Binance to dump FTX deal less than one day after it agreed to buy out rival
The crypto trading giant has gotten cold feet after US agencies opened new investigations into FTX.
Binance is backing out of an agreement to acquire FTX’s non-US business / Adobe Stock
Less than a day after Binance, the world’s largest crypto exchange by trading volume, signed a letter of intent to acquire all non-US operations of rival FTX, the company is backing out.
Binance this afternoon released a statement reading: “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.” The company went on to say that, initially, its “hope was to be able to support FTX’s customers to provide liquidity,” but that there were issues “beyond our control or ability to help.”
Advertisement
The company also said that consumers suffer when industry players fall and that “the crypto ecosystem is becoming more resilient.”
It issued what appears to be a thinly-veiled dig at FTX, noting that “outliers that misuse user funds will be weeded out by the free market.”
The news comes on the heels of a report by Blockworks that Binance was prepared to walk away from the deal unless its terms were modified to include FTX.US, the US branch of the business, per reports by Blockworks citing a source familiar with the matter.
However, new investigations into FTX opened by the US Federal Trade Commission and Commodity Futures Trading Commission this morning muddied the waters further for Binance.
Advertisement
Just a day ago, Binance said it would buy FTX’s non-US operations after reports that founder Sam Bankman-Fried’s hedge fund Alameda Research was storing the majority of its reserves in FTX’s proprietary coin FTT saw investors ditching its FTT holdings in droves. Ultimately, FTX faced a liquidity crunch.
Binance chief executive Changpeng ‘CZ’ Zhao said in a tweet yesterday that FTX asked for help from its competitor. “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,” the executive said.
Suggested newsletters for you
Earlier today, however, reports suggested that Binance was wavering on its decision after beginning its due diligence review of FTX’s business. Meanwhile, new investigations into FTX from US trade agencies only compounded matters for Binance, which is facing a slew of its own investigations – including one opened by the Department of Justice in conjunction with the Internal Revenue Service last year.
Experts expressed concerns today that an acquisition or merger between Binance and FTX would be blocked. “Even without a look at the book, it was clear from the start that this deal wouldn’t pass muster,” Dr Martin Hiesboeck, head of blockchain and crypto research at digital currency exchange Uphold, told The Drum.
He suggested that US authorities would surely see the deal as an infringement of anti-competition law. “If not failing at due diligence, it would never get past antitrust [legislation],” Hiesboeck says. “Otherwise, this would mean that Binance would be 80% of the market.”
The sentiment was reinforced by an anonymous source familiar with the deal, who told Blockworks: “100% if they try to sell FTX.US to Binance, regulators will say fuck off.”
A handful of popular digital currencies dropped in light of today’s news; Bitcoin dipped to less than $15,700 and Ether fell to $1,111 today.
For more, sign up for The Drum’s daily US newsletter here.