Binance CEO Changpeng Zhao has announced plans to acquire FTX with hopes of helping cover the liquidity crunch.
“This afternoon, FTX asked for our help. There is a significant liquidity crunch..”
Following days of circulating rumors about FTX’s liquidity crisis, Binance came in at the last minute to acquire the company and prevent its collapse. FTX’s native token, FTT, has plummeted by 43% over the past few days, putting the entire community under high pressure.
FTX CEO Approaches Binance
On Tuesday, November 8, Sam Bankman-Fried unleashed a Twitter thread announcing the agreement between FTX and Binance based on a signed Letter of Intent (LOI). From the announcement, the two companies have reached a “strategic transaction” understanding that would see Binance clear FTX’s withdrawal backlog.
“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 have asked Binance to come in. It may take a bit to settle etc.”
FTX’s SBF invited Binance to the matter with hopes to “clear out liquidity crunches and cover assets on a 1:1 basis.”
“..To protect users, we signed a non-binding LOI, intending to acquire https://t.co/BGtFlCmLXB and help cover the liquidity crunch fully. We will be conducting a full DD in the coming days.”
FTX CEO Sam Bankman-Fried, also known as “SBF,” has described the move as a “user-centric development that will benefit the entire industry.” He also assured “we are in the best of hands,” thanking FTX supporters, Binance, and especially CZ for his continued efforts to build the global crypto ecosystem and create a more accessible economic world.
SBF also assured that the news did not affect FTX.US and Binance.US. as they are separate companies. On FTX.US, Sam Bankman-Fried said:
“FTX.us’s withdrawals have been live, are fully backed 1:1, and operating normally.”
SBF also seized the opportunity to address claims of existing conflict between the two giant companies, saying:
“I know that there have been rumors in media of conflict between our two exchanges; however, Binance has repeatedly shown that they are committed to a more decentralized global economy while working to improve industry relations with regulators.”
This comes after an announcement by CZ about Binance exchange’s plan to liquidate its position in FTX token following “recent revelations.”
Binance CEO Says Transaction Is Non-Binding
CZ has also issued his statement acknowledging the news to his 7.3 million followers that FTX approached Binance for help on November 8 in response to a “significant liquidity crunch.” However, the CEO of the largest crypto exchange in market cap articulated that the transaction to which Sam Bankman-Fried was referring was non-binding, given that only a letter of intent had been signed for Binance to acquire FTX, nothing definite as of now.
Considering the background of FTX’s current position, we expect that the process would involve much groundwork and, therefore, time, given the highly dynamic nature of the situation. Changpeng Zhao has also assured that Binance is conducting all the necessary due diligence, including a real-time problem assessment.
Noteworthy, according to the non-binding LEO, Binance reserves the right and discretion to withdraw from the deal at any time. Consequently, he noted:
“We expect FTT to be highly volatile in the coming days as things develop.”
Shortly after the announcement of the expected acquisition, the FTT price reacted with a brief uptick that lasted only moments before a correction.
At the time of this writing, FTT price is $15.10 on CoinGecko, down by 15.1% over the last hour and -45.1% intra-day trading.