FTX to be acquired by Binance following ‘liquidity crunch’

There was a surprising twist Tuesday in the days-long public squabble between Binance and FTX that contributed to several digital tokens taking a tumble, as Binance announced that it had signed a letter of intent to acquire its most formidable rival FTX. FTX founder Sam Bankman-Fried and Binance founder Changpeng Zhao had been in a social media spat for months, which escalated earlier this week, leading to the deal.

Zhao affirmed that Binance reached the decision following a request for help from the exchange FTX. “To protect users, we signed a non-binding LOI, intending to fully acquire FTX and help cover the liquidity crunch. We will be conducting a full DD in the coming days”.

It is clear from the emergency deal-making that the crypto industry has been suffering from persistent instability over the past few months, which was revealed by a $2 trillion crash this spring, which wiped out the savings of the vast majority of amateur investors. As a result of that downturn, some of crypto’s largest companies have had to deal with destabilization, with FTX being the biggest casualty by far. Until its finances started unraveling virtually overnight, it was widely thought to have been among the world’s most nimble and best-run crypto companies.

A rumor had been circulating around that FTX’s financial foundations were shaky, leading to reports that the company was in trouble. A large number of its customers, who use FTX to purchase and store their digital currencies, rushed to withdraw their money from the exchange. Over the course of the previous 24 hours, more than half a billion dollars had been expelled from the platform according to the crypto research firm Nansen on Monday night, as reported by The New York Times.

The Binance exchange is estimated to be worth over $300 billion, making it one of the most valuable crypto exchanges in the world. The most recent funding round for FTX (a Series C round) was held in January of this year and the company was valued at $32 billion. Sequoia, BlackRock, Tiger Global, Paradigm, Thoma Bravo, SoftBank, Ribbit Capital, Insight Partners, Lightspeed Venture Partners, Altimeter Capital, Coinbase Ventures, Sino Global, Bond and Iconiq Growth are some of the companies that have backed FTX.

Sam Bankman-Fried (CEO of FTX), based in the Bahamas, said on Twitter that he was grateful to Mr. Zhao for being a part of the deal, which, in his words, will help FTX to “clear out liquidity crunches”. Additionally, FTX.US which is based in the United States, and in his tweets, Bankman-Fried mentioned that the company was meeting withdrawals, and that it would not be included in Binance’s deal.