Binance, the world’s largest crypto exchange, has backed out of a bailout agreement with its smaller rival FTX : Cruptocurrency.
Binance stated it would not undertake the deal after performing due diligence.
It stated that reports of “mismanaged client money as well as alleged US agency investigations” influenced its judgement call.
FTX had been dealing with a spike in withdrawals that had resulted in a “liquidity crisis.”
FTX is a large crypto exchange where people can buy as well as sell various cryptocurrencies.
Worries about FTX’s financial health allegedly prompted $6 billion (£5.2 billion) in withdrawals within only 3 days.
According to Reuters, the US Securities and Exchange Commission (SEC) is looking into FTX’s management of customer funds and crypto-lending activities.
The markets regulator was investigating if the platform had abided by securities laws regarding the separation of customer assets and if it had traded against customers.
Binance stated on Twitter that the issues confronting FTX were “over and above our control or capability to assist.”
“We have observed over the last several years that the crypto ecosystem is becoming increasingly resilient, and we believe that outliers who misuse user monies will be singled out by the free market.”
“As policy measures are developed and the industry continues to evolve forward into increased decentralisation, the ecosystem will gain strength,” the exchange concluded.
Sam Bankman-Fried, the founder of FTX, and Changpeng “CZ” Zhao, the CEO of Binance, are the two most influential people in the crypto space, as well as high-profile rivals.
FTX has been contacted for comment.
According to a notification on its website: “Withdrawals are presently being processed by FTX. We highly advise against making a deposit.”
Mr Zhao, who tweeted on Sunday that Binance will indeed sell its holdings of FTX’s digital token, known as FTT, added to the pressure on FTX. This week, the token has lost roughly 90% of its value.
Binance intervened on Tuesday, announcing that it had signed a letter of intention to purchase FTX’s non-US unit. However, it added that it had “the autonomy to withdraw from the deal at any time.”
On Wednesday, Mr Zhao tweeted: “It’s a sad day. I attempted, but [crying emoji] “.
Bitcoin fell below $16,000 once Binance withdrew from the deal before gaining back some ground, while Coinbase shares fell by over 9.5%.
See more
