On November 6, 2022, FTT Tokens owned by FTX went into a downward spiral, in the process also pulling down the crypto market, following announcements by Binance CEO Changpeng Zhao. He had tweeted of liquidating FTT Tokens on the back of a Coindesk report, which had mentioned of irregularities in FTX’s balance sheet.
Two days after Zhao announced the sale of Binance’s entire portfolio of FTT tokens, the price fell over 70 per cent in the last 24 hours. Later, on November 8, 2022, Zhao mentioned that Binance has now signed a non-binding letter of intent and intends to fully buy FTX.
“This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire http://FTX.com and help cover the liquidity crunch. We will be conducting a full DD in the coming days,” Zhao tweeted.
FTX founder and CEO Samuel Bankman-Fried (SBF) said in a series of tweets: “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. It may take a bit to settle etc. -- we apologize for that.”
Bankman-Fried, however, assured that customers are protected.
Notably, news of the development has impacted the crypto market harshly. Bitcoin fell over 7 per cent, while Ethereum was down over 12 per cent in the last 24 hours. The global crypto market plunged over 7 per cent and again went down below $1 trillion.
The Trigger: What Happened In The Past Few Days?
Binance CEO wrote in a Tweet on November 6: “As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion equivalent in cash (BUSD and FTT). Due to recent revelations that have come to light, we have decided to liquidate any remaining FTT on our books.”
This occurred after a recent Coindesk report, which indicated that Alameda, FTX’s trading division, had assets worth $14.6 billion. It, however, turned out that FTX’s FTT tokens were the majority of the assets listed on the balance sheet.
However, leading cryptocurrency exchange Coinbase has confirmed that due to a partial outage on FTX, it only had deposits totalling $15 million available to support business operations and client trades, according to various media reports.
“We have very little exposure to FTX and we have no exposure to its token, FTT. We have no exposure to Alameda Research, and we have no loans to FTX,” Coinbase said in a blog post late on Tuesday.
Reacting to this incident, Johnny Lyu, the CEO of Kucoin, a global crypto exchange tweeted: “I’d like to give my sympathy for anyone who has been hurt by the current FTX situation. Hopefully, everything can be resolved quickly and the industry can get back on track.
The Backstory
Binance invested in FTX in early 2019 when it was a much smaller exchange. Later, in July of that year, it sold its stake. By then, FTX had grown into a significant contender to Binance, the market leader in the cryptocurrency space with more than 120 million users.
Following a Coindesk investigation on a stolen balance sheet from Bankman-Fried’s trading company, Alameda Research, which has ties to FTX, tensions between Zhao and Bankman-Fried have recently erupted, with a public argument taking place on Twitter.
