Following a liquidity crunch, FTX reached out to Binance to solve its liquidity issues through acquisition to keep FTX customers whole.
“Our teams are working on clearing out the withdrawal backlog as is,” CEO Sam Bankman-Fried said regarding the pause of withdrawals on FTX assets. “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.”
Bankman-Fried noted in his announcement that Binance.US and FTX.US “are not currently impacted by this,” stating that withdrawals are currently live and operating normally.
Changpeng Zhao (CZ), CEO of Binance, also commented on the upcoming acquisition noting that Binance can pull out of the deal at any time should the due diligence lead to such a decision.
“There is a lot to cover and will take some time,” said CZ. “This is a highly dynamic situation, and we are assessing the situation in real time.”
Moreover, the news of the acquisition can appear shocking to some as FTX attempted to play a pivotal role in restoring the bitcoin and cryptocurrency ecosystem following events before and after the Terra collapse.
Amid market turmoil, FTX moved to acquire quite a few companies in the ecosystem including: Voyager, BlockFi, and Celsius. Babel Finance also fell to the whims of the market, along with Three Arrows Capital.
However, now FTX is the one in distress and calling for aid. Cory Clippsten, CEO of Swan Bitcoin, reached out to Bitcoin Magazine to comment on the evolving situation.
“Any centralized business that rehypothecates is by definition a confidence game,” Clippsten said. “With a fair value of zero for all of the non-Bitcoin altcoins on their balance sheet, all it takes is a little bit of momentum for every trader in crypto to believe it could be a great trade to short all of their positions into oblivion.”
Clippsten went on to explain that any centralized company with “piles of altcoins on their balance sheet” are inherently playing this risky game making the participating companies “inherently fragile, susceptible to a Lehman-like collapse at any time.”