By SI Linwei
Binance, the largest cryptocurrency exchange, agreed to bail out minnow FTX Wednesday, but has since had a change of mind.
“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com,” Binance said in a statement.
Price of Bitcoin dropped more than 15 percent on the news, hitting a new low since November 2020. Ethereum also crashed.
The US Department of Justice and the Securities and Exchange Commission have reportedly launched investigations into the sudden implosion of the crypto trading platform.
When Binance said it planned to buy the exchange, FTX tokens surged to US$20 (145 yuan), but soon collapsed to US$2.57.
In a memo to staff, CZ Zhao, founder of Binance, said the incident reinforced the company’s position in the business but was not a victory. It had shattered confidence in cryptocurrencies, and would lead to tighter supervision.
FTX founder Sam Bankman-Fried had told investors that the platform would go bust if liquidity problems were not solved.
A total of 94 percent of Bankman-Fried’s personal assets evaporated overnight and the has-been billionaire deleted a tweet in which he promised to protect investors’ interests and ensure FTX had adequate liquidity.
Contagion is spreading beyond the crypto world. Sequoia Capital marked down its $210 million stake in FTX to zero. Other big names like Software, Temasek Holdings and Lightspeed Venture Partners have also invested in FTX.
“The full nature and extent of this risk is not known at this time,” Sequoia said.
After its fourth round of US$400 million financing as recently as February this year, FTX’s value of assessment reached US$32 billion.
