After reaching a deal to acquire FTX’s non-US businesses, Binance has turned away from the deal because of mishandled customer funds and alleged U.S agency investigations.
A spokesperson for Binance said the crypto exchange has scrapped its letter of intent to buy rival crypto exchange company FTX. Changpeng Zhao’s company was hoping to be able to support FTX’s customers to provide liquidity. It said issues are now beyond their control or ability to help.
Binance said retail customers suffer every time a major player in an industry fails. The crypto ecosystem over the last several years has become more resilient. As such, Binance believes that outliers that misuse user funds will be weeded out by the free market. The crypto ecosystem will grow stronger and stronger as regulatory frameworks are developed and as the industry evolves through greater decentralization.
Zhao, who has been at loggerheads with FTX for the past several months, said he did not master plan the fall of FTX. He told employees in a memo that FTX going down is not good for anyone in the industry and employees should not see it as a win for Binance. Zhao instructed employees not to trade FTT tokens.
The Sam Bankman-Fried crypto exchange was facing a major liquidity crunch on Monday. FTX was looking at raising money from venture capitalists and other investors before it turned to Binance. Initially, CZ agreed to help bail out FTX but then changed its decision after reports of mishandled customer funds and alleged U.S agency investigations surfaced. Bankman-Fried had told investors that FTX was in dire need $8 billion because of mass customer withdrawals, and thus needs emergency funding. He said on Tuesday that customers had demanded withdrawals to the tune of $6 billion.