Binance walks away from the bailout deal with FTX

Binance, the largest cryptocurrency exchange in the world, has abandoned a plan to save FTX. According to Binance, “We have concluded that we will not pursue the potential acquisition of FTX as a consequence of corporate due diligence, as well as the newest news stories alleging mismanaged client cash and purported US agency investigations.”

A surge in withdrawals that resulted in a “liquidity constraint” has put FTX in peril. Concerns over FTX’s financial viability are said to have led to withdrawals of $6 billion (£5.2 billion) in three days.

According to the news agency Reuters, the US Securities and Exchange Commission (SEC) is looking into how FTX handled customer funds and its crypto-lending activities on Wednesday.

The markets regulator was looking into whether customer trading had taken place and whether the platform had complied with securities rules regarding the segregation of customer assets.

Binance stated in a tweet that the issues facing FTX were “beyond our control or ability to help”.

“Retail customers will suffer every time a key company in an industry falters. Over the past few years, we have observed that the cryptocurrency ecosystem is strengthening, and we are confident that in due course, the free market will eliminate outliers who misappropriate user cash.”

The exchange stated that “the ecosystem will get stronger as regulatory frameworks are implemented, and the industry continues to advance toward greater decentralisation.”

FTX’s pioneer Sam Bankman-Seared and Binance’s CEO Changpeng “CZ” Zhao are two of the most influential individuals in the crypto market and high-profile rivals.

FTX has announced on its website read: “FTX is not currently processing withdrawals. Depositing is strictly discouraged.”

Mr. Zhao, who had tweeted on Sunday that Binance will sell its shares of FTX’s digital token, known as FTT, partly contributed to the anxiety on FTX. The token’s value has dropped by roughly 90% this week.

Binance intervened on Tuesday, stating that it has signed a letter of intent to buy FTX’s non-US half. The fact that it has “the discretion to withdraw from the arrangement at any time” was nevertheless made clear.

On Wednesday, Mr Zhao tweeted: “Sad day. Tried, but [crying emoji].”