Binance’s affair with FTX was just a one-night stand. After agreeing to take over FTX on Tuesday, Binance said it was walking away from the deal yesterday, leaving its collapsed rival exchange on the brink of extinction.
Facing a shortfall of up to $8 billion, FTX Chief Executive Sam Bankman-Fried (aka “SBF”) reportedly told investors that his firm needed a cash injection or it would go bankrupt.
Quick recap: On Tuesday, SBF tweeted the stunning news that his company was going to be bailed out by rival Binance after FTX suffered mass withdrawals. Why was this so shocking? FTX is a giant in the space and was considered a source of stability amid the chaos of crypto winter. Recently valued at $32 billion, it was reportedly going to be bought for $1.
But even $1 proved too pricey for Binance once it found the 12-foot skeletons in FTX’s closet. The company took a look at FTX’s books yesterday and saw a “financial black hole,” Bloomberg wrote.
Plus, US regulators smelled blood and have started to investigate whether FTX mishandled customer funds. Binance had no interest in taking on that baggage.
This episode is a disaster for crypto
FTX’s meltdown could single-handedly wipe out whatever legitimacy the crypto industry had left. Don’t take it from us—here’s what crypto execs themselves said about it.
- Binance CEO Changpeng “CZ” Zhao said the FTX calamity was not “a win” and had “severely shaken” confidence in crypto.
- “That’s a not a good thing for anybody,” Coinbase’s CEO Brian Armstrong said.
Why? It has to do with regulation. SBF frequently visited Washington, DC, to work with lawmakers on regulating the Wild West of crypto. But with crypto’s most trustworthy diplomat left holding the bag after an epic collapse, regulators who feel duped could try to buckle the industry.
The most humiliation in this entire episode is, of course, reserved for SBF himself. When he was at the top of the crypto world, the 30-year-old billionaire discussed his grand ambition of giving away his fortune to help humanity.
Now, there’s little fortune left. On Tuesday, SBF’s net worth plunged from $15.6 billion to less than $1 billion. That 94% evisceration is the worst one-day wipeout for a billionaire ever tracked by Bloomberg.
We’ll be diving deeper into this story in our Incrypto newsletter later today.