Binance Opts Not To Purchase FTX, Citing Significant Concerns Raised During Due Diligence

Binance, the world’s largest cryptocurrency exchange, has walked away from a deal to purchase cash-strapped rival FTX just one day after signing a non-binding letter of intent to acquire the stricken exchange.

The about-face came after Binance conducted its initial due diligence of FTX’s financial position and business practices, which sparked significant concerns. Binance CEO Changpeng Zhao, commonly referred to as CZ, retweeted a tweet from the Binance account on Wednesday declaring the deal was off:

“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

CZ Publicly Releases Letter to Binance Staff

Earlier on Wednesday CZ had tweeted an internal letter sent to Binance employees updating them on the FTX situation. In the letter CZ told his staff the due diligence for the deal was ongoing and they must not trade any FTT, presumably to avoid running afoul of regulators.

CZ also stressed in the letter that he had not masterminded FTX’s collapse, as some had speculated:

“We did not master plan this or anything related to it. It was less than 24 hrs ago that SBF called me. And before that, I had very little knowledge of the internal state of things at FTX.” 

Changpeng Zhao, Binance CEO

He went on to insist the collapse of one of Binance’s largest rivals should not be viewed as a win, and that it would have ongoing harmful consequences for investors and for the entire crypto space:

“FTX going down is not good for anyone in the industry. Do not view it as a “win for us”. User confidence is severely shaken. Regulations will scrutinize exchanges even more. Licenses around the globe will be harder to get.”

Changpeng Zhao, Binance CEO

Market Tanks In Reaction

The market’s reaction to the news that Binance would not be acquiring FTX has been swift and negative, with prices down virtually across the board. Unsurprisingly, the biggest losers have been those cryptocurrencies most closely linked to FTX. 

At the time of writing, data from CoinGecko showed FTT was down almost 90 percent since Tuesday, changing hands at US$2.47, down from US$22. Solana (SOL), which was heavily backed by FTX, was also hit hard, dropping around 51 percent since Wednesday.

Other major cryptocurrencies have also dropped considerably, with Bitcoin (BTC) down over 20 percent since Wednesday and Ethereum (ETH) down over 25 percent.