It’s official. Binance will not be purchasing FTX. One day after Binance announced its intent to buy its collapsing competitor, the company has now announced it will walk away from the deal, according to an initial report from the Wall Street Journal. This comes after days of animosity shared between FTX CEO Sam Bankman-Fried and Binance CEO Changpeng Zhao that was felt throughout the crypto industry.
Till now, Binance’s potential purchase of FTX has had the collective crypto and NFT communities on edge. But it seems fears might not be assuaged anytime soon, since, without a support system to help FTX through its current liquidity crunch, it’s unclear what will become of the crypto-exchange giant.
The Binance buyout: what happened?
On the morning of Tuesday, November 8, FTX CEO Sam Bankman-Fried and Binance CEO Changpeng Zhao confirmed that Binance is seeking to acquire FTX. Taking to Twitter, both executives noted that the move stems from an FTX liquidity crunch, which has resulted in a lack of cash or easily convertible to cash assets on hand for FTX to disseminate to its customers.
But just one day after Binance began due diligence (DD) to help the company further understand the state of FTX, sources familiar with the matter told CoinDesk that the deal might be developing in an entirely different direction — with the source (who wasn’t named) saying it’s highly unlikely that Binance will go through with its acquisition of FTX.
Now, suspicion has come to fruition — as Binance is backing out of a deal supported only by a nonbinding letter of intent (LOI). But perhaps this was predictable, as Zhao had continued to comment on the flexibility of the deal, alluding to Binance’s discretion to pull out at any time.
Considering Bankman-Fried and Zhao’s complicated past, it’s too early to say if the two will leave the failed deal on good terms, or return to antagonizing each other in public. Regardless, the Earth-shaking events surrounding the acquisition have already created major ripples throughout the blockchain ecosystem, with the price of FTX’s native token, FTT, plunging 80 percent since announcements were first made.
Since Zhao declared Binance’s plan to liquidate its remaining FTT token holdings a few days ago, many had speculated that the Binance acquisition was possibly part of a bigger play from the company. But Zhao attempted to assuage these fears in a note sent out to Binance employees on November 9, saying Binance’s potential selloff was orchestrated before any communications between Binance and FTX, and is apparently on hold, as of writing.
Now that Binance and FTX are parting ways from their short stint, much remains ambiguous regarding the sustainability of the FTX ecosystem. Although the dissatisfaction of its customer base has become palpable, since some users reportedly hosted and subsequently lost their entire net worth on the platform. And it’s not only users who are freshly disheartened by FTX. According to the aforementioned report from the Wall Street Journal, during DD, Binance was taken aback by “a big hole it found in FTX’s finances”.
While some — who have no qualms openly criticizing FTX’s management — might rejoice at the sight of the platform’s fall from the heights of the crypto industry, insolvency would lead to countless users losing their stored assets. Whether this eventuality might come to pass or not, Binance’s stance on the situation might best be summed up by a line from Zhao’s note to employees, which states: “do not view it as a ‘win for us.’ User confidence is severely shaken.”
This story is developing and will be updated as new information becomes available.
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