- Binance has agreed to purchase FTX after days of uncertainty over the financial status of the company.
- The deal is a non-binding one that allows Binance to withdraw from the negotiations at any time.
- FTX has had to endure $6 billion in net withdrawals in the last three days while its FTT token tumbled.
The brewing tension between Binance and FTX might just end up in a marriage, as both firms are in talks for a potential acquisition.
Binance CEO, Changpeng Zhao has announced that his firm is in talks with FTX over a potential acquisition of the firm. The decision to purchase FTX is coming on the heels of a report that poked holes into the balance sheet of FTX and Alameda Research, fueling liquidity problems for the digital exchange.
“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 FTX.com and help cover the liquidity crunch,” tweeted Zhao.
Sam Bankman-Fried, CEO of FTX, confirmed developments noting that “things have come full circle” and that his firm has “come to an agreement on a strategic transaction with Binance.”
The exact figures involved in the transaction were not made public, but analysts expect a full disclosure in the coming days. The non-binding deal gives Binance the right to walk away from the deal if terms cannot be reached between both parties, with Binance said to be carrying out its due diligence.
A few months ago, FTX was valued at an impressive $32 billion and had a streak of bailing out troubled companies by extending credit lines. Things turned around for the worse amid fears that FTX was on the brink of insolvency with a Reuters report noting that FTX may have recorded net withdrawals of $6 billion.
“What could have been just an isolated issue at Alameda became a bank run,” said Jeff Dorman, Chief Investment Officer at Arca. “Everybody started to pull their assets out of FTX and there’s this fear that FTX would be insolvent.”
It’s for the good of the industry
At the start of the week, the industry was rife with speculation that there was a rift between Zhao and Bankman-Fried, especially with the announcement of Binance selling off its FTT tokens and other cryptic tweets.
However, Bankman-Fried has disclosed that there is no beef between the two founders and that they are committed to building a healthy ecosystem.
“I know that there have been rumors in the 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,” said Bankman-Fried. “We are in the best of hands.”
It is important to note that the deal will not affect FTX.US and Binance.US as they are different entities operating independently.