The largest cryptocurrency exchange in the world, Binance, has abandoned a plan to help its smaller rival FTX. According to Binance, the purchase will not be pursued after due diligence. It claimed that information about “mishandled customer funds and alleged US agency investigations” had influenced its choice. A “liquidity crunch” brought on by a spike in withdrawals left FTX in trouble. On Tuesday, Binance intervened, announcing that it has signed a letter of intent to purchase FTX’s non-US entity.
The markets regulator was investigating whether the platform had complied with securities rules regarding the segregation of customer assets and whether it had engaged in customer trading. The problems FTX was having, according to Binance, were “beyond our control or ability to help,” the company claimed in a statement shared on Twitter.
Withdrawals of $6 billion (£5.2 billion) were reportedly sparked in just three days by worries about FTX’s financial stability. The US Securities and Exchange Commission (SEC) was reportedly looking into how FTX handled customer funds and its crypto-lending activities on Wednesday, according to the Reuters news agency.
Sam Bankman-Fried, the creator of FTX, and Changpeng “CZ” Zhao, the CEO of Binance, are two of the most influential figures in the cryptocurrency industry and prominent rivals. Mr Zhao, who had tweeted on Sunday that Binance will sell its holdings of FTX’s digital token, known as FTT, contributed to the pressure on FTX.
Over the course of the following week, the token then lost almost 80% of its value. Cryptocurrency After Binance walked out of the transaction, Bitcoin dropped more than 15%, while cryptocurrency exchange Coinbase also dropped by 9.5%. A growing number of bitcoin firms have failed as a result of not having enough cash on hand. As worries about how crypto platforms are trading rise, the SEC and other regulators have been increasing their surveillance of the market, adding to the pressure.
