Cryptocurrency prices plunge after crypto exchange platform Binance withdraws from purchase of its failing rival FTX Trading
FTX CEO Sam Bankman-Fried tells staff he is exploring all options for his failing crypto exchange platform.
It comes after cryptocurrency prices plunged this week after crypto exchange platform Binance confirmed it was pulling out of its deal to purchase FTX Trading.
The collapse of Binance’s rescue of FTX trading resulted in Bitcoin sinking to a two-year low.
FTX rescue collapse
The price of bitcoin plunged more than 13 percent to $15,840, according to CoinDesk, its lowest level since November 2020. It had been above $20,000 earlier in the week.
The other major cryptocurrency, Ethereum, dropped 13 percent.
According to the Guardian newspaper, a non-binding rescue deal had been agreed by the CEOs of both crypto exchange platforms, but was subject to Binance carrying out due diligence on FTX’s balance sheet.
After an initial review, Binance said in a statement Wednesday that it had significant concerns that convinced it to back out of the deal.
“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” Binance was quoted as saying in a statement.
The Guardian reported that FTX had agreed to sell itself to Binance after experiencing the cryptocurrency equivalent of a bank run.
Customers reportedly fled the exchange after becoming concerned about whether FTX had sufficient capital.
FTX’s own crypto token, known as FTT, plunged more than 50 percent on the reports. The token, now worth around $2.69, was worth 10 times that amount only a week ago.
It seems that investor concern centred on whether the balance sheet of an affiliated company of FTX known as Alameda Research was saturated with increasingly worthless FTT tokens, whose total value would not exceed the exchange’s liabilities, effectively making FTX insolvent.
FTX is now reportedly under investigation by US authorities for how it handled customers’ deposits, Bloomberg News and other media outlets reported.
FTX CEO Sam Bankman-Fried meanwhile has told staff he is exploring all options for the exchange.
“I’m working, as quickly as I can, on next steps here. I wish I could give you all more clarity than I can,” said Bankman-Fried in a message to FTX employees seen by Reuters.
Bankman-Fried said in the staff email that his goals were to protect customers and provide any help he could for staff and investors.
“I’ll keep fighting for those (goals), as best as I can, as long as it’s correct for me to. I’m exploring all the options.”
“I’m deeply sorry that we got into this place, and for my role in it,” he reportedly wrote. “That’s on me, and me alone, and it sucks, and I’m sorry, not that it makes it any better.”
In a later message to staff, seen by Reuters and sent around 6pm Eastern Time (2300 GMT Wednesday), Bankman-Fried said: “I will post many more updates tonight, I promise.”
Meanwhile Reuters also reported (citing a senior executive at OKX) that Sam Bankman-Fried had appealed on Monday for a $2 billion to $4 billion cash injection from OKX, just prior to the announcement of the now collapsed acquisition mooted by arch rival Binance.
The CEO of the troubled exchange had allegedly presented “a lot of urgency” in seeking that amount of cash injection during a call on 8 November, as this would have helped FTX survive a short-term liquidity crisis, Lennix Lai, director of financial markets at OKX was quoted by Reuters as saying.
The appeal for cash injection has come as FTX is facing a $7 billion total liability, said Lai, citing Bankman-Fried’s comment made in the call.
FTX is the latest cryptocurrency company this year to come under financial pressure as crypto assets have collapsed in value during 2022.