After announcing it would come to the aid of FTX, Binance on Wednesday confirmed that it would no longer move forward with the deal to acquire the troubled cryptocurrency exchange after conducting due diligence.
Binance CEO Changpeng “CZ” Zhao on Tuesday announced that it had signed a non-binding letter of intent to acquire troubled cryptocurrency exchange FTX. The deal was however contingent on the assessment of FTX’s internal data and loan commitments. After about half a day into the review process of FTX’s financials, rumors were circulating that Binance was strongly leaning against moving forward with the transaction. CZ later confirmed the news on Twitter.
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
Binance stepped in when FTX reached out saying it was undergoing a serious liquidity issue and appeared to have stopped processing withdrawals. FTX was said to be under severe pressure after growing but unsubstantiated rumors around the balance sheet of its sister firm Alameda Research were purported causing growing concerns that another Terra-like situation may occur.
FTX CEO Sam Bankman-Fried lost about 95% of his net worth in a matter of a day and says he was “exploring all the options” but hopes for a rescue for FTX seem unlikely. A message on FTX’s website currently reads:
FTX is currently unable to process withdrawals. We strongly advise against depositing.
Fellow exchange OKX also said that it had been approached by Sam Bankman-Fried but discovered that around $7 billion is needed to cover FTX’s liabilities. Reports from The Wall Street Journal indicate that Bankman-Fried told investors FTX needed $8 billion to cover withdrawals. Lennix Lai, director of financial markets at OKX told Reuters:
Even Elon Musk would not be able to commit to a deal with a $7 billion liability within a few hours of negotiations. That was too much for us. Adding, (It) is a big hole to plug. The dagger will continue to hang over the crypto market, as long as the outlook of FTX’s fate remains unclear.
The drama surrounding FTX has sent the overall market into a free for all. Bitcoin was down 13% trading at $16,277.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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