Binance is set to buy rival cryptocurrency exchange FTX after a liquidity crisis at the company led by billionaire Sam Bankman-Fried left it facing surging withdrawals and financial difficulties.
“This afternoon, FTX asked for our help,” tweeted Binance chief executive Changpeng “CZ” Zhao. “There is a significant liquidity crunch. To protect users, we signed a non-binding [letter of intent], intending to fully acquire FTX.com.” Zhao added that “Binance has the discretion to pull out from the deal at any time”.
The announcement marks the culmination of an explosive spat between Bankman-Fried and Zhao — two of the most powerful figures in the crypto industry — and the combination of two of the world’s biggest crypto exchanges.
FTX’s troubles peaked over the weekend, when Binance said it intended to offload its holdings of FTX’s token FTT, citing concerns over the exchange’s financial stability and sending the token plunging in price.
Bankman-Fried responded on November 7 by saying a “competitor is trying to go after us with false rumours”. He added he would “love it” if he could work with Zhao “together for the ecosystem”.
The FTX chief also tried to calm markets by saying: “FTX is fine. Assets are fine.”
But on Tuesday, he tweeted: “We have come to an agreement on a strategic transaction with Binance.” He added: “CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world.”
If completed, this deal will leave Binance as the pre-eminent platform in this industry. “This elevates Changpeng Zhao as the most powerful player in crypto”, said Ilan Solot, co-head of digital assets at Marex Solutions. “Zhao’s view of the world will matter a lot more, in terms of how he wants to interact with regulators and policymakers, the weight of his views will be much more powerful.”
FTX confirmed the deal. The two companies did not immediately disclose the terms.
The crypto industry has struggled over the past year, particularly since the failure of the terra and luna tokens in May. The price of flagship tokens bitcoin and ether plunged and several big companies have collapsed, including lender Celsius Network and hedge fund Three Arrows Capital.
Bankman-Fried has long been viewed as a relatively stable figure in the often shaky world of crypto. In 2021, FTX signed a 19-year deal to rename the Miami Heat Arena as the FTX Arena. His exchange has also turned the heads of blue-chip investors including Japan’s SoftBank and Canada’s Ontario Teachers’ Pension Plan, who both participated in a $400mn investment round for FTX in January this year.
In the wake of this year’s crypto market collapse, Bankman-Fried earned a reputation as an industry saviour after bolstering failing companies. In June, the FTX chief announced a $250mn loan to ailing crypto lender BlockFi. The loan followed further assistance given to crypto broker Voyager Digital, which was rescued by an FTX loan that totalled about $485mn in cash and bitcoin.
In 2021, Bankman-Fried said that buying Goldman Sachs was “not out of the question at all”.