World’s Largest Cryptocurrency exchange platform Binance recently disclosed that it has opted out of acquiring its formidable rival FTX, due to issues beyond its control.
This is coming two days after Binance signed a letter of intent to acquire the crypto exchange platform with the intention to help cover the firm’s liquidity crunch, amongst other reasons.
Binance disclosed that it backed out of the deal after it reviewed the company’s finances, structure, and books, noting that the firm is currently under investigations by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) which has deterred them from proceeding with the deal.
Binance said in a statement made on Twitter, “Our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help.
“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].
“Every time a major player in an industry fails, retail consumers will suffer. We have seen over the last several years that the crypto ecosystem is becoming more resilient and we believe in time that outliers that misuse user funds will be weeded out by the free market.”
According to reports, Binance is the first investor that backed FTX, but as the latter grew in popularity, their relationship became shaky.
The two executives have on several occasions thrown tantrums at each other, which saw the relationship hit an all-time low earlier this month after Binance founder Zhao disclosed that his company was selling its holdings of FTT, the native token of FTX exchange, that it had received as part of an exit from the firm last year.
On the other hand, the CEO of FTX Bankman-Fried has told investors that the company is facing a shortfall of up to $8 billion (€8 billion) from withdrawal requests and needs emergency funding.
The company needs about $4 billion to remain solvent and is attempting to raise rescue financing in the form of debt, equity, or a combination of the two, according to reports.
Due to Binance’s decision to back out of the deal, FTX Trading is reportedly experiencing a liquidity crisis. Cryptocurrencies across the board are taking a massive hit with Bitcoin reaching a yearly low. Bitcoin plunged below the $16,000 mark on Thursday with other altcoins following suit.
Following this crisis rocking FTX, its rivals are also benefiting from it. Robinhood Markets Inc. has seen its biggest crypto inflows ever in the last two days, which was disclosed by the company’s Chief Executive Officer Vlad Tenev. Also, Binance and Coinbase Global Inc. have seen large inflows.