Binance has announced that it will not proceed with its plans to acquire FTX, referencing the outcomes of its due diligence and reports regarding U.S. regulatory investigations into the rival cryptocurrency exchange.
“In the beginning, our hope was to be able to support FTX’s customers by providing liquidity, but the issues are beyond our control or ability to help,” Binance stated in a series of tweets.
According to a tweet from Binance, “As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged U.S. agency investigations, we have decided that we will not pursue the potential acquisition of FTX.”
This reversal occurred just a day after Binance and FTX had reached an agreement for a takeover, which was contingent on a thorough due diligence process.
Since that time, reports have emerged that both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been investigating FTX’s relationship with FTX US and its sister entity, Alameda Research, for several months.
Alameda Research is the crypto trading firm led by FTX founder Sam Bankman-Fried. Recently, a leaked balance sheet indicated that FTX’s native token, FTT, constituted around 25% of Alameda’s assets. This revelation contributed to a liquidity crisis at FTX, prompting Binance to consider liquidating its holdings of the token.
With FTX experiencing a significant increase in withdrawal requests, raising alarms about its financial stability, Bankman-Fried reached out to Binance’s CEO, Changpeng Zhao, to discuss a potential deal. However, shortly into these discussions, Binance discovered a substantial financial shortfall at FTX, with sources suggesting the difference between its liabilities and assets could exceed $6 billion.