221109100859 Bitcoin Cryptocurrency Stock

Crypto giant Binance drops bid to save rival, stoking chaos in digital assets


New York
CNN Business

In a sudden reversal, cryptocurrency exchange Binance has pulled out of a deal to acquire its controversial rival FTX, saying the company’s problems are “beyond our control or ability to help.”

Binance, the world’s largest crypto exchange, said it reviewed FTX’s finances as part of the due diligence process, and it cited reports of “mishandled client funds and alleged US agency investigations” in announcing the deal. off.

The reversal is the latest twist in a dramatic and fast-moving saga involving the crypto world’s most powerful players.

It also marks a stunning fall for Sam Bankman-Fried, the 30-year-old industry rock star who founded FTX in 2019. Bankman-Fried, known to insiders as SBF, has frequently drawn comparisons to investment icons such as Warren Buffett and JP Morgan as he engineered a series of bailouts of struggling crypto firms earlier this year. He has appeared in advertisements alongside celebrities such as Gisele Bündchen, part of a campaign to bring crypto into the mainstream.

Without a bailout, FTX is poised to collapse, along with the rest of Bankman-Fried’s sprawling crypto-empire.

According to the Wall Street Journal, Bankman-Fried told investors on Wednesday that he needed emergency financing to cover a shortfall of up to $8 billion due to withdrawal requests received in recent days.

Virtually all digital consent sank on Wednesday amid the turmoil at FTX.

Bitcoin fell below $16,000, its lowest level in two years, after Binance confirmed it would not buy FTX. The cryptocurrency has fallen more than 75% from its all-time high near $69,000 a year ago. Ether, the second most popular token, fell about 13% to $1,137 – also 75% from its record high.

Representatives for Binance and FTX did not immediately respond to requests for comment.

Even for assets known for their volatility, it’s been a brutal week.

The FTX saga escalated over the weekend when Binance CEO Changpeng Zhao said his company would liquidate its holdings in FTX as speculation swirled about the company’s financial health. Essentially, this forced a $580 million capital call that Bankman-Fried did not have the liquidity to meet.

Despite bad blood between Bankman-Fried and Zhao, the rivals appeared to have come together on a deal that stunned the crypto world on Tuesday, when Binance said it would acquire FTX pending due diligence.

However, investors were concerned about the deal and immediately sold digital assets of all kinds.

According to Bloomberg, the collapse of FTX is already being investigated by the Securities and Exchange Commission and the Commodity Futures Trading Commission. The outlet reported that regulators are investigating whether FTX handled client funds properly, citing people familiar with the investigation.

An SEC spokesman said the commission does not comment on the existence or non-existence of a possible investigation.

The CFTC declined to comment.

—CNN Business’ Matt Egan contributed to this article.

Related Posts