Technology

Cryptocurrency platform Binance refuses to buy FTX

Cryptocurrency platform Binance said on Wednesday that it is definitively refusing the transaction. (Photo: Getty Images)

NEW YORK — Cryptocurrency platform Binance said on Wednesday that it will not come to the aid of rival FTX.com after all, raising questions about the latter’s very survival and causing further turmoil in the virtual currency world.

Binance, the number one in its niche, announced on Tuesday that it is considering buying FTX.com to help it out of serious difficulties.

But after conducting an operational audit, “we have decided not to proceed with the acquisition of FTX.com,” the company explained in a tweet.

The company also cites press reports of FTX mismanaging client funds and investigations by US authorities.

“We initially hoped to help FTX clients secure liquidity, but the issues are beyond our control or our ability to help,” Binance said.

The future of FTX.com and its founder Sam Bankman-Freed is still unclear.

The company did not immediately respond to AFP’s request.

But, according to Bloomberg, citing a person familiar with the talks, Sam Bankman-Fried told investors on FTX.com that without an immediate cash influx, the company would have to file for bankruptcy.

The platform needs up to $8 billion and is trying to find it by borrowing, selling shares, or a combination of the two, the entrepreneur added.

Withdrawal is not possible

However, until recently, FTX was still considered a solid player in the sector. Its founder is a figure in the world of cryptocurrencies, and during the last fundraiser in January, FTX was valued at $32 billion.

But in recent days, doubts have arisen about his accounts and his relationship with the Alameda cryptocurrency investment fund, also founded by Sam Bankman-Freed.

Binance boss Changpeng Zhao, after saying FTX had asked him for help due to a “significant liquidity crunch”, on Tuesday signed a letter of intent to buy FTX.com, which does not include US affiliate FTX.us.

However, he also clarified that he would conduct an audit within a few days, which is a common procedure in M&A transactions, before confirming his intention.

“Every time a major player in the industry goes bankrupt, consumers suffer,” Binance noted on Wednesday, suggesting that FTX.com customers may be affected by this situation.

The following message appeared on the platform’s help page: “FTX is currently unable to process withdrawals. We strongly recommend not to make deposits.”

This turbulence is rocking the crypto sector, already scalded in recent months by multiple bankruptcies and investor preference for less risky assets.

Bitcoin fell below $16,000 on Wednesday for the first time in two years.

More regulation

The situation with FTX worsened in a few days.

An article from a dedicated site first mentions Alameda’s massive investment in FTX’s own cryptocurrency, the FTX token (FTT), a reflection of lame accounting. Shortly thereafter, Changpeng Zhao announced that he was selling his FTT reserves held by Binance as part of a capital outflow from FTX.

Sam Bankman-Fried then dismissed criticism of his company’s financial condition as “unfounded rumours” and yet assured on Monday: “FTX is doing well.”

But the clients of the platform took it differently and began to withdraw funds en masse. Sam Bankman-Freed then reached out to his rival to try and salvage the furniture.

A surprising request from this entrepreneur, who until recently was compared to a white knight after offering in June to come to the rescue of digital currency companies BlockFi and Voyager Digital.

He was also known for regularly lobbying politicians in Washington to increase regulation of the cryptocurrency industry.

On Wednesday, Binance tweeted that the cryptocurrency ecosystem will “get stronger” as the “regulatory framework develops” and the industry “continues to move towards greater decentralization.”

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