Crypto Corner: Binance buys rival FTX, rescue takeover explained

The crypto kings were warring and the battle ended with Binance, the largest crypto exchange by volume,agreeing to buyout its biggest rival FTX. But this crypto takeover had many twists and turns with many pointing to Binance for being the reason its rival was forced into a liquidity crisis.

Crypto exchange FTX backed by billionaire Sam Bankman-Fried also known by his initials SBF, was valued at a whopping $32 billion earlier this year. SBF’s net worth was estimated at $17 billion mostly due to his stake in the company. So where did the fortunes turn?

Memes and rumours flooded social media over the weekend that FTX, the world’s second largest crypto exchange was at the brink of insolvency after a leaked balance sheet of sister concern Alameda showed huge holdings of its own crypto FTT and large leverage levels.

To add fuel to the fire, rival crypto giant Binance chief Changpeng Zhao (who was one of FTT’s initial investors, incidentally) tweeted that Binance would begin liquidating all of its FTT “due to recent revelations.”

This led to panic among investors and finally FTX founder and CEO SBF took to the microblogging site and stated “A competitor is trying to go after us with false rumours. FTX is fine. Assets are fine.”

But clearly it was not all fine as within 48 hours, crippled under a crypto and cash crunch SBF not only admitted to the crisis but thanked those he indicated caused it just a few day ago. “A huge thank you to CZ, Binance, and all of our supporters,” said Bankman-Fried, CEO of FTX.com, on Twitter. “Our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in.”

Binance Boss Zhao confirming the deal stated on Twitter “To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com and help cover the liquidity crunch,”

Crypto exchanges are facing not just a funding winter but also severe regulatory crackdowns worldwide. While Sam Bankman-Fried was summoned to testify before the US Congress, Binance which operates without a headquarters after moving out of china is now facing regulatory hurdles in over seven countries worldwide.