In December 2019, Binance announced a strategic partnership with FTX, allegedly acquired 20% in FTX, and took a long-term position in the FTX token, FTT. The initial investment allegedly was in the range of “tens of millions” at a valuation of $1.2 billion. In July 2022 Binance exited and received $2.1 billion. A huge profit for Binance. The break was reportedly over regulatory issues. Sam Bankman-Fried (SBF) accused Changpeng Zhao (CZ) of causing him problems with regulators.
The FTX-Binance Situation
On Sunday, 6 November 2022, CZ tweeted that Binance would “liquidate” its holding of FTT tokens. Its position was thought to be around 5% of the total, worth around $580 million before the currency crashed:
After the CZ Tweet On Sunday, it was practically over for FTX. On Monday, November 7, 2022, it was obvious that FTX had lethal liquidity problems. Initially CZ still announced a possible bail-out via Twitter, but withdrew it on Wednesday. Then on Friday FTX filed Chapter 11 Bankruptcy deposition.
People like Canadian celebrety entrepreneur and paid FTX spokesman Kevin O’Leary, claimed that the roots of FTX collapse laid in the Binance buyout. O’Leary accused Binance in a hearing before the U.S. Congress of intentionally causing FTX‘s bankruptcy in order to get rid of its main competitor and establish a monopoly. O’Leary was paid nearly $15 million for his service as a spokesperson for FTX.
Dispair And Disappointment
FTX was the new great hope for very many inside and outside the crypto scene. As an answer of the Americans to Binance, which was assigned to China because of the origin of the founder CZ. SBF spent hundreds of millions to make FTX a household name via celebrities, politicians, sports sponsorships and media. Quite successful. That this was paid for with FTX customers’ embezzled funds was not known (or did not want to know) at the time.
For U.S. lawmakers and regulators, FTX was also the great hope for a new regulated crypto era dominated by the U.S. Therefore, many well-known U.S. VCs such as BlackRock or Sequoia Capital joined as investors. SBF and FTX could have become one of them.
The disappointment of this hope, which is also seen as a victory for Binance, is certainly the reason for the war against Binance, along with the despair of FTX customers over their total loss.
The Binance War Fronts
Whatever the reality may have been between CZ and SBF or Binance and FTX. However, through the present indictment by the U.S. prosecutors and the fraud charges by the U.S. regulators SEC and CFTC, it is also clear that customer funds were embezzled at FTX and this was the reason for the collapse. The SEC alleges in its fraud complaint that SBF systematically created this misuse through manipulated software. We won’t know that legally for a few years.
The attacks against Binance are now happening via two directions. On the one hand, U.S. authorities are investigating allegations of money laundering and violations of U.S. financial laws. On the other hand, it is claimed, especially on Twitter, that Binance is insolvent and, like FTX, does not have sufficient reserves to pay out its customers’ balances.
On Twitter, some crypto activists like Dirty Bubble Media (@MikeBurgersburg), Bitfinexed (@Bitfinexed) or Paolo the Parrot (@PaoloTheParrot) are the most aggressive attackers and are making massive noise. They are urging Binance customers to withdraw their funds immediately because Binance would soon be bankrupt.
We will see over the next few weeks and months how Binance does in this war or if it goes down like FTX. The latter does not seem likely at the moment.
Share Information
If you have any information about FTX or Binance, please let us know via whistleblower system, Whistle42.
