The dust-up between Binance and FTX has turned into a bit of a shit show.
In the past days, Binance founder and CEO Chengpeng “CZ” Zhou – announced via Twitter it would be selling its FTT, the native token of FTX received from a past investment in the crypto exchange. Sam Bankman-Fried, FTX founder and CEO, quickly responded to the Tweet, stating that a “competitor” has been spreading false rumors about his company, adding that FTX is “Fine. Assets are fine.”
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
The “recent revelations” most likely alluded to an article in a digital publication that questioned the relationship and assets held between Alameda, a trading firm controlled by Sam Bankman-Fried, and FTX.
Following the very public discussion between the two largest crypto exchanges in the world, markets reacted.
Last night, FTX revealed it was struggling to keep up with withdrawals as investors rushed to pull out their funds.
“we want to thank our team for working tirelessly to process the backlog of withdrawals.”
a: we want to thank our team for working tirelessly to process the backlog of withdrawals. See here for context:
queue is decreasing and getting back to more reasonable levels; nodes and banks catching up
— FTX (@FTX_Official) November 8, 2022
Earlier today, Bankman-Fried Tweeted they have “come to an agreement on a strategic transaction with Binance for FTX.com.”
“Our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in. It may take a bit to settle etc. — we apologize for that.”
1) Hey all: I have a few announcements to make.
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.).
— SBF (@SBF_FTX) November 8, 2022
Bankman-Fried gave a “huge thank you” to CZ and Binance and all of their supporters.
“I know that there have been rumors in media of conflict between our two exchanges, however, Binance has shown time and again that they are committed to a more decentralized global economy while working to improve industry relations with regulators. We are in the best of hands.”
CZ tweeted that they have signed a non-binding agreement to fully acquire FTX.com.
This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire https://t.co/BGtFlCmLXB and help cover the liquidity crunch. We will be conducting a full DD in the coming days.
— CZ 🔶 Binance (@cz_binance) November 8, 2022
Bankman-Fried also clarified that FTX.US and FTX.com are completely separate, and the US instance of the exchange is operating normally.
While this may be viewed as an “all-clear” for now, the erstwhile dispute between the two exchanges reflects poorly on the entire industry. With legislation poised to outline clear rules for digital asset exchanges, FTX’s inability to meet immediate withdrawal requests has raised eyebrows and will certainly provide fodder for crypto industry detractors. As FTX.com does not operate within the US, there should be little risk of some sort of inquiry, but regulators are watching.
Another interesting note is the fact that CZ decided to publicly announce their sale of FTT as opposed to a private sale, helping to cause the rush to the exit. In the end, CZ probably realized the optics were bad – not just for FTX but for Binance as well. At the same time, CZ may have executed a huge crypto coup.