Binance CEO states FTX was riddled with way too many problems to solve
•Binance has called off its plans to acquire FTX, one day after announcing its intent to do so.
• Binance cited “issues” with FTX that are “beyond our control or ability to help.”
• The deal would have combined the two largest centralized crypto exchanges in the industry.
• Binance was an early investor in FTX, but sold its shares back to FTX last July.
• On Sunday, Binance CEO Changpeng Zhao explained on Twitter why Binance had decided to liquidate its FTT holdings, saying “We gave support before, but we won’t pretend to make love after divorce.”
In a turn of events, Binance has called off its deal to acquire FTX, just one day after announcing its intent to do so. Citing issues “beyond our control or ability to help”, Binance has pulled out of the deal that would have combined the two largest centralized crypto exchanges in the industry, even though the deal would have only cost Binance $1 according to inside sources.
This move comes after a number of companies have distanced themselves from FTX in recent days, raising concerns about the company’s business practices. Let’s take a look at what may have led to this dramatic turn of events.
Binance’s original announcement stated that it had agreed to acquire a majority stake in FTX for an undisclosed amount. The move would have created a behemoth in the cryptocurrency exchange industry, with the two companies combining for over $13 billion in daily trading volume.
However, within hours of the announcement, concerns were raised about FTX’s business practices. In particular, people took issue with the fact that FTX appears to use wash trading to artificially inflate its trading volume numbers. Wash trading is a practice whereby a trader buys and sells a security for the express purpose of creating artificially high volume levels.
In the wake of these concerns, a number of companies announced that they would be distancing themselves from FTX. Prominent figures in the cryptocurrency community such as Litecoin founder Charlie Lee and Ethereum co-founder Vitalik Buterin also spoke out against FTX.
It appears that Binance was swayed by these concerns, leading to its decision to back out of the deal. In a statement, Binance CEO Changpeng Zhao said: “We have arranged everything but there are always some things beyond our control or ability to help.” He went on to say that “the acquisition will no longer moving forward.”
The debacle surrounding FTX is a cautionary tale for cryptocurrency exchanges. In an industry that is still relatively new and largely unregulated, it is more important than ever for exchanges to maintain high standards when it comes to business practices. Otherwise, they risk losing the trust of both their users and their partners.
This move is already causing major waves in the crypto community with yet another of Changpeng Zhao’s competitors seeing the squeeze. Solana’s native SOL token is a competitor of sorts to the BNB token and its NFT aspirations. With the move, CZ just implemented the already faltering token has seen another 50% of its value drop within the past 24 hours, the token is currently trading at a little over $13.
What could have possibly happend?
Sources close to the situation state that the deal was originally for $1 but FTX.US was not a part of the deal thus Binance is not interested in going on with the deal. One of the factors is the fact that the FTC and CFTC have both opened investigations into FTX just this morning November 9. Binance will not consider a deal unless the US arm of the company comes with it. There are those that are stating the obvious that no one is going to want to buy billions of messy debt for $1. There are legal advisors that also believe that regulators in the US would be against the move as well. The fact of the matter is the deal is not one that Binance feels very comfortable with , especially since they are dealing with their own issues at the moment.