To help rival cryptocurrency exchange FTX out of a liquidity crunch, Binance, the largest cryptocurrency company in the world, has agreed to purchase it for an undisclosed sum.
Binance CEO Changbig Zhao tweeted Tuesday that there is a "severe liquidity crunch" that has hit the FTX exchange, and that after the latter requested Binance's help, the company signed a "non-binding agreement" with the intent to "completely acquire http://FTX.com". and help cover the liquidity crisis.
Gao added that Binance, which was initially based in China but now claims to have no official headquarters, will do its best to rescue FTX in the coming days, and the company is free to opt out of the deal at any time.
Sam Bankman-Fried, owner of FTX, confirmed the deal in a tweet.
1) Hey all: I have a few announcements to make.
— SBF (@SBF_FTX) November 8, 2022
Things have come full circle, and https://t.co/DWPOotRHcX’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for https://t.co/DWPOotRHcX (pending DD etc.).
The deal represented the catastrophic downfall of a company that earlier this year was valued by private investors at $32 billion and was hoping to carve out its way to becoming a crypto giant.
Months earlier, Sequoia Capital and BlackRock backed FTX with nearly $25 billion. Forbes estimated Bankman-Fried's net worth at $17 billion, most of which comes from his stake in FTX.
Bankman-Fried told CNBC in September that while FTX is not "immune" from cryptocurrency declines, it was in a better position compared to competitors because it captured most of the market.
Binance and its founder were among the first investors in FTX, and Bankman-Fried said that Binance will be the first and last investor in FTX.com.
This, and the acquisition is believed to affect only the non-US branch of the company: FTX.com. The US subsidiary: FTX.us will remain independent of Binance, noting that FTX is based in the Bahamas, where Bankman-Fried resides.
News of the deal saw the value of FTX’s FTT virtual tokens rise by 26 percent, while the value of Paynas’ BNB tokens increased by 20 percent over the same time period.
Gao said in a tweet that he expects FTT to be "extremely volatile in the coming days as things develop."
Today, Tuesday, FTX suspended withdrawals from its platform, after terrified investors tried to withdraw their money. Investors' confidence was shaken when Zhao tweeted in recent days that the company would sell its FTT holdings.
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 came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 Binance (@cz_binance) November 6, 2022
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