The crypto industry is witnessing a saga like never seen before. Barely a day after Binance signed a letter of intent to acquire embattled exchange FTX, the company has backed out of the proposed acquisition, leaving FTX to its fate.
Binance announced in a tweet that it has decided not to pursue the potential acquisition of FTX, which appears to be insolvent and unable to redeem customers’ funds in the near term.
Binance pointed to news reports of FTX mishandling customer funds and rumored investigations from U.S. government agencies as the primary reason for pulling out of the proposed deal.
The saga began last week after a news report showing that Alameda Research, a crypto trading firm with close ties to FTX, had considerable debt on its balance sheet and the majority of its equity tied in FTT, a relatively illiquid token– FTT is the native token issued by the FTX exchange.
Following the news report, Binance announced that it was selling all its FTT tokens, dragging the price considerably.
The price slump affected FTX, which reportedly held most of its assets in FTT tokens, and made the exchange unable to redeem withdrawals after users rushed to transfer $6 billion worth of tokens from the platform in 72 hours.
In a shrewd move, Binance swooped in with an offer to acquire its embattled rival. Yet, barely a day later, it backed out of the deal, leaving FTX on the hook to solve its problems. FTX may have to shop itself around again given the situation– the exchange reportedly approached OKX, a rival, for a deal before its agreement with Binance.
With the proposed takeover now called off, it’s unclear how FTX intends to proceed with its operations after failing to fulfill customer withdrawals.
FTX is the fifth-largest crypto exchange globally, with a year-to-date trading volume of over $600 billion, according to CoinGecko. Binance is the largest by far, with nearly $5 trillion in trading volume in the same period.