As for why Binance backed out of the deal, the company said it was because FTX was being accused of “mishandled customer funds” and investigations by regulators. Binance claimed FTX’s issues are beyond their control or ability to help.
“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 FTX.com.
In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help.”
This news sent the crypto market further in the red, with the Bitcoin price dropping 12.5% over the past 24 hours. At the time of writing, Bitcoin is trading at $16,151 on CoinMarketCap. FTT, meanwhile, fell more than 90% to $2.43, the lowest price since April 2020. The overall crypto market cap fell 11.5% to $809.68 billion over the past 24 hours.
Shortly after Binance’s decision, Sam Bankman-Fried told FTX investors that without a cash injection, the company would need to file for bankruptcy, as Bloomberg reported. The CEO said that his crypto exchange faced a shortfall of up to $8 billion and needed $4 billion to maintain operations. Sam Bankman-Fried said he would be extremely grateful if investors could help FTX.
Binance, the world’s largest crypto exchange was the first investor that backed FTX but as FTX grew in popularity, their relationship started to wither. The relationship hit an all-time low as Zhao said that Binance was selling its holdings of FTT, the native token of FTX exchange, that it had received as part of an exit from the firm last year. Hours after this news, FTT plunged to $2.51 before recovering to $14.32.
On Nov 8, Binance said it had signed a non-binding agreement to acquire FTX after FTX asked them for help. Sam Bankman-Fried then also confirmed this agreement and thanked Zhao and Binance for their help. FTX CEO said that the agreement will help them to solve the liquidity crisis, all assets will be covered 1:1. However, after all, this deal failed and FTX is in danger of bankruptcy.
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