Published , by Ozzie Mejia
Published , by Ozzie Mejia
A day after announcing that it would acquire cryptocurrency exchange company FTX, crypto giant Binance has now backed out of the proposed deal. Following an evaluation of FTX's financial troubles, Binance has determined that an acquisition is not in its best interests, leaving FTX in a heap of trouble and the volatile cryptocurrency exchange on the brink of collapse.
The following statement was posted to the Binance Twitter account (compiled by CNBC):
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.com.
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.
FTX's issues stemmed from its finances being heaavily tied to FTT, the token owned and distrbuted by the company itself. Once FTT was sold off en masse, including by Binance CEO Changpeng Zhao (a.k.a. CZ), its value dropped to the point of insolvencey. Binance later agreed to buy FTX's non-U.S. businesses for an undisclosed amount. The deal would have essentially saved FTX and covered its liquidity crunch. Now that this deal has fallen through, the news appears dire for FTX and the effect on cryptocurrency exchanges as a whole could be devastating.
What this ultimately means remains to be seen. Binance was essentially one of the last FTX lifelines and the effect on cryptocurrency could be felt by every crypto investor out there. We'll watch this story closely as it develops.