World's largest crypto platform Binance buys rival FTX Trading
The cryptocurrency exchange Binance said it plans to buy its rival FTX Trading, in what appears to be a bailout of FTX.
The owners of the two exchanges — Samuel Bankman-Fried of FTX and Changpeng Zhao of Binance — announced the deal on Twitter, but did not disclose details. The deal was pending due diligence, Zhao tweeted.
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
"This afternoon, FTX asked for our help. There is a significant liquidity crunch," Zhao said on Twitter. "To protect users, we signed a non-binding (letter of intent), intending to fully acquire FTX and help cover the liquidity crunch."
Bankman-Fried Tuesday thanked Zhao, who often goes by "CZ," and said Binance's takeover will improve the crypto industry.
"This is a user-centric development that benefits the entire industry," Bankman-Fried said in a tweet. "CZ has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world."
Unknown hackers gained access to $570 million worth of cryptocurrency from Binance last month but company officials minimized the losses to under $100 million.
Binance gains dominance
Still, the deal would make Binance an even more dominant player in the cryptocurrency industry. Binance handles 1.4 million transactions per second and moves $2 billion worth of crypto assets per day.
By comparison, FTX was the third largest exchange as of this week. Earlier this month, FTX opened a new headquarters in Chicago. Last year, the company bought the naming rights to the former American Airlines Arena in Florida.
FTX is the latest cryptocurrency company this year to come under financial pressure as crypto assets such as bitcoin and ethereum have collapsed in value. Binance said this weekend it planned to sell a portion of FTX's own cryptocurrency known as FTT on concerns that the company was illiquid.
Much of the concerns about FTX lay in its exposure to FTT. Bankman-Fried's trading company Alameda Research was heavily exposed to FTT tokens, and those tokens were largely not trading as of this weekend. On Tuesday morning, cryptocurrency investors said they were having trouble withdrawing money from FTX as well. The value of FTT plunged overnight only to stabilize after the deal was announced.
Other major cryptocurrencies were higher after the deal was announced as well, with bitcoin rising 5%.
Bankman-Fried, better known by his initials SBF, was considered a savior of the crypto industry earlier this year after pledging to buy certain crypto assets to shore up the balance sheets of other failing crypto companies. That included companies like Voyager Digital, which failed after owning a stake in the failed stable coin Terra.
Bankman-Fried also purchased a stake in the online trading platform Robinhood after that company's shares plunged as revenue dropped and it lost money.