FTX’s Binance rescue deal falls apart in less than 48 hours

On Nov. 9, less than 48 hours after Binance CEO Changpeng “CZ” Zhao announced his intention to bail out troubled competitor FTX, Binance stated that it would not be pursuing the deal.

A series of tweets by Binance confirmed that it would “not pursue the potential acquisition” of crypto exchange FTX citing “reports regarding mishandled customer funds and alleged US agency investigations.”

The agency investigations may be in reference to a Nov. 9 Bloomberg report which suggests that the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are investigating whether the FTX exchange may have mishandled funds, as well as its relation to FTX US and Alameda Research.

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

In its reasoning for not pursuing the purchase, Binance explained initially it wanted to support the ailing crypto exchange by providing its customers with liquidity but said the issues were “beyond our control or ability to help.”

Binance also said that retail consumers will suffer with every instance of a major industry player failing but said the ecosystem is “becoming more resilient” and believes industry “outliers that misuse user funds will be weeded out by the free market.”

Sad day. Tried, but
— CZ Binance (@cz_binance) November 9, 2022

Shortly following the announcement by Binance, FTX’s website went offline returning around two hours later with a banner that warned the exchange is unable to process withdrawals and strongly advised against depositing funds.

Reports also surfaced that FTX CEO Sam Bankman-Fried called investors saying the exchange needed $8 billion in emergency funding to help cover the withdrawal requests and looked to raise $3 billion to $4 billion.

Update (Nov. 10, 5:00 AM UTC): The article has been updated to include the recent developments of FTX halting withdrawals and Sam Bankman-Fried reportedly seeking emergency funding from investors along with background Binance’s possible reference to a Bloomberg report.