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Tracy Wang
Tracy is a deputy managing editor at CoinDesk. She owns BTC, ETH, MINA, ENS, various stablecoins, and some NFTs.
Nick Baker
Nick Baker is CoinDesk's deputy editor-in-chief. He owns small amounts of BTC and ETH.
Binance agreed to buy rival cryptocurrency exchange FTX, a stunning outcome that followed days of speculation – spurred by a CoinDesk article on Nov. 2 – that FTX and corporate sibling Alameda Research faced a liquidity crisis.
The deal – which, like so much else during almost a week of drama, was revealed in tweets – unites two powerhouses of crypto trading. Financial terms were not disclosed, and the transaction does not affect FTX US and Binance.US, which are two separate companies, said FTX's Sam Bankman-Fried in a tweet.
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
Binance CEO Changpeng "CZ" Zhao also took to Twitter to confirm the deal, saying the two exchanges signed a non-binding letter of intent. Bankman-Fried and Zhao both said that a full due diligence process would be underway in the next couple of days.
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
The deal comes in the wake of a CoinDesk scoop last week that triggered concern that the balance sheet of FTX's corporate sibling, Alameda Research, was too heavily reliant on illiquid tokens including FTX's own FTT. Both FTX and Alameda were founded and are largely owned by Bankman-Fried.
Some observers interpreted the story as meaning Alameda's finances – and therefore maybe FTX's – were not as solid as it had been thought.
Then Binance's CZ amped up the pressure on Sunday by saying he planned to sell his holdings of FTX's FTT token, since the CoinDesk story had shown that much of Alameda's balance sheet was make up of FTT. "Liquidating our FTT is just post-exit risk management, learning from LUNA," he tweeted. "We gave support before, but we won't pretend to make love after divorce. We are not against anyone. But we won't support people who lobby against other industry players behind their backs. Onwards."
CZ's decision pushed down the price of FTT. Alameda's CEO, Caroline Ellison, then tweeted on Sunday that she would buy all of Binance's FTT holdings for $22 each in order minimize the impact on prices.
The situation worsened early Tuesday as FTX customers struggled to withdraw money from FTX. Dozens of customers complained in FTX’s Telegram group and on Twitter about difficulties they experienced. In his tweets announcing the deal with Binance, Bankman-Fried wrote that “FTX.us’s withdrawals are and have been live, is fully backed 1:1, and operating normally."
Investors had taken out a significant amount of assets from FTX, withdrawing bitcoin (BTC) en masse over the last 24 hours, cutting the balance there from about 20,000 bitcoins to just one on Tuesday morning, according to data from Coinglass.
On the news, FTX's FTT token rallied 20% to $17.50 from about $14.50. Binance's BNB token jumped 8% from $326 to $355. The price of bitcoin also pared its losses after the takeover was announced.
UPDATE (Nov. 8, 16:40 UTC): Added additional information throughout.
UPDATE (Nov. 8, 16:59 UTC): Added additional information throughout.
UPDATE (Nov. 8, 17:25 UTC): Updated with info about FTX US and Binance.US in second paragraph.
UPDATE (Nov. 8, 16:59 UTC): Added additional information throughout.
UPDATE (Nov. 8, 17:25 UTC): Updated with info about FTX US and Binance.US in second paragraph.
