Crypto giant Binance said on November 8 that it has signed a non-binding letter of intent to fully acquire its rival FTX, helping to cover a liquidity crunch. Binance was the first investor to back FTX.
However, the deal between these two leading crypto exchanges has drawn concerns of antitrust retaliation such as by the Sherman Act in the US and elsewhere, CoinDesk‘s report showed. FTX was valued at $32 billion in a financing round earlier this year, while Binance is the world’s largest crypto exchange by volume.
“Things have come full circle, and FTX.com’s first, and last, investors are the same: we have come to an agreement on a strategic transaction with Binance for FTX.com (pending DD etc.),” Sam Bankman-Fried, the CEO of FTX who is often called “SBF,” tweeted on November 8.
This transaction will not affect FTX US and Binance.US, which are two separate companies, said Bankman-Fried. Binance CEO Changpeng “CZ” Zhao also took to Twitter to confirm the deal, saying the two exchanges signed a non-binding letter of intent to help cover a liquidity crunch.
The deal comes after a CoinDesk report last week that triggered concern that the balance sheet of FTX’s corporate sibling, Alameda Research, was too heavily reliant on illiquid tokens including FTX’s own FTT. Alameda has disputed that claim, saying that FTT represents only part of its total balance sheet. Both FTX and Alameda were founded and are largely owned by Bankman-Fried.
Tuesday’s announcement shocked the business world and the crypto community. FTT, which was traded at around $22 on Monday, sank below $5 on Tuesday afternoon. The selloff wiped out more than $2 billion in value within the span of 24 hours.
Before this deal, Binance’s CZ has revealed his plan to sell his holdings of FTX’s FTT token, which will take a few months. As part of Binance’s exit from FTX equity last year, the crypto exchange received roughly $2.1 billion worth of FTT and BUSD, its own stablecoin, and decided to liquidate any remaining FTT on its books.
Star Xu, founder of OKX, a Seychelles-based cryptocurrency exchange argued CZ should stop selling FTT and make a new deal with SBF by stating that decentralization is the basis of the crypto industry. “If unfortunately FTX becomes another LUNA, nobody in the industry can benefit from the accident, including Binance.” In another tweet, Xu wrote, “If Binance gets 100% market share and BNB market cap exceeds BTC, the industry will get failed and CZ will lose everything,” said Xu.