The deal follows Binance founder Changpeng Zhao and FTX founder Sam Bankman-Fried’s months-long social media feud that escalated earlier this week. Zhao (pictured above) said Binance made the decision after the three-year-old FTX exchange sought help from the crypto behemoth. “To protect users, we have signed a non-binding LOI, intending to fully acquire FTX and help cover the liquidity crisis. We will conduct a full DD in the coming days,” he said in a tweet. “Binance has the discretion to withdraw from the agreement at any time,” warned Zhao, better known as CZ. But “the important thing is that customers are protected,” said Bankman-Fried, or as many call him SBF. Binance, the world’s largest crypto exchange, is the first investor to back FTX, but as the newer company grew in popularity, the relationship between the two began to wither. The companies haven’t disclosed the financial terms of the deal, but it’s likely no big / totally terrible for investors in FTX, which was valued at $32 billion in a funding round earlier this year. Closing the deal could attract regulatory scrutiny. The two billionaires have been lobbing nasty comments at each other for several months, but the relationship hit an all-time low earlier this week after Zhao said Binance was selling its holdings in FTT, the native token of the FTX exchange, which had received. as part of an exit from the company last year. Zhao said the firm was liquidating the FTT holdings as “post-exit risk management,” lending some credence to a widespread rumor about Alameda Research’s financial health. Alameda and Bankman-Fried had earlier dismissed such concerns. Bankman-Fried also founded the trading and support trading firm Alameda, which has at least some exposure to FTT tokens. The FTT token fell to $14.32 from $25.47 earlier on Tuesday as investors lost confidence, according to Binance’s trading view. (Hours after the news broke, the token fell to $2.51 before recovering slightly.) In a note to clients earlier Tuesday, research firm Bernstein suggested that FTX should consider terminating Alameda because of the perceived risks. To be clear… Binance CEO raises doubts about the financial soundness of Alameda/FTX, thus causing investor panic around FTX, leading a ton of investors to move their funds out, and then… buy outright company; — Ryan Browne (@Ryan_Browne_) November 8, 2022 “Binance is the immediate trigger, but FTX will have to resolve its relationship with Alameda. FTX cannot continue its existing ownership structure with Alameda. FTX needs to completely curtail itself and possibly shut down its Alameda-backed trading business. If Alameda’s trading affects FTX customer confidence (perception of Alameda’s trading vis-à-vis users on FTX and the state of Alameda’s finances), then there is more downside to Alameda’s operation than otherwise,” one analyst wrote in the note by Bernstein. Bankman-Fried offered a “huge thank you” to Zhao and Binance on Tuesday, adding that the deal was “a user-centric development that benefits the entire industry.” “CZ has done, and will continue to do, an incredible job of building the global crypto ecosystem and creating a freer financial world,” Bankman-Fried said in a tweet. FTX is working to clear pending withdrawals, he said. “This will clear up the liquidity problems. all assets will be covered 1:1. This is one of the main reasons we asked Binance to come in. It may take some time to settle etc. — we apologize for that,” he said. Binance is the world’s most valuable crypto exchange, estimated to be worth over $300 billion. FTX was valued at $32 billion in its most recent funding round (Series C) in January of this year. The firm includes Sequoia, BlackRock, Tiger Global, Paradigm, Thoma Bravo, SoftBank, Ribbit Capital, Insight Partners, Lightspeed Venture Partners, Altimeter Capital, Coinbase Ventures, Sino Global, Bond and Iconiq Growth among its backers. FTX and its US FTX business have raised over $2.2 billion in various funding rounds, according to Web3 Signals, a crypto deal book. Tuesday’s announcement shocked the business world and even the cryptocurrency community, which has grown accustomed to tumultuous developments this year. Bankman-Fried was hailed as a crypto savior earlier this year after buying a string of companies. FTX Ventures, the venture arm of the crypto exchange, is also a major investor in a large number of crypto startups, including Aptos Labs, Messari, Sky Mavis, LayerZero, YugaLabs and 1inch Network, according to Web3 Signal. Bankman-Fried tried to raise additional capital from investors before approaching Binance, according to a source familiar with the matter. Axios suggests many existing investors are surprised by the move. Dozens of companies are suffering from this week’s event. Shares of Bankman-Fried-backed Robinhood fell nearly 20%, while crypto exchange Coinbase was down about 10% on the day at press time. In a statement following the Binance-FTX deal — and the subsequent fall in cryptocurrency prices — Coinbase assured investors that it has no exposure to FTT tokens and “very little” exposure to FTX. “We currently have $15 million worth of deposits in FTX to facilitate business and customer transactions,” Coinbase CFO Alesia Haas wrote in a blog post. “We have no exposure to Alameda Research and no loans to FTX. Second, as a publicly traded company in the US, we have also built our business in a way that allows us to be transparent about our track record, the strength of our balance sheet, and to effectively and prudently manage risk for our clients and ourselves.” . Want to hear from the best and brightest in crypto? Attend TechCrunch Sessions: Crypto on November 17 in Miami. Get your tickets here.
