors shy away from riskier assets amid rising interest rates. The cryptocurrency market fell nearly two-thirds from its peak to $1.07 trillion.
Major cryptocurrencies initially rallied on news of the deal on Tuesday, but those gains were quickly erased.
FTX tokens – which give holders a discount on FTX trading fees – last traded at $5.33, down more than three-quarters. Bitcoin, the largest digital token, fell 11%.
Bankman-Fried, with a net worth of $16.6 billion According to Forbes, said just a few months ago that it has billions on hand to help struggling digital asset platforms I published in May 7.6% in shares Robinhood Markets Inc (HOOD.O)Trading apps capitalize on weak share prices.
Tuesday’s events have FTX investors scrambling to figure out what Binance’s deal means for their investments in FTX, according to people familiar with the matter.
In a note to investors late Tuesday, which was shared on Twitter and verified by a source familiar with the situation, Bankman-Fried sought to reassure FTX investors, saying that “protecting shareholders is our highest priority” but that details of the deal “were still hashed out.” being kicked out.” FTX did not immediately respond to a request for comment.
The companies did not disclose the terms of the deal, and it remains to be seen whether it will close.
Binance, the world’s largest crypto exchange, will conduct due diligence in the coming days as the next step in the acquisition of FTX.com Binance and FTX’s US operations are not part of the deal, said Bankman-Fried, who is from California but lives in the Bahamas where FTX is based.
It is unclear how regulators would consider a deal between the two crypto exchanges.
US antitrust enforcers may insist on investigating the merger, antitrust experts said. “If they think it adversely affects U.S. consumers, they can sue to stop it,” said Seth Bloom, an antitrust expert at Bloom Strategic Counsel.
Binance is under investigation by the US Department of Justice for possible violations of money-laundering rules, Reuters reported last weekA series of investigations during this year Binance’s Troubled History with financial regulatory approval.
last month, Reuters has published new information About Binance’s strategy to keep regulators at arm’s length and keep up Chaos in its compliance program. Binance said in response that it is helping to drive higher industry standards and is looking to improve its ability to detect illegal crypto activity.
A spokesman for the US Commodity Futures Trading Commission said the agency was monitoring the situation. The Federal Trade Commission declined to comment.
Two of the crypto industry’s most powerful moguls, Bankmann-Fried and Zhao, known by his initials CZ, have had a tumultuous relationship.
In late 2019, Binance invested in FTX, then many smaller exchanges, before exiting the investment in July last year. By then FTX had become a growing rival to Binance, which dominated the crypto industry with 120 million users.
Tensions have flared between Zhao and Bankman-Fried in recent days, with public disagreements on Twitter following a report by news website CoinDesk on the leaked balance sheet of Alameda Research, a trading firm founded by Bankman-Fried with which it has close ties. FTX. Read more
However, the speed of withdrawal proved to be too high. “On an average day, we have a net in/outflow of tens of millions of dollars,” Bankman-Fried wrote in a message sent to staff Tuesday morning, explaining how that amount ran into the billions.
FTX did not respond to requests for comment on messages to staff.
In a tweet announcing the deal on Tuesday, Binance’s Zhao said FTX “sought our help” after “a significant liquidity crisis.”
Bankman-Fried said his teams are working to clear the backlog of withdrawals: “It will eliminate the liquidity crunch. That’s one of the main reasons we asked Binance to come in.”
“A *huge* thanks to CZ, Binance,” Bankman-Fried wrote.
Reporting by Tom Wilson in London and Hannah Lang in Washington Additional reporting by Megan Davis, Catherine Evans and Matthew Lewis Editing by Tom Westbrook in Singapore, Prentice in Washington and Angus Berwick and Anirban Sen in New York
Our values: Thomson Reuters Trust Policy.