Cryptocurrency exchange Binance will acquire rival exchange FTX in a surprise twist after FTX temporarily halted user withdrawals Tuesday.
Those “recent revelations” stem from the balance sheet of Alameda Research, FTX’s sister company, which, according to a Nov. 2 CoinDesk report, has $14.6 billion in assets and $8 billion in liabilities, with most of its net equity in FTX’s FTT token.
CoinDesk’s report and Zhao’s decision to offload his stake in FTT tripped a wave of withdrawals from FTX that amounted to $6 billion in 72 hours, according to an internal FTX memo seen by Reuters.
Bankman-Fried said Monday on Twitter that FTX and its assets were “fine” and that Zhao was going after it with “false rumors.” That tweet had been taken down as of Tuesday.
However, reports of FTX’s withdrawal halt surfaced 23 hours later, and Binance’s intended purchase of the exchange was announced just a few hours after that.
“FTX asked for our help. There is a significant liquidity crunch,” Zhao tweeted. “To protect users, we signed a non-binding [letter of intent], intending to fully acquire http://FTX.com and help cover the liquidity crunch. We will be conducting a full [due diligence] in the coming days.”
Bankman-Fried tweeted that both teams are working on clearing out the withdrawal backlog and that all assets will be covered 1:1.
“This is one of the main reasons we’ve asked Binance to come in. It may take a bit to settle etc. — we apologize for that,” he tweeted. “But the important thing is that customers are protected.”
The promise of protection brought a sigh of relief to the crypto world, which, since May, has been rife with customer-protection issues. The collapse of the Terra Luna stablecoin in May caused a bank run that wiped out $60 billion of assets, and crypto firms Voyager Digital and Celsius both filed for bankruptcy in July.
In a thank-you tweet to Zhao, Bankman-Fried called the deal “a user-centric development that benefits the entire industry.”
“CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world,” Bankman-Fried tweeted. “I know that there have been rumors in 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. We are in the best of hands.”
News of the deal wasn't enough to calm the waters in the cryptoverse. FTT tumbled from $22.32 at the start of the day to $2.56 by 2:30 p.m. Eastern time, and Bitcoin, the oldest and most powerful cryptocurrency, hit a 52-week low of $17,484.20.
Both coins showed signs of rebound by 3:50 p.m., with FTT valued at $4.81 and Bitcoin valued at $18,435.22.