Binance walks away from FTX rescue
By Abigail Townsend
Date: Thursday 10 Nov 2022
(Sharecast News) - Cryptocurrency exchange FTX was facing collapse on Thursday after rival Binance walked away from takeover discussions, citing an alleged investigation by US regulators.
FTX, which is run by 30-year-old crypto entrepreneur Sam Bankman-Fried, has been rocked by a surge in withdrawals after concerns mounted about its financial health, causing a liquidity crunch.
On Tuesday, Bankman-Fried - one of the sector's most high-profile figures - announced FTX had "come to agreement on a strategic transaction with Binance", dependent on due diligence.
"Our teams are working on clearing out the withdrawal backlog as is," he tweeted. "This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we've asked Binance to come in. It may take a bit of time to settle - we apologise for that.
"But the important thing is that customers are protected."
However, just two days later, Binance announced it was walking away.
It said: "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."
Reuters reported that the US Securities and Exchange Commission was probing FTX's handling of customer funds as well as its crypto-lending activities, citing an unnamed source with knowledge of the inquiry.
Bankman-Fried and FTX have yet to make any official response. A statement on FTX's website reads: "FTX is currently unable to process withdrawals. We strongly advise against depositing. All onboarding of new clients has been suspending until further notice."
Investor Sequoia Capital, meanwhile, confirmed on Wednesday it had written off its $214m investment. The venture capital firm said: "In recent days, a liquidity crunch has created solvency risk for FTX. The nature and extent of this risk is not known as this time. Based on our current understanding we are marking our investment down to $0."
It is thought FTX needs around $8bn to bring the current liquidity crisis under control.
Bankman-Fried stands to lose billions personally should FTX and its sister trading firm Alameda Research collapse.
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