The world’s largest cryptocurrency exchange Binance announced on Wednesday it has pulled out from its agreement to acquire rival exchange FTX citing due diligence and “news reports regarding mishandled customer funds.”
Recall that on Tuesday, Changpeng Zhao (CZ), CEO of Binance announced that the company is planning to acquire FTX to help cover the latter’s liquidity crunches. At the time, the CEO revealed that Binance had signed a non-binding letter of intent (LOI) on the possible acquisition.
FTX CEO Sam Bankman-Fried (SBF) also confirmed the announcement, saying that Binance’s intended acquisition will help clear out “liquidity crunches,” and that all assets will be covered 1:1.
However, CZ noted in his tweet that the deal was only non-binding and that Binance had the “discretion to pull out” of it at any time.” He also noted that Binance will be conducting due diligence in the coming days.
Binance Backs Out of FTX Bailout
In a latest update, Binance noted that “as a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations,” it will no longer pursue the acquisition of FTX.
Binance stated that initially, their intention is to help FTX solve its liquidity crisis but the issue is beyond their control or ability to help.
“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,” Binance said.
Meanwhile, it appears Binance is not the only industry firm to back out of the FTX bailout. According to reports, FTX has also been turned down by other prominent exchanges including Coinbase and OKX.
Price Reaction
The latest news severely impacted the crypto market, with Bitcoin (BTC) and Ethereum (ETH) dropping by 16% and 24% respectively. BTC was trading at $16,550 while ETH was at $1,200 at the time of writing.
FTT, the native token of FTX, is also severely impacted. The token is currently down by almost 80% on the day and was trading at $2.90 at press time after dumping to as low as $1.58
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Source: https://coinfomania.com/binance-backs-out-of-ftx-deal-following-due-diligence/