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In a sudden reversal, cryptocurrency exchange Binance pulled out of a deal to acquire struggling rival FTX, saying the company’s problems were “beyond our control or ability to help.” .
Binance, the world’s largest cryptocurrency exchange, said it had reviewed FTX’s financials as part of its due diligence process, and in announcing the suspension of trading, said it had “mishandled customer funds and Investigation Suspicions” report.
Inversion is the latest twist in a dramatic, fast-moving tale involving the most powerful players in the crypto world.
It also marks a surprising downfall for Sam Bankman-Fried, the industry’s 30-year-old rock star who founded FTX in 2019. Bankman-Fried, known to insiders as his SBF, regularly made comparisons to investment icons such as Warren Buffett and his JP. Morgan designed a series of relief packages for struggling cryptocurrency companies earlier this year. He has appeared in ads alongside celebrities such as Gisele Bündchen as part of a campaign to bring cryptocurrencies into the mainstream.
Without a bailout, FTX is poised to collapse, along with the rest of Bankman-Fried’s massive crypto empire.
Bankman-Fried told investors Wednesday that he needed emergency funding to cover a shortfall of up to $8 billion due to recent withdrawal requests, according to the Wall Street Journal.
Virtually all digital assets sank Wednesday due to turmoil at FTX.
After confirming that Binance will not buy FTX, Bitcoin has fallen below a two-year low of $16,000. The cryptocurrency has fallen more than 75% from his near-$69,000 high a year ago. Ether, the second most popular token, fell about 13% to $1,137, also down 75% from its all-time high.
Representatives for Binance and FTX did not immediately respond to requests for comment on Wednesday.
Even assets known for their volatility had a tough week.
FTX headlines escalated over the weekend when Binance CEO Changpeng Zhao announced that the company would liquidate its holdings of FTX amid speculation about the company’s financial health. Essentially, it forced Bankman-Fried to make his $580 million capital call that it doesn’t have the liquidity to meet.
Despite the rift between Bankman-Fried and Zhao, the rivals appeared to have rallied in a deal that stunned the crypto world when Binance announced Tuesday it would acquire FTX pending due diligence.
Still, investors were quick to sell all kinds of digital assets, worried about the deal closing.
According to Bloomberg, the FTX meltdown is already under investigation by the Securities and Exchange Commission and the Commodity Futures Trading Commission. The outlet reported that regulators were investigating whether FTX handled customer funds properly, citing people familiar with the investigation.
An SEC spokeswoman said the commission would not comment on whether an investigation is possible.
The CFTC declined to comment.
—Matt Egan of CNN Business contributed to this article.
