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Binance, the world’s largest exchange, announced that it will not go ahead with the proposed acquisition of Sam Bankman-Fried’s FTX. Changpeng “CZ” Zhao walked away from the deal yesterday, almost as quickly as it was offered.
The FTX deal collapsing was sensationally announced in a short run of tweeted statements, which read:
“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 FTX.
In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our 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.
As regulatory frameworks are developed, and as the industry continues to evolve toward greater decentralization, the ecosystem will grow stronger.”
The news was met with incredulity and turmoil among investors. FTX, which came under extreme liquidity issues earlier in the week, holds substantial funds belonging to retail investors.
Many think that the initial problems for Binance stem from an article on the Coindesk website, which pointed to worrying links between FTX, its native token FTT, and research and trading firm, Alameda, also owned by FTX boss SBF.
(Beginner's Guide: What Is DeFi? Decentralized Finance Explained)
FTX is facing a US government investigation into its client fund and lending business. The investigation is a joint one by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission. The liquidity crunch at the center of the probe pushed FTX to the brink. The SEC began scrutinizing FTX US months ago.
According to unnamed sources on the inside, American regulators are also looking into the relationship between FTX, its American counterpart FTX US, and SBF’s research and trading house Alameda Research. However, there have been no official comments from the SEC, the CFTC, FTX, and FTX US.
(In case you missed it: SBF Responds To Criticism About Regulation Proposal)
There has been a long-standing suspicion surrounding crypto in the eyes of the SEC. The commission’s chair Gary Gensler has repeatedly commented on risks associated with crypto exchanges. He believes many platforms violate securities law by dealing in unregistered securities to US citizens, providing improper loans, and even front-running their clients’ trades. In addition, he raises concerns that platforms are engaging in conflicting lines of business. His long-term goal has been to split up the different functions of crypto exchanges.
Two of SBF’s companies, FTX Ventures, and Alameda, went dark as news of the collapsed deal spread. As of 7:00 pm UTC on Wednesday, 9th November, the sites were not accessible. Staff was not notified, leaving FTX Ventures executive Amy Wu to state that she is “finding out along with everyone else on Twitter.”
The two associated companies of FTX.com and FTX.US remain online. However, it appears that customer withdrawals have been suspended, and customers advised to cease depositing funds.
Unsurprisingly this shambles had led to a severe collapse in the price of FTX tokens. At the time of writing, they are trading at $2.28, an alarming drop of 51%.
In addition, news of the proposed acquisition collapse sent the markets into chaos. Bitcoin, Ethereum, Solana, and most other cryptocurrencies saw huge downward swings. All three of the big hitters dropped at least 20%. At the time of writing, Solana is down 29% at around $15. Bitcoin is trading at circa $16,700, which, although it has rallied slightly today, is still 29% down over the week. Ethereum sits at $1,190, 8% up on the day but still 20% down on the week.
It’s fair to say that there are tumultuous times ahead in the coming few days.
(You may also like: The Ultimate Beginner’s Guide To Ethereum)
Almost $1 billion of Solana is set to be unlocked at 8:30 UTC today, Thursday, November 10th. The amount represents 13% of Solana’s supply. This is the second-largest volume of tokens Solana has unlocked in any epoch. It is happening at a time of considerable turmoil in the crypto market. (Read more)
According to the latest Bloomberg Billionaire list, SBF lost an estimated $14.6 billion. This massive amount represents 94% of his total wealth. He still has around $991 million, so he’s not starving yet. However, the enormous tumult surrounding his companies this week has had a devastating effect on his assets. SBF made the promise earlier this year to donate most of his fortune, which was then valued at $21 billion, to charity. (Read more)
The Musk Twitter era continues on its rocky start. Hundreds of thousands of users, including many high-profile people, vowed to leave the site. In the wake of this, Musk applied for Twitter to become a money service business. They filed an application to conduct money services within the US and several of the country’s international territories. (Read more)
The US has moved to redesignate Tornado Cash as a sanctioned business amid allegations that North Korea used the crypto company to fund its (WMD) weapons program. In a treasury press release, it stated,
"This action is part of the United States' ongoing efforts to limit the DPRK's ability to advance its unlawful weapons of mass destruction (WMD) and ballistic missile programs that threaten regional stability and follows numerous recent DPRK ballistic missile launches, which are in clear violation of multiple United Nations (UN) Security Council resolutions."
The Treasury Department's Office of Foreign Asset Control (OFAC) first designated Tornado Cash in August 2022. (Read more)
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The much talked about Polygon MATIC cryptocurrency platform is directed and discussed to provide a thorough guide to this relatively new kid on the block
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