Binance CEO Changpeng Zhao tweeted the news, “there is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com and help cover the liquidity crunch.”
He added the company will do its due diligence in the coming days.
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Binance is the largest crypto exchange by volume, while FTX is the fourth. The deal does not involve FTX’s U.S. business, FTX US.
The deal comes after a few days of investors’ concerns centering on FTX’s native token, FTT.
During the weekend, Zhao tweeted Binance would sell its holdings of FTT.
“Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books,” he said.
On Monday, FTT witnessed a major sell-off amid concerns about the solvency of FTX and Bankman-Fried’s other trading firm Alameda Research, amidst reports Alameda had a large portion of FTT on its balance sheet. Alameda has disputed that claim.
FTT prices have not responded well to the controversy, dropping about 65% in the last seven days.
Concerns seemed to be heightened Monday and Tuesday when users reported slow withdrawals on FTX’s platform. Bankman-Fried has since said the company is working to clean out a backlog.
The deal is stunning when considering earlier this year FTX raised $400 million at a $32 billion valuation. According to Crunchabse, FTX has raised nearly $2 billion. Investors in FTX include the SoftBank Vision Fund, Singapore’s Temasek Holdings and Sequoia Capital.
Zhao and Binance also were early investors in FTX.
Forbes has estimated Bankman-Fried’s net worth to be $17 billion.
Illustration: Dom Guzman
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