- Binance has signed a non-binding letter of intent to acquire the FTX cryptocurrency exchange
- Due to recent rumors about the potential insolvency of Alameda Research and FTX, users began withdrawing funds from FTX en masse
- This led to a liquidity crunch at FTX, which asked Binance for help
Binance is planning to acquire FTX, CEOs confirm
The FTX / Alameda Research saga has taken another unexpected turn—according to Binance CEO Changpeng “CZ” Zhao and FTX CEO Sam Bankman-Fried, the two companies are now planning for FTX to be acquired by Binance.
Per a tweet from CZ, Binance has signed a non-binding letter of intent to “fully acquire FTX.com” and help FTX cover its liquidity issues.
This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire https://t.co/BGtFlCmLXB and help cover the liquidity crunch. We will be conducting a full DD in the coming days.
— CZ ? Binance (@cz_binance) November 8, 2022
According to CZ, the agreement between the two exchanges is not set in stone and Binance “has the discretion to pull out from the deal at any time”. The Binance CEO also said that he expects the FTT token to be highly volatile while the situation develops.
Bankman-Fried says that the FTX and Binance teams are working on clearing FTX’s withdrawal backlog and clear out any liquidity crunches, covering all client assets on a 1:1 basis. He also called the deal a “user-centric development that benefits the entire industry”, and praised Binance’s contributions to the cryptocurrency industry. According to Bankman-Fried, the FTX.US and Binance.US exchanges are not currently affected by the agreement between Binance and FTX.
1) Hey all: I have a few announcements to make.
Things have come full circle, and https://t.co/DWPOotRHcX’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for https://t.co/DWPOotRHcX (pending DD etc.).
— SBF (@SBF_FTX) November 8, 2022
The situation at FTX got out of hand within just a few days
After rumors about the potential insolvency of FTX and Alameda Research started circulating, FTX users began withdrawing their assets from FTX en masse.
This created a liquidity crunch at the exchange, which is struggling to meet all the withdrawal requests. It appears that the situation got too out of hand for FTX to tackle without outside help. Per a report by The Block, FTX stopped processing withdrawals on the Ethereum blockchain at around 6:37 AM ET today.
In addition to users withdrawing their funds from FTX, the price of FTX’s exchange token FTT also crashed today. The token collapsed through support at $22 and hit a low at $14.97. However, since the announcements from Bankman-Fried and CZ, the FTT price has recovered back above $18.
The plans for Binance to acquire FTX are especially surprising since FTX and Binance appeared to be feuding with each other publicly, albeit mostly in a passive-aggressive manner. On November 6, CZ said that Binance was planning to sell the entirety of its FTT holdings. This added further uncertainty to the FTT markets. Meanwhile, Bankman-Fried accused “a competitor”, presumably Binance, of trying to attack FTX with false rumors.