Binance backs out of FTX deal hours after takeover bid
Binance has called off the FTX rescue operation a day after announcing a non-binding deal to buy its rival exchange. The world's largest exchange reached the decision after going through FTX's books as part of due diligence. The abandoned takeover attempt caps off what has been a tumultuous week for FTX, which was once the third-largest crypto exchange in the world.
Why does this story matter?
- When Binance agreed to acquire FTX following the latter's liquidity crisis, it gave hope to the struggling crypto market.
- However, the exchange's decision to pull out of the deal has created a sense of panic in everyone associated with the industry.
- FTX was once seen as a ray of hope in the struggling industry. Its fall is not a good sign for the future.
Binance pulled out after corporate due diligence
Binance has announced that it is calling off the potential acquisition of rival exchange FTX. The company said that it reached the decision after corporate due diligence. It alluded to reports about FTX mishandling customer funds and the investigation of the US Securities and Exchange Commission into the matter. The exchange tweeted that FTX's issues are beyond its ability to help.
Likelihood of the deal moving forward was less from beginning
Binance's deal to acquire FTX has been filled with uncertainty since it was announced. Mainly because of the way Changpeng Zhao, the founder of Binance, made it clear that the deal is "non-binding." He had also mentioned that Binance has the discretion to pull out of the deal at any time. Therefore, it is not really surprising that the exchange decided to back out.
Check out Binance's latest announcement about FTX acquisition
As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of https://t.co/FQ3MIG381f.— Binance (@binance) November 9, 2022
Zhao is sad about pulling out of the deal
Sad day. Tried, but 😭— CZ 🔶 Binance (@cz_binance) November 9, 2022
Binance didn't express any reservations about the deal earlier: Bankman-Fried
After the collapse of the deal with Binance, FTX chairman Sam Bankman-Fried wrote in an internal Slack channel he came to know about Binance's decision only after the statement from the company. He added that Binance did not express any reservations about the deal. He apologized for the current state of affairs and said that he is working on the next steps.