Binance Had Signed an LOI to Look at Investing in FTX
Posted on 11/08/2022
STORY NOTE: Binance decided to not acquire FTX. In this case, we decided to change the title.
Binance signed a Letter of Intent (LOI) to potentially buy rival cryptocurrency exchange FTX. This was spurred by an article from Coindesk on November 2, 2022, that talked about the balance sheet of Alameda Research. Financial terms were not disclosed, and the transaction does not affect FTX US and Binance.US, which are two separate companies, said FTX’s Sam Bankman-Fried in a tweet. The two cryptocurrency exchange companies signed a a non-binding letter of intent (LOI), Binance CEO Changpeng “CZ” Zhao confirmed on Twitter. Sam Bankman-Fried and Zhao both said that a full due diligence process would be underway in the next couple of days.
FTX’s linked cousin Alameda Research was heavily holding massive amounts of FTX’s own digital token FTT. The tying of Alameda to FTX through a massive amount of FTT digital tokens carries risk for FTX and if these FTT tokens were used as collateral that would be an alarming development. If the price of FTT would drop fast and then Alameda Research could face margin calls and other financial issues. And if FTX is the lender to Alameda Research, then it could make FTX insolvent, another crypto giant hitting the dustbin like Celsius Network LLC.
After the story by Coindesk and Binance’s move to sell FTT tokens, FTX customers ran into issues in trying to take out money from FTX. FTX’s infamous Telegram group and on Twitter had customers complaining about the difficulties they experienced.
