Binance backs out of its deal to acquire FTX after further review

In the biggest reversal since the second half of Super Bowl LI, Binance, the world’s largest crypto exchange, is backing out of a recently agreed-upon deal to acquire FTX, the world’s fourth-largest exchange, after a review of its structure and books. Binance signed a non-binding letter of intent on Tuesday to purchase FTX amidst an ongoing “liquidity crisis.”

🪙 Background: A CoinDesk report, published last Wednesday, found the balance sheet of Alameda Research – a trading firm run by FTX CEO Sam Bankman-Fried – is full of billions of dollars worth of FTT tokens, a coin minted and issued by FTX.

This raised governance issues, since ties between an exchange and a firm providing coins to trade on said exchange creates a conflict of interest. Which in turn led Binance CEO Changpeng Zhao, an early investor in FTX and major holder of FTT tokens, to announce his company would sell its entire FTT stake.

• The announcement triggered a freefall in the token’s price. Just prior to Binance’s announcement on Sunday, one FTT token was worth nearly $25; as of last night, it was under $2.50.

👀 Looking ahead… Bankman-Fried reportedly told investors yesterday that FTX needs $8 billion in emergency funding or else it goes bankrupt. And things don’t get better from there – the SEC has expanded its ongoing investigation into the exchange following the circumstances of the past week.

+In the know: On Tuesday, SBF’s net worth plunged from $15.6 billion to less than $1 billion. That 94% freefall is the worst one-day drop for a billionaire ever tracked by Bloomberg.