Nov 9, 2022•5 min read
Binance and FTX have been the hottest names recently with many twists and turns leading to the whole crypto market turning red yesterday. So what really happened? Let’s have a glimpse and check our article to have an overview of this occurrence.
The start of this "crypto-earthquake" is when the $FTT price of Sam Bankman-Fried (SBF)- CEO of FTX exchange and CEO of Alameda research fund - dropped sharply on early Sunday morning (November 6). There is a rumor of a giant whale with 23 million FTT tokens (FTX native tokens), possibly Binance, is dumping the token. Soon after, the price of FTT started to drop by 10%.
Zhao informed that he will sell all of FTX tokens (FTT) on his books due to "recent disclosures that came to light." According to a person familiar with the exchange who asked to remain anonymous because the information is private, Binance possesses around 23 million FTX tokens, now valued at about $529 million at current pricing.
The announcement follows rumors regarding the financial difficulties of Alameda Research - a sister company of FTX. A report from CoinDesk showed that Alameda Research's balance sheet was largely composed of illiquid FTT and SOL tokens last summer.
According to Caroline Ellison, CEO of Alameda Research, the balance sheet wasn’t reflective of the true story and Alameda has an additional $10 billion in unlisted assets. She also tweeted to CZ that Alameda will “happily buy” Binance’s FTT tokens at $22 if the exchange wants to minimize the market impact (the tweet is now deleted).
The price of FTT fluctuated due to the news, rising from about $23 to $24.50 in a two-hour period on November 6 before dropping more than 9% to $22.28. FTT is currently trading around $22.50, down more than 4.3% over the last 24 hours.
Nov 7, 2022:
- Zhao was asked on Twitter if he would accept Caroline Ellison, CEO of Alameda Research, offer to buy Binance's FTT holdings for $22 per token. Zhao said: “I think we will stay in the free market.”
Additionally, Zhao updated with a tweet that exacerbated rumors and community concerns that FTX is a Ponzi scheme like Terra Luna. Binance CEO tweeted: “Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won't pretend to make love after divorce. We are not against anyone. But we won't support people who lobby against other industry players behind their backs. Onwards.”
- BitDAO Community Asks Alameda for Proof of Funds After BIT's Sudden 20% Drop
The BITDAO community, which is backed by Pantera, the billionaire Peter Thiel, the cryptocurrency exchange Bybit, and several other funds, has demanded evidence from trading company Alameda that they still possess the 100 million BIT tokens they bought in November of last year by converting 3.36 million FTT tokens. Alameda was required to hold tokens for a minimum of three years under the token swap agreement.
Nov 8, 2022: Breaking News: Binance CEO announces intent to acquire FTX to ‘help cover the liquidity crunch’
According to a tweet from FTX CEO Sam Bankman-Fried (SBF), FTX has “come to an agreement on a strategic transaction” with Binance. In order to "clear off liquidity constraints" and cover assets on a 1:1 basis,, SBF said he had asked Binance to intervene.
Soon after, Zhao announced the deal's details: “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 FTX.com and help cover the liquidity crunch. We will be conducting a full DD in the coming days.” However, Binance’s CEO added that they are "assessing the situation in real time" and had the ability "to pull out from the deal at any time."
The whole market turning red with the latest news from FTX and Binance
Nov 9, 2022: Following the FTX crisis, many big crypto companies in the US had to speak out to help calm the current situation.
Binance CEO shares ‘two big lessons’ and pledged to implement a Proof-of-Reserve mechanism
In a tweet after the announcement of acquiring FTX, Zhao has shared “two big lessons” to be learned from the crisis
“1: Never use a token you created as collateral.
2: Don’t borrow if you run a crypto business. Don't use capital "efficiently". Have a large reserve.
Binance has never used BNB for collateral, and we have never taken on debt.”
Moreover, he promised to use Merkle Trees, an efficient and secure data structure for encoding blockchain data, to construct a Proof-of-Reserve system at Binance in order to guarantee "complete transparency."
The idea of using more Proof-of-Reserve audits received support from the Twitter community, with crypto industry figures commenting on the move by Binance.
Sam Bankman-Fried is no longer a billionaire after losing $14.6B overnight
FTX CEO Sam Bankman-Fried has disappeared from the Bloomberg Billionaires Index after his estimated personal wealth fell roughly 94% to $991.5 million in a single day.
Nov 10: Binance cancels the deal to acquire FTX – Justin Sun “replaces”?
After the due diligence process, plus the information that FTX misused customer funds and was investigated by the US, Binance decided to withdraw its offer to buy FTX.
According to a Binance spokesperson, "As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged U.S. agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com."
In the latest updates, Justin Sun said that he is in dialogue with FTX to find a solution for the current situation.
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