Binance plans to buy FTX’s non-U.S. operations in latest crypto bailout

WASHINGTON/LONDON, Nov 8 (Reuters) – Crypto giant Binance signed an informal deal to buy FTX’s non-US unit, FTX.com, to help cover a “water crunch” in the cryptocurrency exchange, the company said. said on Tuesday, in a surprising move that raised new concerns about the risks investors face in the volatile crypto market.

Binance CEO Changpeng Zhao said in a tweet that FTX, run by billionaire Sam Bankman-Fried, asked for our help after “extreme frustration.”

He said that Binance, the world’s largest crypto exchange, will conduct due diligence in the coming days as the next step for acquiring FTX.com. The U.S. operations of Binance and FTX are not part of the agreement, Bankman-Fried said in a separate tweet.

“It’s been an open secret for a while now that FTX and Binance are in a race for existence; the only surprise today is that things have escalated so quickly to a similar conclusion,” said Joseph Edwards, investment advisor at Securitize Capital . “The move should provide relief to consumers in the short term, but creates questions in the long term.”

The deal is the latest emergency rescue in the world of cryptocurrencies this year, as investors are pulling out of risky assets amid rising interest rates. The cryptocurrency market is down about two-thirds from its peak to $1.07 billion.

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It also marks a sudden economic turnaround for Bankman-Fried, which positioned itself as the company’s savior by bailing out rivals that ran into trouble earlier in the year.

“The liquidity crisis continues to affect the crypto market,” said Dan Raju, CEO of Tradier, a financial services and brokerage firm. “It’s scary to think that FTX, which is one of the largest crypto exchanges in the world, is suffering from liquidity concerns and Binance, their biggest rival, is coming to their rescue. some couples will be made different.”

FTX has seen about $6 billion of political activity in the 72 hours before Tuesday morning, according to a message sent to Bankman-Fried officials seen by Reuters.

“On an average day, we have tens of millions of dollars of net in/outflows. Things have been average until this weekend, a few days ago,” Bankman-Fried wrote in a message sent to staff on Tuesday morning. “In the last 72 hours, we have received approximately $6b of deposits on FTX.”

The outage at FTX.com is “suspended for good,” he wrote, adding that it will be fixed in the “near future.”

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FTX did not immediately respond to requests for comment about the news to employees.

‘Good reason to be concerned’

The deal comes after the in-house token of crypto exchange FTX collapsed, losing a third of its value and dragging down other important digital assets, amid talk of pressure on FTX’s currency.

Binance, which controls the crypto industry, which has more than 120 million users, is currently being investigated by the United States Department of Justice for violations of financial regulations, Reuters reported last week.

A spokesman for the US Commodity Futures Trading Commission said the agency is investigating the situation.

News of the deal sent the cryptocurrency soaring, but those gains were quickly erased.

The FTX token – which gives investors a discount on FTX trading fees – was last trading at 11.83, down 47%.

Bitcoin , the biggest digital token, was down 6%.

“People have good reason to worry about the security of their digital assets if one of the world’s largest centralized exchanges ends in financial crisis,” said Pascal Gauthier, CEO and president of crypto security company Ledger. “It’s time for the truth, the company considers the importance of holding crypto.”

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Crypto users raised questions on Twitter last week about the FTX token following a report from the CoinDesk website and a press release by Alameda Research, a trading firm founded by Bankman-Fried that has close ties to FTX.

On Sunday, Zhao said his company would liquidate its holdings of FTX tokens due to “recent new revelations.”

Bankman-Fried has said that the change is “good” and concerns are “false rumors.”

In a tweet on Tuesday, he said that his team is working to eliminate political setbacks: “This will eliminate the financial crisis. This is one of the main reasons why we asked Binance to come in.”

“A *big* thank you CZ, Binance,” Bankman-Fried wrote, referring to the challenging boss who goes by his initials.

Reporting by Tom Wilson in London and Hannah Lang in Washington Additional information Tom Westbrook in Singapore, Prentice in Washington and Angus Berwick in New York Editing by Megan Davies, Catherine Evans and Matthew Lewis

Our principles: Thomson Reuters Trust Principles.

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