Binance, the world’s largest cryptocurrency trading platform has backtracked on a previous deal to buy out its struggling competitor FTX.
On Monday night, Sam Bankman-Fried, CEO of FTX reached out to venture capitalists and other investors with the intention to raise funds as the company faced a liquidity crunch. Binance CEO Changpeng “CZ” Zhao had initially agreed to come to FTX’s rescue, but the company quickly changed course, saying that, “the issues are beyond our control or ability to help.”
Zhao explained on Twitter “As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged U.S. agency investigations, we have decided that we will not pursue the potential acquisition of [FTX].”
There has been an unprecedented crunch in the crypto market this week, with customers withdrawing most of their investments from trading platforms.
It’s not clear exactly what’s ailing FTX, but insiders hint at a loan that might have gone bad. Bankman-Fried on Tuesday said that customers had made withdrawal requests of up to $6 billion.
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
FTX trades with a token called FTT. Between Monday and Tuesday, the value of FTT had fallen to $5 and leading the company to lose more than $2 billion in a day. The decline continued on Wednesday, trading at $2.30.
“Every time a major player in an industry fails, retail consumers will suffer. We have seen over the last several years that the crypto ecosystem is becoming more resilient and we believe in time that outliers that misuse user funds will be weeded out by the free market.” Zhao tweeted.