[Asia Economy Reporter Jeong Hyunjin] Foreign media report that Binance, the world's largest cryptocurrency exchange, appears to be reluctant to proceed further with the acquisition of its competitor FTX, which requested help due to a liquidity crisis. After urgently deciding to pursue the acquisition, Binance found FTX's financial condition to be worse than expected, leading to the possibility of the deal falling through. Bitcoin prices plummeted to the $16,000 range.
On the 9th (local time), Bloomberg, The Wall Street Journal (WSJ), and others cited sources saying that Binance showed this stance after reviewing FTX's corporate structure and books. Bloomberg reported that Binance executives quickly confirmed a gap of more than $6 billion (about 8.2 trillion KRW) between FTX's liabilities and assets, identifying a financial 'black hole.'
WSJ also reported that Binance was surprised that while it has over 7,000 employees, FTX has fewer than 400. Customer screening is necessary to prevent money laundering and to facilitate cryptocurrency trading based on that, but FTX was severely understaffed. Additionally, news emerged that U.S. regulators have launched investigations into FTX's handling of customer funds and transactions with affiliated companies, becoming an obstacle to Binance's acquisition of FTX.
Earlier, Binance CEO Zhao Changpeng announced the day before that they would pursue the acquisition of FTX. FTX, facing a sudden 'bank run' (a situation where customers withdraw coins all at once) due to rumors of financial instability in its affiliated companies, requested help, and Binance agreed. Both parties had planned to conduct due diligence for the acquisition. However, reports emerged that the acquisition could fall through in just one day.
Concerns about such a situation arose in the market from the time of the acquisition announcement. The previous day, CEO Zhao described the agreement as a "non-binding letter of intent," stating, "We are assessing the situation in real-time in a very dynamic environment. Binance reserves the right to withdraw from the deal at any time." This raised the possibility that Binance's acquisition of FTX might fail, causing Bitcoin prices to plunge.
Later that day, CEO Zhao sent a memo to internal staff expressing that this agreement could not be seen as a 'win' that would strengthen Binance's position. He expressed concerns that FTX's collapse would seriously undermine trust in the cryptocurrency industry and lead to stricter regulations by authorities. He also said, "There is no 'master plan' (with everything detailed). It has been less than 24 hours since FTX CEO Sam Bankman-Fried called. Before that, we had very little knowledge of FTX's internal situation."
As reports suggesting the possibility of the acquisition falling through continued, Binance issued an official statement saying, "We are still in the early stages of due diligence and will communicate further when there is information to share." Sources told Bloomberg that Binance's due diligence process is expected to take 30 days.
Following the reports, Bitcoin prices fell more than 10% as of 5:50 a.m. Korean time that day, trading in the $16,000 range. This is the lowest level since November 2020. Ethereum, the second-largest by market cap, also plunged more than 12%, breaking below the $1,200 mark. FTT, the coin issued by FTX, which is the epicenter of the liquidity crisis, fell 80% the previous day and dropped another 30% that day. Solana, supported by FTX for trading, fell more than 40%.
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