Binance has reviewed the FTX documents and has decided to cancel the deal.
FTX won’t be saved by its biggest competitor – a day after the takeover announcement, Binance said it didn’t like what it found in the documents.
Bloomberg writes that FTX management is facing a “financial black hole” — a gap between liabilities and assets on the crypto exchange that sources say is likely more than $6 billion.
“As a result of our review, as well as recent reports of misuse of customer funds and likely US investigations, we have decided that we will not proceed with the potential acquisition of FTX. We hoped we could support FTX clients to provide liquidity, but the issues are beyond our control and we can’t help,” Binance tweeted.
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 https://t.co/FQ3MIG381f .
— Binance (@binance) November 9, 2022
Following the Binance announcement, Bitcoin fell 9.9% to $16,853. This brings this week’s decline to almost 20%.
The rejection of the takeover bid ends a tumultuous week for FTX. On November 2, the Coinbase website published a report showing that the Sam Benkman-Fried crypto exchange was facing a liquidity crisis. In response to the article, Binance CEO Changpeng Zhao announced that the company would sell FTT (FTX token) for around $529 million, after which the token dropped over 70% to around $6.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have come to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ ? Binance (@cz_binance) November 6, 2022
Later, it was announced that Binance was buying FTX, and the owners signed a “letter of intent” – which, in fact, meant that the agreement was not binding.
“This is a very dynamic situation and we are evaluating it in real time. Binance has the right to withdraw from the agreement at any time,” Zhao said on Tuesday.
The following morning, The Wall Street Journal and Coinbase published separate reports claiming that Binance was strongly leaning towards abandoning the takeover. Less than an hour later, Bloomberg wrote that the U.S. Securities and Exchange Commission (SEC) was investigating FTX to determine if the company had misused customer funds.
The review began a few months ago and has been investigating FTX US and its crypto lending activities. FTX’s ties to its American counterpart and Sam Benkman-Fried’s trading house Alameda Research are now being explored. Sources of the publication say that in the past few days, regulators have requested detailed information about the ownership structure of FTX US and FTX.com – the auditors are interested in any duplication of management structures and the board of directors, as well as financial relations between these two organizations.
It should be noted that the Department of Justice and the SEC are also looking into Binance . The crypto giant has processed $7.8 billion worth of Iranian transactions since 2018, in defiance of U.S. sanctions aimed at shutting Iran off the global financial system, Reuters reported. Almost all funds flowed between Binance and Iran’s largest crypto exchange Nobitex, the latter publishing instructions on its website on how to circumvent sanctions.
Source: Engadget , Bloomberg
