On Tuesday (November 8), FTX and Binance announced an agreement, setting up the purchase of FTX’s non-U.S. operations by Changpeng Zhao’s company. On Twitter, CZ pointed out that the rival exchange “asked for help after a liquidity crunch” on November 7.
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 https://t.co/BGtFlCmLXB and help cover the liquidity crunch. We will be conducting a full DD in the coming days.
— CZ 🔶 Binance (@cz_binance) November 8, 2022
According to him, a non-binding letter of intent was signed to protect users, showing the interest in fully acquiring FTX and helping cover the crisis the company is going through – the price of its token, FTT, has dropped 40% in the last week.
Although there is no information yet on how this integration between the platforms will happen, Sam Bankman-Fried, CEO of FTX, stated on Twitter that he has reached an agreement on the strategic transaction with Binance for FTX.com.
Binance and FTX: no competitive conflicts
“A huge thank you to CZ, Binance, and all of our supporters. This is a user-centric development that benefits the entire industry. Binance has done, and will continue to do, an incredible job of building out the global crypto ecosystem, and creating a freer economic world.”, Bankman-Fried stressed, denying rumors that the two companies might have some competitive conflict.
2) 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.
— SBF (@SBF_FTX) November 8, 2022
According to him, Binance has already shown that it is committed to a decentralized global economy by improving the crypto industry’s relations with regulators. “We are in the best hands”, the FTX founder stated.
Following the news, the FTT token rose 20%, from around US$14.50 to US$17.50, according to CoinMarketCap data, while Binance’s BNB token was up 8%, jumping from US$326 to US$355.
The deal will go through a due diligence process
It is worth noting, however, that Binance may still give up on the deal after evaluating the risk scenario in light of the due diligence process – a review of FTX’s internal accounts – that will be conducted over the next few days.
“FTT is expected to be highly volatile in the coming days as things develop”, Zhao warned on Twitter.
In any case, Bankman-Fried also explained that FTX intends to clear out liquidity crunches. “All assets will be covered 1:1”, he assured on Twitter.